How To Be Early In A Hot Area (Before The Suckers Turn Up)

Myra and Kylene at GoodPlace HQ sucking a lollie!

I‘m not a poker player but I’ve come to know a good few over the years. “The first thing I do when I sit down on a poker table,” Jonathan, a seasoned Hold’ Em Up player had once told me, “is to spot the sucker. If you can’t tell who the sucker is, then it’s likely that the sucker is you.”

I LOL’ed hard when I heard that, but then I realized that Jonathan’s statement was more profound than it was funny. You’ll see that what Jon said was true not only in poker but also in anything even remotely related to money: stock markets, mutual funds, insurance, MLM scams and yes, even properties.

Now look at most money making schemes (legal or otherwise) and you’ll notice that the story line is remarkably familiar:

  1. Some smarty pants come up with the idea
  2. Early investors come in
  3. Idea takes off
  4. The opportunity opens up to the public
  5. Suckers turn up in hordes

In such a scenario, who banks the hardest  you reckon? One doesn’t need a PhD from the Fenland Polytechnic to know that Mr Smarty Pants founder and early investors make the most money by the virtue of being early in the game. This is entirely fair, of course, because the (mammoth) size of their reward is proportional to the (mammoth) risk that they take.

And as such, when an opportunity “matures” and reaches the public, the potential to make money drastically drops because (1) the barrier of entry is too low (i.e. anyone can just “join”), and (2) the risk is quickly dropping to zero (i.e. a mutual fund doesn’t go bust that easily).

shut-up

Now I know I’m probably going to piss off a lot of people by saying this, but the truth needs to be told:-

  • If you’re buying shares in the public market then you’re probably a sucker.
  • If you’re joining some hare brained “fund” which promises you 15.72% year-on-year return then you’re most probably a sucker.
  • If you’re signing up to an MLM scheme under your sister-in-law who had herself signed up under her husband’s uncle’s weekend mahjong kaki then quit reading this blog now. I mean it!

You get my drift! Indeed, it’s not too inaccurate to say that if you’re late to the game, then you’re likely the sucker… unless there’s a bigger sucker lining up behind you.

This Is Why I Love Properties…

… because even late-coming “suckers” can make money. Indeed, you can structure any property deal where both the buyer and seller alike make good money… unlike some ponzi scheme (I am looking at you MLM peddlers) where the only way to make money is to fleece the minnows in the bottom rung of the pyramid.

MLMer seeing me at a party

MLMer seeing me at a party

(Of course, while property can be one of the less scammy ways to make money out there today, it has no shortage of bad apples who are bent on bringing disrepute to the industry.)

In property, even latecomers can get a good deal. However, if you want to play in the big leagues and (to borrow my ex-boss Previndran Singhe’s words) “make playboy money” then you’ll need to be early in the game – it’s really as simple as that. And that’s why I am a big fan of area prospecting (if you’re new to GoodPlace then read these five prospecting guides if you haven’t done so already: here, here, here, here and here).

 Early Signs To Look Out For

Two weeks back I had hired a kickass coder (his name is Cheah) to help me in my uber Top Secret project, and being a property enthusiast himself, he shared with me some of his perspectives when it came to choosing areas to invest in. To Cheah, job growth is one of his top criteria when it comes to area prospecting.

 Job Growth

Areas like Cyberjaya benefited from government initiatives to incentivize multinationals to move into and operate out of the area, resulting in a boom in the number of job opportunities. With ample jobs, then commercial developments will follow soon after, which then would spark off the mushrooming of residential enclaves like what we are currently seeing (OSK’s Pangaea, Setia Haruman’s Ceria Residences, SP Setia’s Setia Eco Glades, Paramount’s Sejati Residences, UEM Sunrise’ Symphony Hills).

Eclipse Pangaea

Eclipse Residences in Cyberjaya by OSK

As demand for employees go up, then supply must also go up – otherwise wages will increase. As the median income goes up, this has an upward effect on the local economies which mean that more businesses will open up, creating more jobs.

And of course, increasing wages also mean that the area’s demographics will then quickly trend to a certain ‘type’ (age, ethnicity, job type, family size). Future launches will closely mirror the demographics (especially in terms of affordability) which then impact the area’s average rental yield.

(Thanks for the pointers, Cheah!)

 Hypermarkets

Another good indication of growth is to see where the hypermarkets are being built. If Tesco, Aeon Big or Giant is setting up business in an area, then you can bet that the place will be a good place to invest – as hypermarkets are big, multi-million dollar investments, you can be sure that lots of money have been spent on industrial-level research on the area’s economic viability. Piggyback on their hard work! 🙂

 Traffic Levels

Traffic is the lifeblood of any business. Different businesses will need sufficient potential customers daily to survive. If you visit a place and you feel that it’s “quieter” than usual, then it’s a red flag. It could mean that people are leaving the area, taking the traffic away.

Unfortunately our local authorities do not share traffic data (at least publicly), so you’ll need to do your own due diligence by going to the ground to do your surveys.

EXTRA CREDIT: Analyse the traffic flow into and out of an area. Is this “local” traffic, or are people just passing through the area? How do the trends change over time?

 Schools

Parents are attracted to areas which provide the best schools for their kids. This is, in fact, one of the main selling points for Mont Kiara.

I personally know of investors who would make good money from student rentals (here’s a related guide), while there are also others who would make it a point NOT to buy properties near schools and colleges for various reasons (rowdy students, poor property upkeep, traffic jam conditions during peak hours).

One of the best moves by Iskandar is to create an education hub (the Educity) populated by the likes of several international universities (not top tier, but still OK) although Marlborough College has been a good catch. Whether things will work out in the long run or not (foreign schools have a rather chequered record in this region – University of New South Wales notably failed in Singapore), it could still be a pull factor for many parents.

 What Suckers Usually Do

Now that you know what to do to spot the early signs of a boom area, here’s a list of things NOT to do (leave them for the suckers who are coming in late!) –

Agree? Disagree? Let me know what you think by leaving me a comment below. 🙂

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. Suckers are late-comers. How true. That goes for people who use indicators such job growth, hypermarts, good schools etc. Any businessmen setting up industries for job growth, hypermarts and schools usually rely on data from the current established areas with talent and labour supply, supporting population and other infrastructures first before plunging their moolahs. Property hunters using your suggested methods will then be suckers…..haha..

  2. Recently become your devoted reader (and loving it) but this one I just can’t help myself not to laugh. Not so sure whether its because the article itself’s a crack orrr questioning myself “I think I am that sucker/sucker wanabe (which, superiorly damn worse)”.

    Somehow to me, property is a soul. It involves location and emotion. Guidance needed on the left hand, your own feel on the right, make it happen with that two legs.

    Keep up the GoodPlace, Khai Yin!

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