Evergreen Property Investment Strategies: Who Cares If It’s The Bull Or The Bear? (Part One)

Sophie Chng modeling for GoodPlace

One of our most popular blog post ever published in the short history of GoodPlace is the guide to property cycles. Of course, this is hardly surprising because almost every investor and his or her pet chihuahua wants to know when’s the right time to buy or to sell. Indeed, whoever who knows how to “time” the market (property, stocks, etc) literally holds the keys to the moolah kingdom.

Of course, the idea of property cycle is not new, and it’s one of those bread-and-butter topics which have been covered to death especially by wannabe property bloggers. Alas, it’s also one of those things that you can spend days or weeks analyzing with no meaningful results to show in the end. I know this because here at GoodPlace we collect property data like overly enthusiastic prepubescent schoolgirls collect limited edition Justin Bieber button pins. We totally geek out for data, but admittedly sometimes we’re just wasting time (and computer processing power) crunching numbers to arrive at conclusions that we could have come to quite easily using other easier, non-nerdy ways.

Nerds rule

Nerds rule! #sciencebros

For example, if you want to know if you’re in a bull or bear market, you’re supposed to look at transacted prices over time, yada yada. However, I found that instead of crunching the numbers, I can (qualitatively) know that it’s a bull market when I see these two signs:-

  1. Businesses that are usually not in the business of property set up businesses to do business in property.
  2. There’s a dramatic increase of people who claim to be able to help you get rich in your underwear.

That makes a lot of sense if you think about it. When the market is hot, then non-property businesses flushed with cash will try to get a piece of the property action because they can make more money quicker investing in property than doing their usual bread-and-butter (manufacturing adult diapers, etc). Similarly, when property prices are going up, Gurus look like geniuses because the “Get Rich In Your Boxers” techniques that they peddle at their seminars would seem to work.

But that’s all gonna change soon enough, folks. Now that the Malaysia property market is tapering off, you can bet that this year you’ll hear less about adult diaper manufacturers launching “Dual Key Serviced Suites” in “North Kiara” (*snigger*). And as broke Gurus are going back to flipping Ramly burgers on the roadside you’ll also get less this-weekend-only-get-rich-in-your-Calvin-Kleins spam in your inbox. These are the signs of the times, my friends.

 Warren Buffett – Was He Trolling?

Fanboys of Warren Buffett like to parrot perhaps his most oft-quoted quote about investing:- “Buy when people are selling, and sell when people are buying” (I’m paraphrasing – can’t be arsed to Google). Given his God-like status in all things money, Mr Buffett is perhaps beyond reproach but I couldn’t help but to wonder if he was trying to troll his fans when he uttered that line. I mean, if getting rich is as simple as doing the opposite to whatever everyone else is doing, then even my chihuahua can be a millionaire in chihuahua dollars.

Warren Buffett

Was he trolling?

With all due respect to Mr Buffett, I don’t think that what he said is applicable to property investing. Let me give you an example. As it currently stands, Iskandar is really not looking too pretty, and I have heard predictions (bukan saya yang cakap) that it may implode one of these days given the tremendous increase in supply amidst aggressive land banking by foreign developers. Now if (and that’s a big IF) everyone suddenly panics and try to sell their overpriced RM1,200 PSF crap then I’ll be a monkey’s uncle if I go in and buy a la Warren Buffett.

GoodPlace Loves Iskandar

So this is what I am trying to say: property market is different from the stock market (dan lain-lain yang sewaktu dengannya like commodities, mutual funds and bonds) simply because it’s wired rather differently. Also, to the benefit of us property investors, there are a lot of investment strategies that are available to us but not to those who dabble in stocks, etc. In fact, the thing that I like best about properties are that no matter it’s a bull or a bear market, there’s always something you can do to increase the value of your property.

 Strategies For All Seasons – Who Cares If It’s A Bull, A Bear Or Another Furry Animal?

Like it or not, the Malaysia property market is going to be flat for the rest of the year (or maybe even dipping a little in some areas) in terms of prices. This, however, is no excuse for sitting on your arse to the market to pick up. For example, even in the scenario of flat prices in a sluggish market, you can make (cosmetic) renovations which make it easier for you to rent out (at a higher price) or to sell (at a higher price) later.

Now every diligent GoodPlace reader cum investor knows the importance of doing his or her homework prior to starting property investing (or, in GoodPlace terminology, doing the Property Workoutdownload this worksheet if you haven’t done so already). In a quiet market, I usually recommend buying fair value properties and then fix them up to be rented out for cash or to sell (similar to what we have talked about here with a certain Miss X).

If you’re pursuing this strategy, then be clear on your choice of a monetization strategy, i.e. to rent or to sell when your renovation is done. This is because types of houses which generate the biggest rental demand can be different from those which generate the biggest buyer demand. Additionally, this should tie up with your target market (again, you should have covered this in the Property Workout worksheet) and its propensity to buy or rent.

Target MarketBuy or Rent?Location PreferenceDwelling Preference
StudentsRentNear college or public transportBasic
Young ProfessionalsMostly rentNear or inside the city near dining and entertainment spotsMinimal maintenance
ExpatsRentInside the city near the workplace and hotspotsUpmarket with minimal maintenance
Growing FamiliesMostly buySuburban area with parks and near schoolsSafe and spacious
RetireesMostly buyOutside the city but near shops and facilitiesGood walkability and attractive

Now once you’ve zeroed into the buyer or renter that you want to target, then it’s time to create a shortlist of the properties that you want to acquire – we have talked about the strategy of buying the worst house in the best neighbourhood here, here and here. These houses will give you the biggest upside in terms of resale and rental value when you’re done pimping them up.

You want your property to stand out, and to do this you have got to do things that other home owners would probably NOT do, for example:-

  • Expats and young professionals: building a mini bar in the dining area?
  • Families with young children: locks, baby gates, corner guards?
  • Retirees: gardening tools and ready pots in the patio?

Most buyers want to just quickly rent out or sell their units “as is”, and guess what – you only need to be willing to do just a little more in order to stand out from the other cookie cutter units in your area. But of course, there’s always a danger of overdoing things – you don’t want to stand out too much to the point of being grotesque

ugly-house

Next week, we will talk more about three more evergreen property strategies that are good for all seasons:-

  • Spotting the next tidal wave: look for possible areas with price growth after the market rides itself out
  • Predicting zombie areas: an expansion of the idea which we first talk about here
  • Buying distressed properties: I hate the idea of low-balling desperate sellers, but if you’re not going to do it, the next guy is going to

Watch this space!

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. property klang says:

    very good article

  2. Jason Ooi says:

    Great article. Straight to the points!

  3. Is warren buffet doing the Illuminati gesture in that pic?? lolz

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