Property Bulk Purchasing ..Good or Bad? Part 2

POTENTIAL ISSUES: In Part 2, we look at several reasons why joint purchases may not be everyone’s cup of tea

Last week, we covered the first part of my thoughts on joint purchase of properties. To recap, we are talking about the pros and cons of joint purchase between non-family members and I covered the benefits as follows:

• Greater cumulative purchasing power

• Leverage on others’ knowledge and expertise

• Shared risk or risk diversification

• Leverage on others’ financials and credit

• Future credit advantage

So this week I intend to cover what the possible risks of joint purchases are. If I could sum everything up, I feel that a joint purchase carries substantial risk primarily due to its human factor. There are just too many uncontrollable factors that will crop up when huge money is at stake. When it comes to money, siblings can fight and long-time friends can be enemies, let alone a few strangers. Mahatma Gandhi once said:

“There is sufficiency in the world for a man’s need, but not a man’s greed.”

Gandhi is absolutely spot on. There are a few reasons why I don’t fancy joint purchases such as:

1. Too many ‘human’ uncertainties — Let’s assume you shared a purchase of a commercial property with three other friends. Let me just illustrate a few scenarios how people can get stuck when they share:

• One of the partners dies shortly. What’s going to happen to his part of the commitment? Who will be forking out an additional sum every month on behalf of the deceased? What if his will is under dispute, including his share in this shared commercial property?

• One partner got sued by his ex-spouse, who then filed a caveat on this property.

• One partner ended up bankrupt.

• Or just a plain and simple issue, one partner ran out of money and needed to exit the arrangement to pursue other priorities?

• What if the property was a bad buy and the partners could not find a tenant or buyer after 1–2 years? Will all the partners have the patience to wait it out? What if some partners decide to cut their losses but some still plan to hold on? What if one or two partners refuse to pay the monthly installments anymore after months of bleeding cashflow?

I’ve always advocated that anyone who invests in properties needs to have a medium- to long-term holding period. For myself, I’ll only buy a property that I am prepared to hold for a minimum of 5–10 years. A lot of things can happen within five years’ time, and chances of any of the five scenarios above to materialise are very, very real.

2. Shared risks equal lower profit — When you diversify your risks, you are also diversifying your profit. Let’s say you form a joint purchase with three friends to buy a RM1 million shop-house, with all four of you becoming guarantors for the RM800,000 loan. Three years down the road, the shop-house was successfully sold for RM1.3 million. Once you pay the agent fees, early penalties, RPGT (Real Property Gains Tax) and other incidentals, you guys will have a net profit of RM240,000. Sounds a lot, but once you divide among four partners, that’s only RM60,000 perperson, assuming that everyone gets an equal share. Personally for me, I wouldn’t want to make a RM1 million bet just to make RM60,000 after three years.

3. Inflexible arrangement — A partnership only works if everyone sticks to the original plan. All the partners need to have the discipline to last it out. But what happens if something turns up and you yourself need to go for a premature exit? For example, you need money to pay medical fees for an ill family member? Or you saw a once-in-a-lifetime business/investment opportunity (talking about real opportunities, not the gold Ponzi scheme types). You now have to rely on other partners to share your plight and arrange a cordial exit for you. But what if they don’t care about your problems and tell you to stick around or lose everything you have paid? Yes you could make an agreement for this but more often than not, anyone who opts for early exit will normally have to pay a hefty price for causing inconvenience to the other partners.

With single ownerships, one can do as they please. If I needed the money, I can just sell the property. Or else I’ll keep it. It’s that simple. I don’t need to beg others to understand my plight, I don’t need to pay “penalties” to other partners, and more importantly, I have the full freedom to make decisions that work best for me.

4. Additional costs incurred — If you want to have a water-tight partnership, forming a private limited company (Sdn Bhd) will be inevitable. You and your partners can document and officially decide on purchase, exit, early withdrawal penalties etc. However, this means that there will be additional cost incurred such as set-up, annual maintenance and accounting fees, which can amount to thousands of ringgit every year.

5. Encouraging hasty decisions due to perceived low risk — Amongst the benefits of joint purchase are higher purchasing power and shared risks. This in my opinion is a double-edged sword. When it’s your own money and its 100 per cent your decision, you are normally a lot more cautious as a mistake can thoroughly break you. But because the risk is shared with a few others, people often loosen up a bit and get a bit careless. Thanks to the new cumulative purchasing power, they can now dare to enter a world that’s previously unknown to them. There are many instances where I see complete strangers forming a joint-venture to buy a property that they can never afford to alone, say shop-houses or prime offices. Everyone in the venture thinks somewhat that their risk is lower simply because the risk is shared. Actually the risk remains the same, it’s just that now you have company if the whole thing tanks.

6. CCRIS (Central Credit Reference Information System) disadvantage — This is true if you are lending your financial capabilities for the venture to obtain borrowing. For some lenders, they don’t care if you only have 25 per cent share of the venture, but so long as your name is being used to obtain say a RM1 million loan, they take it that you borrowed RM1 million. This could be a hindrance for you to obtain borrowing later in the future, and you could end up missing better investment opportunities coming your way.

My personal opinion
In summary, I’m mainly against joint purchases due to potential issues that could arise from this arrangement. Most of the time, it’s often not worth the hassle. The shared profits from such ventures are often small compared to the risk one has to undertake. Joint purchases are certainly not for beginners, and it should be one’s last resort once all attempts to buy the property on your own capability have failed, and you are 100 per cent sure that the property is a great buy with limited downside.

Till then, invest safely.

The above article is extracted from nst.com.my @16 November 2012

Mother Mary Appearance on a SJMC Hospital, Subang Jaya, Malaysia

Image becomes clearer, say witnesses

SUBANG JAYA: The image of what some are claiming to be that of the Blessed Virgin Mary on one of Sime Darby Medical Centre's windows here has continued to draw people from all over Malaysia.

Many eyewitnesses, some of whom had been visiting the centre for several days, said the image had “grown clearer” since Saturday.

Malacca-Johor Diocesan Pastoral Institute director Rev Deacon Dr Sherman Kuek said if the immediate result actually excited deeper faith among the Catholics, it was a good thing.

“But even so, this by no means confirms the authenticity of the image as an apparition of Mary,” said Rev Kuek, who holds a doctorate in theology.

He advised Catholics to always keep their attention on Jesus Christ.

Traffic along the medical centre was heavy yesterday, with many parking their cars along the side of the road to see the image.

Some were seen taking photographs with their various electronic gadgets while others prayed and sang hymns.

“The image was brighter and clearer than yesterday. It is certainly different,” said student Kyle Lim, 21.

Some eyewitnesses reported seeing another image forming on one of the windows below, which they claimed resembled the face of Jesus.

Special containers for people to place candles were also set up there.

Photographs of the image, believed to have appeared several days ago, have gone viral on Facebook.

Property Bulk Purchasing ..Good or Bad?

Extracted from NST article interview with Faizul  Ridzuan.

Quantity has a quality of its own” – Joseph Stalin

In the last 12 months, there has been a growing trend of individuals and groups organising bulk purchases of properties from developers. Bulk buying is basically an activity that allows few or many property investors to invest in a single development as a group. More often than not, buyers participating in bulk purchases are often promised many additional benefits that won’t be available should they choose to invest individually.

Sounds good, right? It’s actually not as simple as it looks or sound. In this article, I wish to share my thoughts on bulk-buying, and perhaps offer a slightly different take.

The good: Let’s imagine you are a fish seller today. There’s a strong possibility that you could be standing from morning to noon selling 100 fish to about 100 customers. But what if one guy approaches you early in the morning and offers to buy all 100 fish? Even if he wants a good discount you’ll most likely consider it since he is helping you to clear your stock much faster than usual. So instead of spending up to six hours trying to sell 100 fish, you can sell all your stock in less than 10 minutes. You’ll end up with lower profit but plenty of time and you’ll hold zero risk.

Now, imagine the fish seller above is the developer. In business, how fast you can clear your inventory matters. This can make or break a business. The faster they can clear their existing stock, the faster they can move on to the next project and make more money. Therefore it’s no surprise why a lot of developers love group purchasers as they can transfer their risk to the new buyers fast and then move on to the next project.

This is basic common sense where the more you buy, the more discounts you’ll get. They are normally more inclined to discuss flexible terms with these bulk purchasers. Among some benefits participating group purchasers can potentially enjoy are:

1. Discounts — Additional discounts since there are many buyers buying from the same group. Typical discounts can range from one per cent all the way to 10 per cent discount, subject to the number of units confirmed.

2. Easy ownership — Zero or low down-payment schemes, to help the purchasers buy this property using minimal cash.

3. Early preview — Normally there will be previews held by the group for their members, to discuss the property and its prospects, sometimes before the soft launch of the actual project.

4. Networking — Networking with would-be buyers of the said development. This allows one to collaborate with other investors of similar profiles.

The not-so-good: While bulk-purchases can sometimes offer tremendous benefits and advantages to investors, it could also aid investors to make serious mistakes. The biggest problem when you are going as a group is when other members’ false optimism can sometimes overshadow any small doubt that you might have. It’s human nature to be uncomfortable to go against the masses and the following are reasons why I don’t like to be part of bulk purchases:

1. The 3 ‘H’s — Hype, Haste, Herd

Hype: Sometimes in order to sell a unit, these groups will be told by the group leader (bulk purchase organisers) that they can expect to gain hefty profits after a few years. Some common pitches normally thrown are:

“We expect investors of this project to make xxx per cent returns in three years”.

In today’s boom, people tend to get very excited especially when they themselves or the people they know have made good money out of properties. They think that PAST = FUTURE, and combined that with a few more ecstatic members, logic and common sense will fly out of the window and everyone will start taking their cheque books out.

Haste : When people get excited, good practices like research are normally thrown out of the window. “Buy first, think later” becomes the mantra of the day. To get people to commit, some will make special offers only for the day like DIBS (no interest during construction period), IPAD/ IPhone etc, to give people little time to think.

Herd : We are all humans and we never like to be different. Assuming you can remain calm and logical, emotions can still swing things over. Even if you think that the development is a crappy one, you’ll start doubting yourself when you see everyone else buying the development like there’s no tomorrow. Our “kiasu”-ness takes over and before you know it, you’re standing at the counter putting down a booking fee on a property you were never 100 per cent convinced it would be a good buy.

Dan Rather once said, “Once the herd starts moving in one direction, it‘s very hard to turn it, even slightly”. I couldn’t agree more.

2. The discounts offered weren’t real Based on my limited observation, most of the discounts offered weren’t real. To illustrate this, let’s use Condominium X as an example. Condominium X has 3 blocks, 1,2 and 3:

a. The 1st block was sold at RM500 psf, and it’s fully sold.

b. The 2nd block was sold at RM550 psf, and it’s also fully sold.

c. The 3rd block is now being offered at RM650 psf to the group purchasers. It still has many unsold units because the RM650 psf price is considered by many seasoned investors to be over-valued.

In order to move the 3rd block, some groups will come and negotiate with the developer to give them, say 10 per cent discount. But even at 10 per cent discount, the group members still pay RM585 per sq ft, much more than what the buyers of Blocks 1 and 2 have paid for their units. Therefore, they will later be in an inferior position to compete with the earlier buyers.

3. Hefty initial cost involved to join the group

Most of these groups and individuals organising bulk purchases normally charge their members good money before they can participate in such event. The lowest I was told was over RM2,000 and the highest goes up to above RM8,000 for a few days’ seminar and opportunity to join future group purchases. I’m a cheapskate so I personally think that’s a lot of money especially when there are some free/no-fee groups out there that do the same albeit informally over the internet.

4. Potential vested interest of bulk purchase organisers to push for sales

Normally, either the buyer or developer will need to reward the efforts of the organiser for spending their effort and time to organise these bulk purchases. There’s nothing wrong with such commercial arrangements, but one needs to be mindful that the organisers are only paid if you actually bought a unit.

So, what are the chances that you’ll get straight and honest advice from the organisers? It’s like asking a fish seller whether you should buy fish or chicken for dinner! Sometimes, even the organiser themselves are not buying the project they are promoting. Caveat emptor (Latin for “buyer beware”), my friends.

Conclusion: Now, does this means that all bulk purchase groups are bad and should be avoided completely? That’s certainly not what I’m suggesting. Bulk purchases and joining investors clubs certainly has its benefits. It can shorten one’s learning curve, and the discounts can be an advantage. But one shouldn’t neglect one’s own research and gut feeling just because someone out there tells you that the project is a good buy. Whether buying individually or in a group, you still need to conduct your own research and due diligence. Don’t let the hype, haste, and herd influence you. You must be your own man/woman, and be cool as ice when it comes to making decisions.

In my book, I have mentioned the importance of networking and how I have tremendously benefited by being in the right network. The key here is to be in the right network that dishes out neutral advice. I need to stress here that if you are in the wrong network that organises bulk buying, you could be part of the herd that is heading towards the slaughter barn. So choose your network and group carefully, as they can really make or break you.

Lastly, there are many free platforms out there that can help you do your own due diligence, especially online. Internet property forums such as forum.lowyat.net and propertyWTF.com.my are very useful research platforms. With a few thousand members in these sites, you can expect decent, impartial input given by some of these members. This should aid significantly in your decision-making process prior to joining any bulk buying sessions.

Take care, and please invest safely.

10 Pointers For House Owners On Renovation

10 Pointers For House Owners On Renovation: What You Must Know And Adhere To Mass housing development is the mass production of a few standard home designs that often fails to satisfy any actual house buyer’s needPosted Date: Aug 28, 2012 By: HBA

Mass housing development is the mass production of a few standard home designs that often fails to satisfy any actual house buyer’s need. This has inadvertently led to the emergence of a spin-off industry known as ‘renovation’. Renovation refers to varying the original design of a house by addition, omission or a combination of both. Oftentimes, as soon as the house buyer occupies his property, he goes about having it remodelled to suit his needs and taste. Some of the most common changes are the widening of the kitchen area, the addition or merging of rooms and, horror of horrors, the paving of the ‘handkerchief-sized’ grass frontage. Excessive and indiscriminate renovation, approved or otherwise, makes the whole neighbourhood appear disjointed, incongruous, uncoordinated, disharmonious and even at odds with the house next door, and as a result, the value of these properties suffer. Typically, a terrace house owner has his housed renovated based on some design he found in his favourite architecture/design magazine. This is often done without taking into account the impact it would have on the aesthetic sense of his immediate neighbours, let alone the neighbourhood. The end result would be that either his house stands out from the others like a sore thumb or it is at odds with the immediate neighbours. As such, the National House Buyers Association (HBA) would like to offer the following cautionary pointers for the benefit of wannabe renovators: 1) Ensure the house has been certified as ready for occupation In their rush to renovate, some house purchasers do not wait for the Certificate of Fitness (CFO) or Certificate of Completion and Completion (CCC) or Occupational Certificate (OC) to be issued, which causes across the board delay. The fact is, no house owner is allowed to occupy his property before the issuance of any of these certificates. There have been cases where extensions to two or more linked units have caused an entire row of houses to sink and crack, especially where the housing estate is built on a landfill scheme or ex-sand mining land. 2) Be clear about what you need and what you want Draw up your ‘wish list’ and itemise, then pare it to suit your needs and budget. The downside of not estimating the renovation costs accurately or not at all (thinking it will be within your means) is that you may end up abandoning the works midway when funds are exhausted. Seek the help of a quantity surveyor. He would know how to estimate the costs accurately unless the renovation work involved is so small that it makes engaging such a professional not worthwhile. The next best alternative is for you to obtain a few quotations from a selection of builders or building contractors. Remember to ask for a breakdown, particularly of the more expensive or dispensable items, and most importantly, the timeframe needed to complete these works. If the scale of the renovation is relatively complex and large, get a professional to help you out. 3) Get the right professionals involved: Do not be ‘penny wise and pound foolish’ If the alteration works involve structural changes such as an extension with (i) removing column(s); and (ii) the addition of beam(s) to create room or space within your existing property, it pays to consult a qualified architect or a qualified engineer. If you are not sure, then consult one on what needs to be done including whether their services are needed instead of engaging just a building contractor. Any added structure, without professional engineering input, may cause structural stress or even structural failure not only to the existing building but also to the neighbouring houses. Their involvement may be a legal requirement. Otherwise, the Local Authority (LA) will not entertain applications, including the requisite Building Plan Approval, to carry out any of your planned works. A building draughtsman may be engaged to facilitate your application to the LA for - (i) renovation works of a one-storey building not involving reinforced concrete or steel structure provided that the total built-up area does not exceed 100 sqm/about 1,076 sq ft; or/and (ii) renovation works of a two-storey building not involving reinforced concrete or steel structure provided that the total built-up area does not exceed 300 sqm/about 3,230 sq ft. For works exceeding the above, a qualified architect’s service is required and where works involve structural alteration, your application to the LA would require the input and endorsement of a qualified engineer. 4) Get a responsible builder/contractor It is important to engage a responsible builder/contractor for such works. The right builder/contractor may ensure timely completion and deliver quality workmanship without exceeding the budget. In choosing the right builder/contractor, you may wish to be guided by the following criteria. 1) Shortlist the candidates on the basis of word of mouth recommendation, then interview them, with the assistance of a friend who is knowledgeable in this field before making a final decision. 2) Try to satisfy yourself about their financial background and track record. They usually operate either as sole proprietorships or partnerships or, at best, a small scale company and, therefore, their capital and financial resources are minimal. 3) Usually, building contractors do not have large permanent teams of competent or skilled workers; they are recruited ad hoc, and if he has such a staff, it is usually a reliable indication of the health of his business. 4) At this time, construction workers comprise predominantly of non skilled and semi skilled foreign workers. Therefore, before engaging the building contractor, enquire about the background of the workforce. 5) Check out how many current projects he is undertaking. This indicates his available resources and concentration. 5.1) Find out what you can and cannot do from the Local Authority (LA) You may require some professional help with this. This item comes after the wish-list and budget are done, but prior to your soliciting a quotation from selected builders/contractors. Most house owners may, at this stage, and prior to the engagement of any consultant, make enquiries with the LA on the building requirements based on the nature of their intended renovation works. For those who reside in Kuala Lumpur, the LA is Dewan Bandaraya Kuala Lumpur (DBKL), while for those who reside in Petaling Jaya, the likely LA is Majlis Bandaraya Petaling Jaya (MBPJ), and if the renovation is to be done in the Subang Jaya/Seri Kembangan/Puchong vicinity, it is Majlis Perbandaran Subang Jaya (MPSJ). One could check the assessment bills to verify the related LA. You may check with the LA on the nature of the renovation; whether a professional is required to draw up plans and make submissions, or whether a standard form or pre-approved (plans) would suffice. Simple jobs such as a kitchen extension do not require submissions for approval by an architect or draughtsman. You may also enquire about the scope of works allowed, such as the requisite ‘setback’ requirement, i.e. the minimum distance from the boundary for erecting your building or column and wall, and a check on the height restriction would also be helpful.

Immortals poured out golden stone in Kepong!

Believe it or not, the pious worshiper in return gets his prayer fulfilled.

Gosh, human mortality power is greater than the immortals' !! See the below testimonial photo below :

It's a Wonderful Life ~ Loved ones smile = You smiling

七种人永远也买不到房子

一句话：没钱就别买房，买房了就别后悔！房子不一定要买最好的，合适你的就可以！

　1、永远觉得房价还会跌的人

这些人天天就在盼望崩盘，最好是开发商把房子都造好了再倒贴给他，在等待奇迹会发生的梦中人！

2、永远总是慢人一拍的人

看房的时候，这好那也好一到关键时候就磨磨唧唧，当断不断，犹犹豫豫，总是等机会过去了再懊悔的人。

3、永远都不相信开发商和中介的人

这些人永远都以自己为中心，宁可自己负天下人不能天下人负我！世界上没有纯为人民服务的开发商也没有永远坦诚的中介，毕竟大家都是做生意要吃饭的，关键是你怎么去看怎么去对待！

4、永远总是看而不买的人

这些人不是不想买，而是总想多看几套结果一看就不可收拾，房子总是越建越好，价格却也越升越高，好不容易看好了一套一问价格傻了，怎么和我当初看的价格差这么多呢？

5、永远相信专家的话的人

孰不知那些天天喊房价要跌的专家其实一边在喊跌一边却在到处抄底，试问下中国那位专家不都是有好几套房子？如果房价靠那些整天就知道吹牛皮的专家能跌下来，那……那你相信吗？

6、永远都在等待房价跌到谷底的人

这些人就跟炒股票一样，天天在等抄底，可是又有几个能知道谷底在哪呢？

7、总想买套十全十美的房子

这些人往往口袋里都没几个钱，所以总想把钱用在刀刃上！实际上有见过十全十美的房子吗？想要新街口的位置，紫金山别墅区的环境，江北的价格，想想可能吗？ 结果在看了N套房子后终于觉得累了困了，明白了房子原来是不能没有缺点的，在遇到一个黑中介或者是黑心开发商拼命地忽悠下一头就栽进去了，最后就整天在家 里怨天怨地怨人！

Malaysian made 불고기 Dream

Lately， I dreamt & dreamt of going to places. Its time to travel (again). Yesterday nite was a ridiculous one, came to a temple with many people queuing up to buy pork flesh, instead of to do prayers(dun they suppose to practice vegetarian)??? Musta got it from one of the Korean drama I'm watching now (they consume grilled pork flesh & meat (불고기 ~ Bulgogi).