It was sheer laziness that catapulted Eric Lee, in his late 20s from being an average young man playing RPG to a property millionaire. Asian Property Review talks to him about his winning formula
APR: How did you discover property investing?
Eric Lee: When I was at school, I was always dreaming about not having to work yet receiving a big passive income. I really didn’t want to work. So, I scouted around for the easiest way to earn money. I discovered that investment is the best way for me to achieve what I wanted during the first year of my university life. Like most people, the first investment product that I started with was shares. I played the stockmarket for about a year but at the end of it, I felt that it wasn’t suited for me (due to some personal reasons), so I make a switch to property investment. I started out in 2010 just when the property market in Malaysia was starting to heat up. In my 5-year-old property portfolio, I’ve only spent about RM100K capital but now own at least five properties worth a few million ringgit. Of course, my net worth is only say, a fraction of that on paper. If I cashed out today however, I should achieve my 5-year financial target and will not need to work for money anymore. I can just let the money work for me.
APR: Was it smooth-sailing from the start or did you encounter problems? What were some of the lessons learnt?
Eric Lee: I made a loss from my first property investment due to my being too desperate to rent it out. I also made losses from bad tenants. So, now I am more careful with my selection. If the tenant is good and reliable, I may rent out the apartment cheaper as this works out better in the long run than having a bad tenant. I can wait for a good tenant but sometimes, it’s not too good to leave your property unoccupied for a long time because you need someone to stay there to know what’s wrong with the property, for example, leaking pipes, etc. I once bought a shop lot and left it unoccupied for a few months. Later, I discovered that burglars had entered and stolen some of the fixtures and fittings such as the lightings.
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APR: What are your methods or mindset that set you apart from the rest?
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Eric Lee: I am an aggressive investor; a lot of people think I am an extreme risk taker (laughs) because they saw me continuously buying properties these past few years. My basic investment philosophy is pretty simple: I don’t have much cash in hand, so I leverage on the bank’s money and of course other people’s knowhow and experience. I learnt most from bankers who know how to gain the most from the system. After all, without money, one can’t even begin to talk about investing in property. Next, I learnt from seasoned investors. I have had a chance to join Swhengtee International Real Estate Investment Club some five years ago and it helped me a lot in terms of knowledge I picked up from the seasoned investors and professionals there.
How did I get to know Swhengtee? Back in 2009 when I was searching for a Chinese Property Investment Course, Swhengtee was the only one available in the Malaysian market.
It’s my character/habit to want to know as much as I can before embarking on anything. Say for example if I want to go anywhere, the first thing I do is to check the traffic condition on Google map. Even back when I was younger and spending lots of time playing Role Playing Game (RPG), I read all the manuals/ strategies on how to beat the system, then played up to the level just before the highest level. I stopped at the penultimate stage because that was where you have to start training. I was too lazy to do the training! But I learnt all the tricks needed to reach that stage.
Similarly, when it comes to property, I made sure I studied all I need to know about investing in property before I embarked on it because if you make a mistake in property investment, it might cost you a lot of money! I talked to the bankers and seasoned investors who gave me invaluable advice. I even read the whole series of “Rich Dad Poor Dad” by Robert Kiyosaki consisting of 20 books and I joined an investors’ club.
On top of doing all the necessary preparations, I also ensured that I have enough money to sustain for 2 years in order to cope in a worst case scenario where I can’t rent or sell.
Property investment is a waiting game, much like fishing. You need patience to realise the profits. I would say it takes about 5 years to be proficient in it. A lot of people give up because they couldn’t take the long years (about 3-5 years) when their property is under construction and you don’t see any income coming in. But once that 3-5 years is reached and you see the profit from renting or selling, you feel the satisfaction. For example, I bought one property each in my first and second year; 2 in my third year and 3 in my fourth year. But only in 2015, the fifth year in my property investment journey, I really started to see some returns from my investment. A lot of people say investment is risky, but for me, it’s just like driving a car – you get more and more proficient with it when you do it more.
APR: Fantastic. Can you distil your methods into an investment guide?
Eric Lee: There are 6 basic points that you need to consider or master before you start your investment journey. They are as follows:
Planning – investment is planning to achieve your financial goal. Do your planning before you start.
Know the rules of the game. This is an absolute must. If you make a mistake in property investment, it means you lose money.
Risk management. There are risks in any investment. Cover all the eventualities. The risk we undertake should be a calculated risk. For me, the risk in property investment is you either cannot rent or sell. So, if I have sufficient funds to service the bank instalments until I can rent or sell, then I am safe.
Leverage- the most advantage in property investment is you can leverage through bank facilities. Try to maximize it.
Time factor- give yourself five years to practise and master it. So try to start your 5- year journey as soon as possible. You should see the results from the fifth year onwards.
Contrarian. Buy when others sell and sell when others buy.
APR: Any other gems of wisdom?
Eric Lee: 1. For me personally, I buy based on current situation, not on future value. For example, I bought my second property in Kuchai Lama, Kuala Lumpur in 2011. I bought it because the price was reasonable, at RM360 psf when the surrounding secondary market property was also selling at RM300+ psf. Kuchai Lama’s location is strategic; it’s only 15 mins to KLCC, Petaling Jaya, Subang Jaya or Serdang. My property is located just across the road from all the shops and amenities. There is a very strong rental demand in this area.
So no matter the market condition, I was sure that I could still manage to rent it out. There are rumours that an MRT Line 2 station will be built in Kuchai Lama. For me, that is a bonus, but I won’t purchase this property based solely on plans that the area will have a future MRT station.
That’s exactly what happened to buyers of a condominium in Ara Damansara. They bought with high hopes that the LRT extension station was to be built linking the condo directly to Inti College. But eventually, there were some delays in getting the LRT up and running. This resulted in the condominium units not being able to be rented out due to the delays. For me, the future is uncertain. So I prefer to buy based on the current situation. Of course, if any positive future development is really going to happen nearby the property that I purchased, I treat it as a bonus.
2. A lot of people buy using two persons’ names and bankers would also encourage it. But I suggest using only one name. Due to the banks’ restriction in only allowing a loan margin of 70% for your third property onwards, you are better off buying in your own name so that you could get loans for two properties at a margin above 70%. If your partner does the same, between the two of you, you would have four properties that can be approved for loans of over 70% margin.
3. I like to invest in pre-launch units because as long as you purchase the right property, aim for an average of 30% profit for each property which is what I do. Of course, if the market is good at the time the property reached completion or there are developments/upgradings going on, it might appreciate more than 30%. For example, my second property in Kuchai Lama appreciated from RM360 psf to RM580 psf after it was completed – that’s about 60% appreciation
4. For me, property investment is separated into different stages. My first five years was focused on rolling my capital, that means selling of most of my properties. At a later stage, after you have accumulated sufficient capital, it’s a good strategy to diversify into other types of properties such as shoplots and sub-sale with the target of getting a good rental return. I like sub-sale or secondary properties because I can see the current situation; and I don’t have to worry about getting a tenant. It’s far easier to get tenants in an established or matured area.
5. For young buyers aiming to buy their first property, I suggest not buying a new car. Buy a cheap second-hand car so you can save for the deposit of your first property.
APR: A lot of people complain about the difficulty in getting housing loans. How do you manage to get loans for your properties? What is the secret to getting several loans from banks?
Eric Lee: Simply said, it’s how you leverage your financing. In my second year, I refinanced my first property and in my fifth year, I refinanced my second property. I managed to take out some of the extra cash to roll over for my next purchase. I was leveraging on the banks as well as on my relatives/ friends where we jointly purchase properties.
APR: With the dampened outlook on the property market in Malaysia, what is currently your strategy?
Eric Lee: I have always taken a contrarian approach. I believe now is the best time to buy property in Malaysia because most people have bought in 2011-2012 which was when the market was hot. It’s only now that most of the projects are being completed amid a slow market.
When people are selling during this slowdown, I am thinking of buying because you should buy during a market downturn so that when the market goes up again in three or four years’ time, just in time for the completion of most of the public train systems such as the Mass Rapid Transit (MRT) and Light Rail Transit (LRT) Line 2, there would be lots of chances to sell at a higher price then.
No one can predict the future, so I will just do my homework, buy property based on the current situation, and keep at least two years of funds for my bank instalments after the property is completed.
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