flipping

House Flipping – Real Estate

We’re bound to think that the only investment options we have inreal estate‬ is ‪ ‎house flipping‬. But there’s actually more to that than we think. Here are ways at which you can enter the real estate ‪‎investing ‬industry:

1. A Basic Rental Property. This is an investment as old as the practice of landownership. A person will buy a property and rent it out to a tenant. The owner, the landlord, is responsible for paying the mortgage, taxes and costs of maintaining the property. Ideally, the landlord charges enough rent to cover all of the aforementioned costs. A landlord may also charge more in order to produce a monthly profit, but the most common strategy is to be patient and only charge enough rent to cover expenses until the mortgage has been paid, at which time the majority of the rent becomes profit.

2. A Real Estate Investment Group. Real estate investment groups are sort of like small mutual funds for rental properties. If you want to own a rental property, but don’t want the hassle of being a landlord, a real estate investment group may be the solution for you. A company will buy or build a set of apartment blocks or condos and then allow investors to buy them through the company (thus joining the group). A single investor can own one or multiple units (self-contained living space), but the company operating the investment group collectively manages all the units – taking care of maintenance, advertising vacant units and interviewing tenants. In exchange for this management, the company takes a percentage of the monthly rent.

3. Real Estate Trading. This is the wild side of real estate investment. Like the day traders who are leagues away from a buy-and-hold investor, the real estate traders are an entirely different breed from the buy-and-rent landlords. Real estate traders buy properties with the intention of holding them for a short period of time (often no more than three to four months), whereupon they hope to sell them for a profit. This technique is also called flipping properties and is based on buying properties that are either significantly undervalued or are in a very hot market.

4. Leverage. With the exception of REITs, investing in real estate gives an investor one tool that is not available to stock market investors: leverage. If you want to buy a stock, you have to pay the full value of the stock at the time you place the buy order. Even if you are buying on margin, the amount you can borrow is still much less than with real estate. Most “conventional” mortgages require 25% down. However, depending on where you live, there are many types of mortgages that require as little as 5%. This means that you can control the whole property and the equity it holds by only paying a fraction of the total value. Of course, your mortgage will eventually pay the total value of the house at the time you purchased it, but you control it the minute the papers are signed.

5. A Real Estate Investment Trust. Real estate has been around since our cave-dwelling ancestors started chasing strangers out of their space, so it’s not surprising that Wall Street has found a way to turn real estate into a publicly-traded instrument. A real estate investment trust (REIT) is created when a corporation (or trust) uses investors’ money to purchase and operate income properties. REITs are bought and sold on the major exchanges just like any other stock. A corporation must pay out 90% of its taxable profits in the form of dividends to keep its status as an REIT. By doing this, REITs avoid paying corporate income tax, whereas a regular company would be taxed its profits and then have to decide whether or not to distribute its after-tax profits as dividends.

We have looked at several types of real estate investment. However, as you might have guessed, we have only scratched the surface. Within these examples there are countless variations of real estate investments. As with any investment, there is much potential with real estate, but this does not mean that it is an assured gain. As with any investment, make careful choices and weigh out the costs and benefits of your actions before diving in.

*Investopedia

Nine Seputeh

Completion of Property Transaction Malaysia

This question is not only asked by the purchaser of a property transaction but is also asked by the seller who sells the property to get money out of it. Most seller and purchaser expect a property transaction to be completed within a month or two. That is not the case as there are various factors to be taken into consideration and various parties involved other than the seller and the purchaser.

A lawyer is involved in a property transaction as a facilitator. A lawyer manages the various parties involved in the property transaction which include:

  1. The seller,
  2. The purchaser,
  3. The lawyer representing the   seller (if the lawyer is acting for the purchaser) and vice versa,
  4. The housing developer (which can be the seller or is involved  in the  transaction as the  property is not issued with an  individual title yet),
  5. The land office (where the property is registered as proof  of ownership),
  6. The State authority (which is actually represented by the and office but the State  authority is involved the property requires a  consent to transfer or consent to charge –  usually leasehold property),
  7. Local authorities (to pay for any assessment notice arrears),
  8. Bank (or banks, depending   whether the purchaser purchase the property by taking a housing loan and if the seller still owes the bank any money which needs to be paid first).

The duration of a property transaction, from the time that the Sale & Purchase Agreement is signed to the time that the purchaser can say that he is the new owner of the property, fluctuates according to the type of property being transacted.

The easiest type of property to transfer will be a piece of land but this type of property also has pitfalls which can drag the transaction into many months. If the property is a house, the package that it comes in will be the key to the process. A house can be built on a piece of land and sold as a terrace house, a bungalow or a semi-D. A house can also be an apartment, a condominium and a penthouse. Agreements governing the sale of the house built on land and the one sold as a strata property are different.

When you buy from a property developer, the sale of a house on land will use the agreement provided for in Schedule G under the Housing Development (Control and Licensing) Act 1966 which is the sale of building and land. The time frame provided for the property to be completely built and delivered to the purchaser is two years.

Within the two years, the housing developers at their own pace must built the structure of the house, get all the infrastructures within the housing development ready, deal with authorities and finally deliver the key to the house buyer. The sale of strata property will use the agreement provided for in Schedule H of the Housing Development (Control and Licensing) Act 1966 which is the sale of building or land which will be subdivided into parcel. As for strata property, the timeframe is increased to three years as there are a lot more complications in building a property with many units within it.

As housing developers have their own capability in building their housing project, you cannot actually say they are not delivering because you do not see any construction taking place at the place where your new house is supposed to be. As much as housing developers are said to have a reputation as businessmen who don’t deliver what they have promised, they can set the schedule of building the houses according to their own time frame.

If they are serious businessmen, they will want more purchasers to purchase their housing projects and keep them in business.  Only when there are no progress in the housing development for more than one year should you worry about the fate of your house, if you buy the property from a housing developer.

However, if you are buying a property from another individual, the timeframe for the completion of the transaction can fluctuate between three months to more than a year (or even more), depending on the type of property that you are buying and how you intend to finance your purchase.

If the property that you are buying is not charged to any financial institution and the property does not require to be approved by the State authority to be transferred, whether the property has been issued a title or not, the time for it to be transferred can be a short time of two or three months. This is a very rare occurrence in this day and age as most properties are purchased by the vendors in the first instance using financial institutions.

If the property is charged to a financial institution, the time for the transfer will be determined by the efficiency of bank which has put a charge on the property before it is sold. The bank will only release the property from its control once it has receives the full amount of payment due from the purchaser’s financier. Just imagine the intricacies that are involved as your lawyers have to communicate with your financier, with the vendor’s lawyer, with the vendor’s bank and in certain matters, the vendor himself, in trying to get the property unencumbered.

Once payments are made, the lawyer who handles the finance side of your purchase will have to secure the interest of the financial institution that you have chosen to finance your property transaction. That will take another duration which will depend on the efficiency of your lawyer and, to some extent, your financier.

One of the timeframe which usually delays the completion of a property transaction is when consent to transfer need to be acquired from the State authority. ‘Application for Consent to Transfer’, as it is called, usually takes between three months or more especially if the transfer is from a bumiputra seller to a non-bumiputra purchaser. Surprisingly, once consent to transfer is obtained, a consent to charge will only require a maximum of two weeks to be obtained from the same department.

If the property is still not issued with an individual title, the housing developer which had built the property needs to be involved in the equation. Although Section 22D of the Housing Development (Control and Licensing) Act 1966 has specifically stated a housing developer should not withhold confirmation of any arrears and can only charge RM50 for issuing an undertaking to the lawyer(s) handling the transaction, things get complicated if there are arrears, if Joint Management Body decided to be tough, or if the property is under receivership, to quote a few ‘complications.’ Add between two weeks to three months for your lawyer to resolve this.

Another delay will usually happen when the property needs to be redeemed from the seller’s financier. As the seller’s financier is in the process of losing a customer, the department that handles the issuance of redemption statement and handling the redemption itself usually takes time to do as such. Another factor is the security documents are usually kept by a storage company and takes some reasonable time to be located. Add in another one or two month to the equation.

These are just some examples which can crop up when a property transaction is being conducted by your lawyer. A good advice for novice or even seasoned seller or purchaser of property is to follow closely your lawyer who conducts your property transaction and help them facilitate the transaction wherever you could.

*propertyinsight
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KL – Butterworth ETS fast train service ready by July 2015.

An alternative transport to avoid bad traffic to & from up north? KL – Butterworth ETS fast train service ready by July 2015.

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Here’s some good news. The northern route of the Electric Train Service (ETS) from Ipoh to Butterworth is expected to start next month. When combined with the current KL-Ipoh service, the fast train will connect the capital city to Penang, offering an alternative to the car and airplane.

“On July 9, I will personally head to Batu Gajah in Perak to attend a trial run with other government officials to check on the Ipoh-Butterworth trains. Only after that, I will announce the important details of this new route, such as the schedule and the fares,” Transport Minister Datuk Seri Liow Tiong Lai said in Sitiawan yesterday.

Liow said that trial runs are currently ongoing and a lot of preparation was needed before the route could be fully operational. “Once it is, I’m sure it will provide a good service to the people.”

 

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New approach in facing a challenging property market

BY THEAN LEE CHENG

The past week, two of Malaysia’s largest property developers made a significant call. Mah Sing Group Bhd and S P Setia Bhd will focus on building more “affordable housing” this year. Although the term “affordable housing” is open to interpretation in terms of its price point – reports have pegged affordable housing at RM1mil – their call is an indication that they have taken note of the slow and challenging market.

However, the RM1mil price tag may continue to be elusive. S P Setia Bhd says its mid-priced range are priced between RM500,000 and RM1mil while Mah Sing will go no more than RM1mil.

Why are these developers re-looking at their prices?

The nature of property development is such that a property developer has to sell in order to bring in revenue. If there are no sales, there is no revenue and no profits, which explains why marketing and branding is so important today.

The last several years before 2014, easy credit had enabled developers to get on the “luxury housing” or “lifestyle housing market.” As more developers jumped on this bandwagon, in order to differentiate themselves from the rest, a couple of them have broken away from the “lux” market and moved on the “aspirational market”.

As the name implies, the “aspirational” trail involves selling housing which creates desire. The onus falls on the developer to create a community that is so desirable that you are willing to fork out that loads for that environment.

Unless one is prolific in terms of ideas, branding and marketing strategies and moving into the a new “aspirational” market, going down a few notches may be the more prudent thing to do.

S P Setia Bhd has also taken the step to cut the group’s sales target for the current financial year from RM4.6bil to RM4bil early this week when it announced its second quarter results. This represents a drop of 13%.

Mah Sing, on the other hand, earlier this week said “it is still premature to revise or adjust” their sales target at its AGM towards the later part of the week.

New strategy
Stripping out S P Setia overseas projects, its domestic sales continue to be driven by locations like Setia Alam in Shah Alam, Setia EcoHill in Semenyih and Setia Eco Glades in Cyberjaya. S P Setia Bhd acting president and CEO Datuk Khor Chap Jen says the company has adapted its strategy to include mid-priced housing of about RM700,000 to RM1mil in the Klang Valley.

This has proven to be “fruitful” with launches in Setia Alam in Shah Alam, Setia EcoHill in Semenyih and Setia Eco Glades, Cyberjaya continuing to be major contributor to sales, he says, when announcing his second quarter results.

Khor says as long as they have the “right products” in strategic locations, they will continue to have strong demand for the current financial year. Its mid-priced housing range from RM500,000 to RM1mil. The company will also be launching other types of affordable housing under the Rumah Selangorku brand. This was supposed to be unveiled this week but was subsequently postponed.

Rumah Selangorku will be launched in Setia Alam in Shah Alam and will be priced at RM170,000 a unit with a built-up area of about 800sq ft, and RM200,000 for a unit with a built-up area of about 900 sq ft, says S P Setia’s corporate communications executive Celina Ong.

Also in Setia Alam, the company launced Seri Pinang apartments in February, priced from RM247,000 with a built-up area of about 850 sq ft. The company also launched three-storey housing priced from RM783,000 and RM795,000 in Setia Alam. Both were fully taken up in February and April respectively.

It will launch super-link homes in a gated and guarded development in Setia EcoHill in Semenyih in the middle of this year, priced from RM773,000 onward.

Better second half?
At its AGM on Thursday, Mah Sing hoped the property sales momentum to improve in the second half of this year. Says executive director Datuk Steven Ng Poh Seng after the company’s AGM: “At this juncture, it is still premature to revise or adjust our sales target.”

As of April 22, its sales hit RM761mil, 22.2% of this year’s sales target of RM3.43bil.

Says Ng: “In the first quarter, our sales of RM560mil was short of our RM800mil target. The feedback from buyers (is that) it is not like before. Loan processing is taking longer, and it is harder to get financing.”

Consumer sentiment has been affected by factors such as the implementation of the goods and services tax (GST), the weaker ringgit and lower commodity prices, he says.

“We think that consumers are in a temporary adjustment period of six to nine months, post-GST implementation,” Ng says.

Managing director and group chief executive Tan Sri Leong Hoy Kum says the company has taken this new strategy of houses below RM1mil because the company has “to sell what people want to buy”.

“Our strategy of reaching out to the mid-range mass market is in line with current market needs amid the challenging property market,” says Leong.

Its 2015 pricing strategy is 84% of planned residential launches will be being priced below RM1mil, 71% priced below RM700,000 and 44% priced below RM500,000. In Greater KL, units that are below RM500,000 include Savanna Executive Suites in Bangi. In Iskandar Malaysia, Johor, these are Sierra Perdana Meridin Bayvue serviced apartments and Bandar Meridin East link homes.

Leong says the fundamentals driving demand remains intact but the overall market is affected by caution. He says the two factors – a young population below 40 years old and urban migration – will be two key drivers of the housing market.

Leong says more than 200,000 marriages are registered annually. Marriages (as with high divorces) create demand in housing, but only 70,000 and 90,000 new homes, on average, are completed every year.

HSR

What happen to Malaysia HSR?

Malaysia’s Land Public Transport Commission CEO ‘misquoted’ on High Speed Rail terminus

Singapore’s Ministry of Transport earlier said it was “surprised” that Malaysia’s Land Public Transport Commission had said in an interview that it preferred to terminate the upcoming high-speed rail terminus in JB. However, the commission says its CEO was misquoted.

HSR

SINGAPORE: Malaysia’s Land Public Transport Commission (SPAD) late Friday (Jun 19) said that its CEO was misquoted in an interview pubished by a Malaysian business paper, that it preferred to terminate the upcoming high-speed rail (HSR) terminus at the two nations’ existing CIQ (customs, immigration and quarantine) complex in Johor Bahru.

In an interview with The Edge Malaysia published on Monday, SPAD’s CEO Mohd Nur Ismal Mohd Kamal was asked to elaborate on how the final station on Singapore’s end is “an issue”.

“We would prefer to terminate the line at the existing CIQ. However, Singapore wants it to terminate in Jurong East and understandably so,” he said. “Just as we want to develop Bandar Malaysia, they want to use the HSR to drive development in Jurong East.

“From our perspective, by terminating it at the CIQ, the entire project will be within our borders and we will have more control of it. This will be closer to Orchard Road than Jurong East,” The Edge quoted him as saying. “But of course, we have to weigh Singapore’s economic and commercial considerations as well to come to an agreement.”

However, SPAD said that he was “regretably misquoted”, and instead said: “We would have preferred to terminate the line at the CBD area. This will be closer to Orchard Road than Jurong East. However this is a joint project for the benefit of both countries and hence there has to be give and take. For example, if we had wanted to terminate (sic) at the CIQ, the entire project will be within our borders and we will have more control. But this would not have been optimal and neither country would have benefited as much.”

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In May, leaders of Singapore and Malaysia announced that the HSR terminus in Singapore will be located at Jurong East. Mr Syed Hamid Albar, SPAD chairman said to Channel NewsAsia: “We carry out decisions of our governments as reflected in the decisions of both PMs. No one can change that.”

Singapore’s Ministry of Transport (MOT) had earlier released a statement stating it was “surprised” at the initial comment that indicated preference for the HSR terminus to be at Johor Bahru’s CIQ complex.

“Our understanding is that Malaysia views the commercial premise of the Kuala Lumpur-Singapore HSR project, and with which we agree, as being based on a direct connection between the two city centres. Terminating the HSR in Johor Bahru will not achieve this objective,” said MOT’s spokesperson.

HSR OPERATING MODEL IN DISCUSSION

MOT said both Singapore and Malaysia are in discussion on the HSR’s commercial and operating models. Singapore has proposed that the domestic transit HSR services, which stop at six stations in Malaysia, be operated separately from express non-stop services between Kuala Lumpur and Singapore.

“This will give Malaysia autonomy over the domestic transit services to serve Malaysia’s domestic needs and benefit Malaysia,” said the transport ministry.

Mr Nur Ismal had told The Edge: “Because the additional stations will benefit Malaysia more, Singapore is not so keen on the transit line. However, just as we must take its economic and commercial considerations into account, it must also take care of us. There has to be give and take so that both parties can benefit.”

He added that the cost of the six stations is “very small”, less than 10 per cent of the entire HSR project.

NO AGREEMENT ON HIGH BRIDGE ACROSS SINGAPORE, JB: MOT

As for the Johor Bahru-Singapore Rapid Transit System Link, MOT said Malaysia has not confirmed its terminus location. Singapore’s terminus will be located at Woodlands North station on the upcoming Thomson-East Coast MRT line.

MOT added that both countries will only be able to determine the type and alignment of the crossing after both terminus locations are confirmed.

“We have yet to receive official confirmation of the location of Malaysia’s RTS terminus in Johor Bahru. As such, contrary to what was said in the Malaysian media by Johor State Exco for Public Works, Rural and Regional Development Committee Chairman Datuk Ir. Haji Hasni bin Haji Mohammad, there is no agreement with Malaysia that the crossing will be a high bridge,” said MOT.

Note: This story was updated at 9.30pm on Jun 19 following a statement to the media from SPAD.

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Imagination and the real estate market

“When we imagine the future, we only see today.”

In order to accommodate economic and population growth, a city can either move outwards or upwards. Moving outwards was a trend that was popular in the 80s and 90s that led to the birth of “Bedroom Townships”, such as Subang Jaya, Bandar Utama, Sri Hartamas, Mont’ Kiara, Bandar Sunway and Puchong, to name a few.

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I WAS fortunate to attend a series of lectures in conjunction with the “Business of Innovation 2015” Conference organised by the London Speaker Bureau earlier this month which featured Sir Bob Geldof of “Live Aid” fame.

During his speech, he asked the audience what would be the most disruptive technology this century will witness. Lacking an answer, he removed his smartphone from his pocket and reminded everyone there that we all should pay attention to the power of what we hold in our hands and how it will reshape our collective future.

The digital economy has arrived  

It started with the Internet back in the 1990s and as bandwidth expanded to allow the streaming of movies and music coupled with the birth of social network and the rapid digitalisation of our business, a revolution was created in the online world.

Its impact on the way we do business is beginning to be felt in many industries that did not see it coming, and have had to scramble to change their business models or face collapse.

We are witnessing the great transformation of the digital age. Among its victims are the following industries – newspaper print edition, brokerage, insurance, publishing, travel and now, the big box retail industry. All have had to make rapid changes to their business models, resulting in broad changes to their real estate requirements.

Professor Douglas McWilliams, one of UK’s leading economists, just launched a book called The Flat White Economy: How the Digital Economy is Transforming London and the Other Cities of the Future. In it, he describes the cultural shift over the past decade from the champagne-soaked city to the coffee drinking technophiles. The flat white economy -technology, creativity and marketing made up 7.6% of the UK’s GDP (gross domestic product) and is expected to rise to 15.8% by 2525.

The next wave of demand
So, how do we look into the future and see how our economic demand for real estate will evolve? The key is to see if we too will follow the path of technological innovation and predict how those companies and their employees will view their office accommodation choices. This revolution will also affect the entire civil service as we are witnessing an unprecedented move by governments to adopt online solutions for dealing with the public/government services interfaces. Counter services could be a thing of the past.

For companies today, staff retention is high up on the agenda. Losing starfee earners, whether they be from the capital markets or technology companies, is damaging for businesses, and many are realising that even the cost of replacing support staff can be higher than the rent paid on their workstations.

In order to accommodate economic and population growth, a city can either move outwards or upwards. Moving outwards was a trend that was popular in the 80s and 90s that led to the birth of “Bedroom Townships”, such as Subang Jaya, Bandar Utama, Sri Hartamas, Mont’ Kiara, Bandar Sunway and Puchong, to name a few.

However, such decisions break up business clusters and create the traffic chaos that we witness today as more and more people live away from the city and have to find their way to work every day.

A skyscraper boom?
Today, world cities are in the midst of the skyscraper boom (defined as a building exceeding 350 ft in height). This is seen as a means of resolving the major economic and geographic changes facing cities. London has added 23 new skyscrapers since 2000 compared to 17 in the preceding 40 years.

Meanwhile, New York has added four new towers last year alone. The new enthusiasm for vertical buildings in cities is the change in the perception of companies in relation to their  workers. In the 70s and 80s, it was always a question of cost that companies wanted to minimise but with little thought on how to boost productivity.

However today, firms are viewing real estate as a means of controlling a much bigger cost due to staff retention. This has coincided with a move back to the city centres to live. In short, they are wanting to create a work/life balance for the new generation of employees.

Companies are now approaching space from the perspective of:

  • Creating an office space that staff want to be in.
  • Changing working habits through office design, thereby enabling a higher degree of collaboration among staff members in the workplace.
  • Encouraging the new workforce to move into city centres to be near their workplace.

We have seen an unprecedented building boom of new skyscrapers, with much more to come. Will every developer get it right? Probably not, but there are some very attractive new developments with integrated F&B (food and beverage) outlets and accommodation blended into a single offering.

I believe that the next wave of workers in the cities will be looking at city living with all the amenities close at hand and to their place  of work. Demand for knowledge workers is increasing so is the need to accommodate them in buildings that they find attractive.

The future success of these new skyscrapers may take many of us by surprise. If we had any imagination, we would have seen it coming.

>> Datuk Stewart LaBrooy is the chief executive officer of Axis REIT Managers Bhd.