Below

b a n k va l u e

How to buy & own

FOUR
PROPERTIES

Heres how you can buy and own

four properties even though you
do not have much cash in hand
 WHY LAH I cannot aord
properties like some people...

Today, people are often puzzled by how some are able to

buy 3 to 4 properties when they are below 30 years old.

We received many enquiries through emails and Facebook

messages from those who are below 35 years old on how
they can buy properties with as less cash as possible.
 Challenges for a young property buyer

To provide this solution, lets try to understand what the typical

challenges are for a young property buyer or investor:

Just started their career and the starting pay is not high

Unable to buy because of inability to raise the 15% cash required

Finding it challenging to be disciplined and to slowly raise cash by

traditional means of savings steadily from monthly income

Afraid if they were to take so long and by the time they have some savings,
for example RM 30,000 after 2 years, there is a high probability that
property prices would have gone up and RM30,000 is already insufficient

Everyone knows its best to buy and invest in properties as early as possible. The
challenge of selecting the right properties but with limited capital is easier said
than done
Ive just started working, my pay is not that much yet
Banks will use your salary to see if you can commit to the month-
ly installments for your mortgage.I dont have enough savings to
put down a downpayment and pay legal fees Banks love to loan
money to first time property buyers, but sometimes these buyers
are unable to proceedbecause of inability to raise the 15% cash
required

Its so hard to save every month..

Finding it challenging to be disciplined and to slowly raise cash
by traditional means of savings steadilyfrom monthly income
I saved all
I saved all this money for many years but now Istill cant
afford a house..
this money
for many
Property prices would have typically gone up by the time they
saved enough money. For example, someone may have saved
RM 30,000 after 2 years, there is a high probability that property
prices would have gone up and that RM30,000savings is already
insufficient.
years but
I was late to decide to purchase because I needed to save
first..
now I still
cant aord
Everyone knows its best to buy and invest in properties as early
as possible. The challenge of selecting the right properties but
with limited capital is easier said than done.
By the time someone is able to save, the properties that they
would like to buy would have typically increased in value, above
a house..
and beyond what they can afford today.

So what is considered as little cash as possible

Before we dive into ways to buy 4 properties, lets understand

that the term as little cash as possible is relative. One may deem
as little cash as RM 5,000 or RM 10,000 or RM 15,000 depending
on investment goals. For the purpose of this ebook, we will
consider all these to help you get a better idea on how best to
move forward with your own amount of cash available.

03
How do I buy 4 properties with as little cash as possible?

There are three strategies that can be used.

1. Buy Under Construction 2. Buy Subsale or Completed 3. Buy a mix of Under

(Undercon) or properties strategy Construction or Subsale
New development strategy

Each strategy above will be explained in some detail and each

comes with its own list of pros, cons and risks. How you would
choose which strategy is best will depend on how much cash
you have in hand, your risk appetite and more importantly the
research you put into it.

So to understand how does one do this, we interviewed a

well-known author and property investor, Faizul Ridzuan who
wrote the book entitled WTF? 23 Properties By 30.

He has purchased over 20 properties before he was 30 years old,

so we think he can give us a solution to this problem faced by
young property buyers and investors. Furthermore, he founded a
property investment firm called FAR Capital in 2013 and today,
FAR Capital have been buying properties valued totaling to
more than RM100 million on behalf of their clients.

Here are the excerpts of our interview with Faizul Ridzuan.

04
THE INTERVIEW with Faizul Ridzuan

BBV:Did you remember your first property purchase and

what were the challenges in acquiring that first purchases
and the lessons learned?

FR: Well, the challenge was that I only had RM2, 000 in capital,
and I did this thing called a zero down deal*, where I bought an
undervalued property and took a bank loan that is higher than
my actual purchase price. As a result, not only do I get to buy the
said property, I also get additional cash of over RM25,000 that I
used as seed capital to buy my next property.I manage to lever-
age on this mortgage to provide me with additional cash to buy
more properties. Thats the biggest lesson I learned from this
transaction, on how to maximize my cash.

BBV:Out of curiosity, why did you pick a completed proper-

ty? Is it better than buying a property from a new develop-
ment?

FR: At that point of time, abandoned projects (incomplete devel-

opment projects) were a lot more common compared to today.
Therefore, given my low salary, and limited cash, I cannot afford
to have my first property become an abandoned development
and not earning any rental income. To be honest, I did not have
the ability nor the knowledge to forecast what will be the future
rental for new properties.

My limited knowledge and fear made me think that I need to buy

properties with greater certainty, so under-construction/new
development properties were not suitable for me at that point of
time. Completed properties meant I knew exactly what I was
getting and the rental rates that I will be able to fetch.

Today, with many changes on requirements and policies towards

property develoers, it is much safer to buy primary market prop-
erties than it was 11 years ago.

04
 The interview - continued

Tropics@PJ/Damansara
BBV:So based on the current situation, buying a completed RM2,000 downpayment and sold
it for a RM120,000 profit in less
property made more sense. What other benefits of buying an
than 2 years.
already completed property?

FR:I believe it was the right move to buy a completed property. I

now understand that buying completed properties allows us to The Zest
Bought at RM230,000 and sold it
rent out the property immediately and give us a source of
3 years later for RM 230,000
passive income. As I can get income right away, I will not have profit
problems getting loans for my next purchase. This was important
to ensure I am eligible for loans.

TitiwangsaSentral
Bought more than 1 unit at
RM250,000 and today it is worth
over RM600,000. I enjoy net
BBV:At present, have you changed your insight on under
positive cashflow of above
construction properties? We heard that you started investing RM1,000 every month.
in completed properties initiallyand now have moved to
buying under-construction properties? Why the shift in your
buying strategy? Axis Ampang
Bought RM145,000 and sold it
FR: The reality is that there are more uncertainties buying for RM185,000 profit 3 years
later. I was able to get over
under-construction properties compared to buying completed RM1,000 net cashflow per unit
one, or what the industry calls it, subsale properties. For some- while I had it.
one with limited knowledge, they are better off buying subsales
compared to buying under-construction properties. But once I
learnt a little, I discovered that buying under-construction proper- Taman Raintree
ties could be profitable as well. On the right are some real life Bought at RM172, 000 and sold it
for RM168,000 profit, 4 years
examples of under-construction properties I have purchased and
later.
how they are performing today.

Palazio in Johor Bahru

Bought a few units between
starting from RM100,000. Today
they are worth over RM200,000.

04
 The interview - continued

BBV:What are the risks in buying under construction proper-

ties? Are you looking more into under construction proper-
ties nowadays?

FR:Yes like everything else, there are risks. The due diligence and
homework required is more whenbuying under construction
properties, compared to buying subsales. Having said that, the
reward can be very good when you select the right under
construction properties.

That is why, lately, whilst I started buying subsales initially, I have

bought more under-construction properties compared to subsa-
les, as under-construction properties provide a huge advantage
to certain type of investors.

However, when equipped with proper analysis

and research, you would be able to greatly
The risk of purchasing an
reduce those risks, hence why I always advise
under-construction property
people to continue learning so that our risk
diminishes over time. I have bought over 40 is higher due to the
properties out of which, approximately 30 of
them were under-construction properties. In uncertainty and our inability
that time, I have not made a disastrous
purchase,hopefully never!). There are certain to forecast correctly what is
formulas and rules that you have to apply in
property selection to minimize their risks when
going to happen to these
investing in under-construction properties. properties upon completion.

BBV:So you mentioned earlier about the advantages of

buying under-construction properties. Care to elaborate
more?Could you also provide an example?

FR:Well, I believe for those who want to invest today, but do not
have much cash, under-construction properties probably suit
them best. Let me give you an example; the difference of capital
required to buy subsales, both on a regular 10% downpayment
and on BelowBankValue.comwhere you have properties where-
downpayment can be as low as 3%.And also an example of an
under-construction property valued at RM300,000 summarized
in the table below:-

04
 The interview - continued

REGULAR SUBSALE VS BBV VS UNDERCON

REGULAR SUBSALE
UNDERCON
SUBSALE under BBV

DOWNPAYMENT 30,000 9,000 3,000

SPA LEGAL FEES 7,550 7,550 0

LOAN LEGAL FEES 3,750 3,750 0

RENOVATIOn 10,000 10,000 0

REFURBISHMENT

TOTAL UPFRONT 51,300 30,300 3,000

Note: SPA and loan agreement legal fees for undercon properties are typically borne by the developer. Renovation costs for
under-construction is only upon completion

On regular subsale deals, a buyer normally needs to In rare subsale deals where you can buy a property
have about 15% to 20% of the property value in with 3% downpayment like the ones you can find
cash in order to safely conclude a purchase. In the in BelowBankValue.com, you will still need about
sample above, the buyer needs to have in excess of RM30,000 capital upfront. In typical under-con-
RM50,000 in savings to buy this completed prop- struction deals in the market, you can buy a proper-
erty. ty for as low as just RM3,000 capital (or even less)
upfront. If we have RM30,000cash, it will allow us to
So even if it is a zero-down-deal* property purchase, buy 10 properties instead of 1 from a subsales
you will still need to fork out the same cash upfront transaction.
first to cover the initial downpayments and also not
forgetting legal fees, government stamp duties and So for an investor like me, I prefer to use as little
other ancillary costs required to complete the cash as possible to buy more properties. I tend to
transaction . favor buying 5 properties instead of just 1 using the
same amount cash at a given time.

04
 The interview - continued

BBV: I see. So what would you recommend to someone who

is about to dive into buying properties? Buy subsales, or
under-construction properties?

FR:I get asked about this a lot and I have a simple solution for
this question. If they haveplenty of cash and savings available, I
think they should always look at subsales first as it is safer. You
know exactly what you are getting, and you can check if you are
buying undervalued properties. In addition you can also check
the rental rates for the properties to easily determine your
expected returns.
But if one doesnot have much cash, under-construction is normal-
ly the best option. Just note that the risk of the unknown is
higher for under-construction properties, so please educate
yourself sufficiently to minimize your investment risk.

BBV: Banks will typically not approve a 90% loan when one
buys more than two properties. You told us you have bought
many properties over the years. So, one question that often
puzzles our readersis that how do people like you overcome
70% Loan-To-Value ratio (LTV) for the 3rd property or more
onwards.

FR:Well there are a few ways on how to do this and I teach these
methods during SarjanaHartanah. However, I donot think it is
suitable to discuss in an open domain like this.

04
 The interview - continued

BBV: Any last advise to aspiring investors?

FR:I guess I can share some advice for young investors. Here are
five (5) tips from me:

Your 90% loan quota is very precious, so if you

can try to use it on a meaningful size property of
Quality is more important than quantity. You do
above RM300,000 with a decent rental of above
not need to buy 40 properties like me to be comfort-
RM1,300.Be strategic about how you use your loan
able. In fact, buying 4 properties is enough to give
as it will make a world of a difference in your proper-
you RM20,000 a month in passive income and a
ty investment portfolio.
RM6 million portfolio after 25 years.
Can you imagine building a RM20,000 monthly
If you still possess 90% margin of financing quota,
retirement income by using minimal capital of only
you could easily buy 4-5 properties and obtain 90%
RM12,000 today?
margin of financing if you know the method. Your
2nd or last 90% quota is your most important quota,
You can look at real examples of the properties that
so learn how to maximize it and use it wisely!
am buying on behalf of my clients, where the proper-
Possessing good, investment grade properties
ty was bought with only RM3,000 capital and we
paired with healthy rental income is a good vehicle
estimate rentals to be around RM2,400 upon
for any individual to achieve a sense of financial
completion based on rental rates of similar, complet-
freedom with an asset that pays by itself (via means
ed units. Therefore, you do not need to have a lot
of your tenants rental payment).
of money to start investing today.

Once you have decent knowledge, get started on

investing. Dont wait. The earlier we start, the Buy completed properties as a start. This allows
better it is. In the last 27 years, property values have you to collect rentals from the property and allows
gone up almost every year based on data from you to use rental income to justify obtaining 2nd,
NAPIC. Since 1988 until 2015, there were only 2 3rd and 4th loan the next round.
years that property values dropped that is during
the 1998-1999 financial and economic crisis. There-
fore, out of the 27 years, only 2 years (1998-1999)
saw a drop in property values.

Do not forget to utilize your EPF savings. When

you buy a property, and once you have signed the
SPA and loan agreements, you can withdraw up to
10% of the property value from your EPF account 2.
So even though you might not need to pay a lot of
cash to buy upfront, you are still entitled to withdraw
your EPF savings and this can be used during rainy
days.
04
The interview - Strategy Summary

STRATEGY SUMMARY

There is plenty of insight shared by Faizul that we think will be extremely helpful in guiding you forward. For
those who are still unclear, we can summarize our key points from Faizul as follows:

1. Buy Under Construction 2. Buy Subsale or Completed 3. Buy a mix of Under

(Undercon) properties strategy Construction or Subsale

Small booking fee / commit- Higher commitment in cash; Buy both types; subsale and
ment e.g RM 3,000 15-20% of property value under-construction

Can purchase multiple units With a completed property, Buy first subsale property with
since the booking fee requires you know the risks as well as higher bank valuation to get
small cash commitment. market demand for rental additional $$$ from initial loan

Risk: Untested demand for Can explore different rental Buy multiple units of under-con-
rental. Requires more research strategies for a completed struction properties. Mitigate
time and due diligence. Look- property. E.g- by room, airbnb, LTV issue with Faizul at
out for public transportation makeover Sarjana Hartanah

Risk: Find out developers Risk: Higher cash commitment Risk: Higher cash commitment
reputation from subsale transaction from subsale transaction

Risk: Multiple units imply Mitigate strategy checkout Requires more cash for initial
multiple loans to be submitted listing at belowbankvalue.com subsale property with higher
to banks,and this comes with to help get additional cash bank valuation, and under-
the corresponding financial from properties with higher stand which under-con works
commitment. bank valuation best for you

04
From the interview with Faizul Ridzuan we can also summarize that:

Step 1: Explore buying completed, BBV properties that come

with a potential to do markup to unlock extra capital

The main objective here is to leverage on job After researching online on Low Yat Forums (LYF)
security to obtain cash from banks via mortgage, and discussions with his LYF kakis, he realized it
and then use the cash to buy other properties that would make more sense to restructure his deal as
we would not be able to afford due to capital per the image on the bottom right.
limitations.

Ali has an opportunity to buy a property at Dam-

ansara for RM 400,000 with bank valuation that is
able to go up to RM 500,000.

REGULAR SUBSALE DEAL MARKED UP DEAL

RM 400,000 RM 400,000
AGREED PRICE AGREED PRICE

RM 40,000 MARKED UP RM 500,000

DOWNPAYMENT SPA PRICE

RM 20,000
LEGAL FEES
AT 90% financing; DOWNPAYMENT RM 50,000
total required to purchase
is RM60,000 to own Ideally, if the owner can agree to only take 3% upon SPA
a RM400,000 property and only receive the remaining balance 7% upon drawdown of financing,
this method will favour the buyer in terms of preserving capital

RM 60,000
CASH UPFRONT
RM 25,000
LEGAL FEES
AT 90% financing
RM 1,858 with additional 7% only upon drawdown;
total required to purchase is
INSTALLMENT RM 40,000 to own a RM 500,000 property
30 years @ 4.66% p/a

RM 40,000
CASH UPFRONT Upon Bank Drawdown,
bank releases RM 460,000 to lawyer,
who proceeds to pay the vendor
the remaining balance of 97% of RM 400,000

RM 25,000
TOTAL CASHBACK
In addition, you are able to recuperate
and preserve capital as the deposit
and legal fees is returned as cashback

RM 2,280
INSTALLMENT
30 years @ 4.50% p/a

04
Just to recap:

Normal VS Marked up Deal

No Markup With Mark Up & 3% DP

(RM400,000) (RM500,000)

RM 60,000 RM 40,000
CASH UPFRONT

none RM 25,000
CASH UPon drawdown

RM 1,858 RM 2,280
monthly INSTALLMENT

In a nutshell: by structuring the purchasedbased on a marked up deal:

a) Can buy with very minimal cash upfront!

b) Can have surplus cash as capital and war chest for next
investment or preserve as savings.

c) Furthermore, if we can withdraw from our EPF account 2

contributions, this will enable us to have more cashback!

04
Step 2: Use cash to buy grade A properties with
marked up cashback!

Possibly do multiple submissions of loan Hold for capital appreciation! A few further insights
applications for 2-3 properties under the on motivations behind holding on to property for as
second 90% property quota. long as possible:

This may enable the buyer to achieve positive a) NAPICs national average is 10.9% positive
cashflow position from these properties to offset for capital appreciation per annum for the past 10
years! (Source: NAPIC)
the deficit position for the 1st property.
b) Malaysia is having a shortage of proper housing
a) Buy into new development launches with hence buying into the right property is very
minimal cash upfront hard to go wrong (TheEdge)

b) Aim for top floored units as interest c) Huge savings reserve Khazanah Malaysias
payments are due later! insight into Malaysians cash reserve shows
although many are skeptical about property
c) Always remember to buy the right product outlook, there are many individuals that have
right sized unit, right neighbourhood in a lots of cash reserve and are likely to buy into
researched area etc! properties the moment they become below
market value
d) Upon Vacant Possession and handover of keys,
the key is to quickly renovate. To obtain r d) Inflation! Your RM 100 today is theoretically RM
rental income via swiftly renting out to good 119 five years ago, and is expected to be worth
profiled tenants! RM 81 five years later! So better to lock in your
money in properties (Source: Statista.com)

Step 3: Rent it out! Many methods to

maximize cashflow

a. Regular tenancy (1 2 years)

b. Rent by room (individual tenancies to individuals

on standard 3.5 deposit terms)

c. Rent by head

d. Rent by flexible tenure viaAirBNB/Booking (a

premium product for those that require specific
term accommodation)

04
Conclusion

With the above list of strategies and real life examples shared in
the interview, it would be straightforward for an individual to
enter into the property market and maximize their opportunity
with as little cash as possible.

After a few years, with the right property acquisitions, the consoli-
dated property portfolio and net worth has a high propensity to
increase tremendously!
So to enable yourself to buy 4 properties with as little cash as
possible:

Learn financial discipline. Overcome all the

challenges outlined above that are faced by new
investors

Learn more about property investments; take notes

and take risks.

Read the above interview again to understand the

strategies and execute your plan

Tells us what you think on FB and Website

Buy more than two properties with 90% LTV

For a limited time only and to the first 50 participants, we can

assist you to obtain 90% loans on your 3rd and 4th properties by
registering here. Offer ends 31st December 2016.