How To Apply 80/20 Rule In Your Property Investment Strategies

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Working hard is overrated,” The Mentor once told me. “You’ll realize this soon enough, but it takes the same amount of effort to make one million, or ten. Or a hundred.”

To my loss, I didn’t buy into that piece of advice when I first heard it. To me, success was all about hard slog and nothing else. After all, this “brute force” approach had served me well in university, indeed, having none of the grey matter that most of my college mates seemed to have, I had to struggle to merely survive not getting kicked out. While the others had made plans to do their grand Continental Europe tours and skiing trips, I had to spend my holidays catching up with work because during the school term, I couldn’t absorb a single darn thing in the lecture hall.

Indeed, it was most humbling on my part because I had done relatively well in high school, and I had entered college thinking I would breeze through with minimal effort. Alas, as Mike Tyson once said, if you don’t learn to be humble, the world would thrust humbleness upon you.

kanye-best

In my second year, my tutor Dr Colin Wood (bless him) told me during one of our one-on-one supervisions, “Khai, I really think you should start working hard from now on.” That comment came as a shocker to me, because I had just spent three sleepless nights working on that piece of work which I presented to him that morning in his lofty study at Wadham College. After retiring to my room and wallowed in self pity for an hour, I decided to do what just expected of me – I would work even harder, if that was even possible.

These days, I still get recurring dreams (more more aptly, nightmares) about walking up that dreaded staircase in this rather intimidating place called “Examination Schools” at my university where I would, as it namesake would suggest, sit for my exams. Thankfully, all those years of slogging through the night burying myself in books at the library (while my college mates would yum seng away at the bar) had paid off eventually, when I had done relatively well, exceeding even my own expectations.

So, if there was one thing that college had taught me (rightly or wrongly), success was all about brute-forcing your way through with intense, continuous slog. Little wonder then that the Mentor’s “working hard is overrated” statement was something that I didn’t want to hear.

If You’re Working Too Hard, You’re Doing It Wrong

The Mentor realized that I didn’t agree with him. But he knew that it was a lesson that I needed to learn. So instead he told me to read a bunch of Richard Koch’s books.

Richard Koch 80 20

Back to school!

Richard Koch went to the same university as I did. By his own admission, he was no hard worker. Indeed, he found a neat little “loophole” in his exams which he then somewhat exploited to gain a First Class degree in history – he found that 80% of all exam questions would come from 20% of the course material. So, he just focused on mastering the 20% of his coursework. Interestingly, he also found that 80% of the main ideas in the 20% of the crucial part of his course would reside in 20% of the books in his reading list. And finally, he realized that 80% of the best ideas in a book were to be found in 20% of its pages.

By applying the 80/20 principle ruthlessly, Koch was able to do well in college while still had the time (I would guess) for fun, frolic and strawberry-and-champagne breakfasts at St Hildas on Mayday. In short, Koch had done the smart thing. I didn’t.

As much as I would grudgingly admit now, if I was working too hard at something, I was probably doing it wrong.

Now looking back at some of the stuff that I did after university, it’s true that most of the stuff that worked well for me was the manifestation of the 80/20 rule. Specifically, in the case of GoodPlace –

  • 80% of GoodPlace’s traffic come organically from Google and word-of-mouth. That’s why I don’t do Facebook or Twitter.
  • 80% of GoodPlace Dealmatcher are for KLCC, Mont Kiara, Damansara and Bangsar. That’s why we are exclusively “upmarket properties” for now.
  • 80% of our leads go to 20% of our agents. That’s why I am probably not that gung-ho in “recruiting” agents because I know most won’t make it.
  • 80% of the value of the transactions that take place through GoodPlace are from 20% of the volume of the deals.
  • 80% of the responses and clicks I get from the GoodPlace Digest come from the 20% most hyper subscribers.

For those who had asked me how I could manage to do GoodPlace all my own while it would take entire organizations to build something similar elsewhere: it’s all about 80/20, folks (even though I didn’t realize consciously what I was doing before I read Koch’s books). I just focus on the things that matter (i.e. the blog and the newsletter) In fact, these days I spend less than four hours a week working on GoodPlace, and that’s by design. The rest of the time… well, I just slack off and ponder about nothing. 😉

Slacking off!

I’m just joking, of course. But here’s the point: I could have put in a 90-hour week and GoodPlace will be at an entirely different place altogether today. As I have related to my friend Derek Uittenbroek (who founded and sold FundTheGap, an equity fundraising platform in the UK), I am merely waiting for the right partners to turn up, which they eventually will. In the meantime, I’ll leave the “grow big fast” game to other players because that’s not my cup of tea – the world doesn’t need yet another property site bloated with sub-par classifieds, shady agents and hyped-up advertorials.  GoodPlace has got a much a bigger fish to fry, and as I have learned the hard way recently, it requires way more time, energy and resources that I can provide on my own.

To Do Well In Property, Apply The 80/20 Rule!

My good pal Lanky Ari (you might have first read about him here) came over just the other day for tea and scones at Tipsy, a quaint little coffee bar downstairs where HackerHub is. “I’m surprised that you haven’t learned this earlier,” Ari had said to me. “I guess it’s fairly obvious that most of us in the Mastermind Group have been doing this one way or the other, consciously or otherwise.”

“I’ll cut to the chase. Tell me how you would apply the 80/20 rule on property.”

Ari laughed. “It’s elementary, my dear Watson. Most of the stuff that most people talk about property investments are the trivial 20%. I look for the small handful of factors which drive 80% of my investments. There’s real danger in paralysis by analysis. You don’t want to spreadsheet something to death.”

“I agree. What are those drivers then?”

“Everyone has got their own based on their style of investing. But let me first tell you about what that I don’t look at… the trivial stuff that have very little effect on whether my investments would work out or not.

  • For new launches, I don’t care who the developer is. The quality really differs from project to project even for the same developer because typically the contractors get changed like soiled diapers. Truth!
  • For sub sale properties, I don’t look at the location at all. I know this sounds insane, but there’s an overriding factor which I look at, which is price. I shall be happy to debate this point with anyone who doesn’t agree.
  • I don’t care if it’s freehold or leasehold. Again, this may ruffle some feathers, but as far as my investing style goes, it doesn’t matter. Also, I invest in both condos and landed properties with no preference in either.
  • The physical condition of the property is trivial. It’s unimportant because I can spend a couple of bucks to get anything fixed. Anything. Being too hands-on will slow you down. You want to spend your time scouting for and filtering properties, not fixing toilets.
  • “Below market value” is irrelevant to me. Some likes to hunt for properties which are sold below their market value. Usually these are problematic properties with equally problematic sellers. I’d rather pay at (or even a little above) market value as long as the upside is good. I’d rather not work with bottom feeders or people with Ah Long problems, thank you very much. It’s just a personal choice that I make.”

NEXT WEEK: Ari shares his “Crucial 80%” tactic which drives his investments to build up a RM20,000,000 portfolio over five years.

About Khai Yin

When I am not writing for GoodPlace.my and helping my readers find properties though the DealMatcher service, I spend time doting on my three kids: Wenyi, Qinyi and Eian. My personal stuff, some published essays and contact details can be found at khaiyin.com

Comments

  1. Frederick says:

    KY,

    Using ‘brute force’ to succeed? My full sympathy. Not to you but your family. You deprive them of your time! It is work smart not work hard!
    Many so-called best sellers or writers do not even know what they write. Ditto for bloggers. Even some of your beloved Guru-authors do that. All they did was just pick some best sellers’ books of similar subjects or topics, took out one or two chapters and outsourced it online to some cheap third world countries’ writers for a very small fee to condense, rephrase or summarise them. This would circumvent copyright laws or plagiarism. There you have it.
    Many of these books can also be elevated to best-sellers list through some smart programming, through own bulk purchase, or rich sponsors buying up a certain amount etc. Once the book is on best sellers list, the momentum would go on its own steam.
    Now you know where all these pseudo- Dr, Dato, and Tun Sris, got their titles.

    • 🙂

      Yep, books on the bestseller lists are usually not what they’re banged up to be.

      Koch is legit though. He’s got a pretty strong track record. I checked.

  2. Interesting points. Looking forward to your next article, as I’d like to get more insight on why Ari doesn’t look at location when coming to sub sale properties (having being told that location is everything when it comes to property). Keep the good articles coming!

    • A consistent, upward trend in price would already presume the effects of location.

      Anyways, as you will see in next week’s article, we would still consider location as a factor, but other reasons.

  3. You mentioned you don’t care about developer for new launches? So you would buy the property even though it is a new developer with no reputation? Good developers do make a big different.

    • I’ll get Ari to talk more about this. To me personally, it does make a difference – one with no track record will automatically get filtered out. But when it comes to “bulge bracket” developers, the product itself is more important.

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