The Gekko Strategies: Uber Risky Methods For The Ballsy Investor

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As far as property buying and selling is concerned, I’m probably as conservative as it gets. I know that this may sound weird from someone who runs a property portal and writes a property blog for a living, but I really don’t see myself as an “property investor” per se; I’d rather plow all my money back into my portfolio of online businesses. As such, I’d typically only buy properties I need to “use” (i.e. my homes and office) and perhaps an odd place or two to rent out for cash. It ain’t sexy, but it works for me. 🙂

In short, I’m not looking at properties to make me rich, and truth be told, I’m quite bearish on Malaysia given the recent avalanche of crapola with the unraveling of the 1MDB shit storm that seems to get worse by the day. I don’t know the stuff I read is true or not, but chances are that we won’t find out given the amount of spin and smokescreen in the media on opposing sides – I mean, I really don’t know who to believe anymore. But there’s one thing that we can be sure of though – no matter who wins in the end, we all lose.

Indeed, some of my friends are already switching into “hustle” mode to build up a quick money nest and be prepared to, you guessed it, leave the country. It’s sad, but entirely understandable. Indeed, the proverbial shit may hit the fan anytime now, and even those who typically play the long game (like me) are now thinking twice about their long-term plans…

Why Make Money Tomorrow When You Can Get Rich Now?

My good friend Slayer (who inspired last week’s blog post) is YOLO personified – indeed, he would frequently quip to me in his fake cockney accent, “Khai Yin, a quid made today is better than two tomorrow.” He is as opportunistic as they come as far as property is concerned, and while his style is completely against the grain, there’s no reason to doubt his methods. As the popular saying goes, the proof in the dalcha is in the eating, and he is one of the most successful people I know who have made gobs of moolah through property buying and selling.

Perhaps unsurprisingly, Mr Slayer’s idol is none other than one Gordon Gekko, the main protagonist of the 1987 movie Wall Street who became an icon of unrestrained greed and excesses of the financial markets. If you’re not an 80’s kid like me, chances are that you’ve missed watching this particular scene from the movie which has rightfully become a classic in modern cinema –

The debate on whether “greed is good” a la Gekko will probably go on for eternity, and there will always be people who are drawn to this line of thinking especially in property. In fact, Slayer has dubbed his techniques the Gekko Strategies after his silver screen idol – I am going to share one of those strategies with you here.

As you would expect, these strategies will not be suitable for the regular mom and pop investor looking to build a retirement nest. There are major risks associated with these methods, and as such, if you decide to use them, you do so at your own risk. I don’t claim that you will make money with these methods, and they might well be illegal depending where you are. Thank you for understanding.

Gekko Strategy #1: The Ah Long Method

When Slayer told me about this particular method, I snapped back: “What, you mean you’re becoming an Ah Long now?”

(To the uninitiated, an Ah Long is a illegal loan shark who would typically charge predatory interest rates on borrowers who often enforce repayments through physical violence and blackmail.)

So here’s what the Ah Long Method entails: when you sell a property, after you close the sale, you get the payment in installments from the buyer instead of cash. In short, instead of getting a bank loan, the buyer will in effect take a “loan” from you and pay you according to mutually agreed terms.

OK, you might be hearing some really loud alarm bells ringing in your head now, but bear with me for a moment. Think about the benefits of an owner-financed sale:-

  1. You get to sell at above fair market value price. You can structure the deal to be more favourable (at least in the short term) when compared to the typical bank loan. Additionally you can appeal to those who won’t / can’t go to a bank for various reasons. This means that you can maintain a premium and sell at a higher profit.
  2. You get to close a deal quickly. Bank loans take time, and as you should already know, a longer wait means that there’s a higher risk of buyer’s remorse.
  3. You get to better yield for your money. Sales by installment can give you the cash to reinvest into another property using the same method which improves the yield.

Of course, now let’s just acknowledge the proverbial elephant in the room. The biggest risk associated with an owner-financed sale, of course, is that the buyer may default, and foreclosure will be long and expensive. There are methods to mitigate this, according to Slayer, and he recommends getting a lawyer who is familiar with drawing up contracts which make it easy to recover any property quickly in the case of non-payment.

And Here Comes The Twist…

Let’s say that now you’ve sold a bunch of properties to a bunch of buyers who are now sending you money monthly. At best, this is a cash generating business, and not one which will net you millions overnight which happens if you in turn flip the properties the traditional way. This is where the secret sauce is, and admittedly, not everyone can do this, except for dye-in-the-wool natural born hustlers like Mr Slayer.

So what Slayer does is that he gets a collection of these debts (say, a group of 10), package them together and sell them to a debt buyer. These are companies which make money from buying debts and then collecting the debts on their own or repackaging and reselling to yet another entity. As you can imagine, these debt buyer companies are pretty cut-throat, and they can represent the worst Gekko-types ever to emerge from Wall Street.

RESOURCE: Here’s a PDF produced by the FTC (USA) which gives a pretty good primer on the debt buying industry – click here.

“The method is pretty straightforward,” Slayer told me, “but if there’s one thing which will make or break your investment is your margins. You will need to sell at a premium with enough margins to give some of the spread to the debt buyers. I’ve done enough deals to make money for everyone, and so I can structure a pretty favourable deal with those debt buyers. One trick is to let your debt simmer over 12-24 months in order to demonstrate a good payment record.”

A Final Disclaimer

Finally, if you do decide to put this method to use, check if there are any legal complications especially when you are treading into the money lending territory. My friend Slayer didn’t claim to have done this in Malaysia, but if he did, he would have found a loophole somewhere and hustled around the limitations, Gekko-style.

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

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