Saturday, October 20, 2007

Types of Properties in Malaysia

There are many types of properties that you can be found in Malaysia:

  1. Squatter houses
  2. Low cost houses and apartments
  3. Landed houses (My choice for capital gain and for staying)
  4. Apartments and condominiums (My choice for rental - apartment)
  5. Townhouse or Duplexes
  6. Commercial - Shop Lots
  7. Service apartments
  8. Luxury homes
Let's discuss this one by one. Just like buying insurance or unit trust, different type of properties serves different purpose. Understand what is the best intention for which types of property helps you make a better decision.

Squatter house
First of all, squatter house is illegal and yet it is the cheapest house that you can buy or invest. The houses are build with no proper planning but still have the basic necessities such as electricity, water and telephone. These house are usually very dirty and unhygienic. There are are built without any proper permits or certificate. Therefore sooner or later, the government will eventually destroy and crack down those houses. Because these houses are very cheap, you can earn a lot by renting it out. Anyway illegal business always earn a lot but with high risk. I won't go for it because I'm scare.

Low cost houses and apartments
If you don't want to do illegal thing, the low cost houses and apartments are the cheapest property you can buy. These houses are build to the lower income group of people. The rental income of this kind of houses usually can cover the loan interest that you pay. The drawback is the people who rent this kind of houses or apartment, they usually turn your house or apartment upside down. Not only that, they will not pay the rental fees for months and abandon the houses eventually. So, it is high risk to buy a low cost house or apartment. I won't go for it.

Landed Houses
Landed houses are the most popular type of properties. The capital gain is usually the highest as compared to other types of properties. But if they are used for rental, then it is a different story. The prices for landed houses in Malaysia are usually higher (at least 2 time higher) than apartments. However the rental between the apartments and landed houses are almost the same. So if you're buying a landed property for the purpose of rental, you may want to think again. You can even buy another apartment to double up your rental income. However, if you're buying it for your own use and capital gain, landed property is the right choice. I will go for it for capital gain and for staying (I need a lot of spaces). Living in apartment just like in jail to me!

Apartments and Condominiums
The good thing about apartments is the reasonable rental income as compared to the price. So if you buy apartments for the purpose of rental income, you're in the right track especially in Penang and KL. Of course, it doesn't mean you can't buy it for staying. If you don't like big house and spaces, landed houses may not suitable to you. However, I personally think that you should consider condominium.

Rental in condominium is expensive and not everyone can pay that. If they're able to pay that, won't they just own their own property? Usually they are there because of their employers are paying for the rent (e.g. employee relocation package). You may not able to rent it out at all if you're buying condominium at the wrong place. I will go for apartment for rental but not condominium (too risky for me). For staying, I will go for landed property.

Townhouse or Duplexes
Townhouses or duplexes are 2 houses build on the same piece of land. The lower unit occupies the ground and part of the first floor. The top unit takes the remainder of the first floor and the whole second floor. Somehow these type of properties are not very popular in Asia. Let's don't waste time discussing them. I won't go for it either. I'm scare that no resell value and not even able to rent it out. Asia doesn't like this kind of properties.

Commercial - Shop Lots
Commercial properties are shop lots. Usually ground floor is for business and the upper floor is used for residential. Commercial properties are more expensive than residential properties. But, there are some places that the commercial properties are cheaper than residential properties. If this is the case, you may want to consider properly the shop lots and do more researches and background check before you buy. Why they sell cheaper than residential property?

Rental in commercial properties are also affected by economy. During good times, renting it out can be easy but not anymore during bad times. I won't go for commercial property because it is too expensive for me now (maybe not in the future when I become very rich).

Service apartments
Service apartments are residential properties that lie in a commercial district. As they cannot build residential properties in a commercial district, the developers so smart that call these building service apartments. All these service appartment sare neither commercial nor residential. They are not even covered in the Housing Act which means you can't sue the developers if anything goes wrong. Of course, I won't go for this. Will you? I'm scare again.

Luxury Homes
What you have in mind? Yes, bungalow. I think the only reason to buy bungalow is for staying. Has anyone actually rent out bungalow? Of course, I won't go for this until one day I have 5 kids and 10 grand children, and perhaps 5 BMWs.

In summary, this is my strategy. Buying apartment for rental and buying landed house for staying and at the same time enjoying the capital gain.

Friday, October 12, 2007

No Pain No Gain

Something meaningful to share, pictures worth a thousand words...

What do you learn from this?

No Decision is Right or Wrong

Not really a new thing but since it is mentioned in leadership training, it refreshes me that in real life no matter how much effort you do to decide the best decision, there is always no right or no wrong decision.

This reminds me a same statement that told by brother in many years back. In reality, there is no right or wrong decision. The world is not just black and white. There is an area called gray. You can only make a decision based on your best judgment at that particular time. It could be a right or wrong decision. Most importantly, the right decision now could be a wrong decision tomorrow and vice-versa. The results of your decision changes over time. Cool, isn't it?

Then, I ask myself why do I need to take so much effort to come out the best decision? In real life, we sometimes put too much focus on decision making but neglect that the importance of "after the decision making". I realized I made the same mistake too. What really important is NOT how you make a decision or whether your decision is the right choice or not. But, the most important thing is how you live with the decisions that you have chosen. How do you cope with the wrong decision that you made? How do you turn over your wrong decision to become the right one? How do you learn from the mistake and make a better decision next time?

Often people try their best to come out the best decision but after they find out the decision is wrong, they're depress and disappointed. Then later they lost energy to make a second or third decision. This is because they're focusing at the wrong thing, to come out the best right decision. What I learn in decision making process, whether the decision is right or wrong is not important. It is how we deal with decision that we have made is the place where we all should focus on. So I will just do it (make decision) and don't wait anymore, learn from it and think how we can make it a better choice tomorrow. No right or wrong decision anyway. Focus on how I can survive with the worst decision that I made makes me a better leader tomorrow.

Monday, October 08, 2007

Do not Under Insure or Over Insure

The most common mistake people make on buying insurance is whether they're under insured or they're over insured. Most importantly this is not something constant. You're fully insured now doesn't mean future you will too. You will need to do your financial assessments to figure that it out.

Just reviewed my insurance policy recently and realized that my my policies are under insure. This due the fact that my annual expenses have been increased for all these 5 years. Anything happen to me, my current insurance policies are not able to fully cover me. Therefore to summarize, I'm under insured. Saving money by not having insurance is begging for trouble. Remember, we are preparing for the unexpected. Plan for the unexpected and we will do well.

Since the insurance agents recently are so convincing, be aware that you're over insured too. Don't simply buy insurance if you don't know what the purpose is. What is the right insurance policy for me? Should we buy term or whole life insurance? Know the whole purpose before you buy everything. Many policies might overlap with other policies you have. Overlap is okay but make sure you don't over insure.

Tuesday, October 02, 2007

Value Investing & Growth Investing

When it comes to investment strategy, there 2 types of investment strategies: value investing and growth investing.

It is always difficult for the fundamental investor to decide whether to be a value or growth investor. Value investing is concerned with the current price level and fair price of a stock, while growth investing is more focused on potential earnings growth of company. In order words, value investing is to buy low, sell high and growth investing is to buy high, sell even higher.

Value investors are always earlier buyers of stocks. They buy based on the belief that the market has misread the real value of the company (see A in the chart). At that moment, the future prospects of the company may still uncertain. There may or may not be an increase in earnings.

In contrast, growth investors will come in the early recovery stages of a company's fundamental. At that point in time, the stock's price would have already moved higher from its recent low (see B in the chart). Value investors will usually start to feel uncomfortable with the price level and sell the stock even though the company's fundamentals have recovered, while growth investors will buy the stock in the belief that they are buying high to sell even higher (see C in the chart). Growth investors believe that it would be safer to buy stocks when the fundamentals have shown definite signs of recovery, and will sell higher when the prices increase as a result of further improvement in the companies' fundamentals.

So which strategy is better? Are you a value investors or growth investor? Can I say normal investors practice value investing strategy and professional investors practice growth investing strategy?

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