Saturday, July 25, 2009

The Difference of Take Care and Not

On yesterday afternoon, a friend and I went to one of the car dealers to pick up her second-hand Toyota VIOS, about 5 years old car. On the other hand, I was also looking for a second-hand car. The dealer was asking us to try out one of the Mitsubishi Lancer VII in their garage.

From the information given, it shows that it is under 1st hand user and the vehicle has been used for 3 years and 3 months time, while the mileage is about 102,000km, and it's 1.6cc petrol. The price offered is also reasonable. The only bad thing is that the driver used the car up to 34,000km a year, that's a lot.

The basic maintenance is to service your vehicle on time.

With the high mileage, my friend and I decided to test the Lancer with the attitude of 'trying only'. At first, we take a look for the exterior and interior of the vehicle, apparently the car is proper taken care of, only minor scratches were found outside the car. The inside's is proper maintain . We also take a look at the engine, it was like new engine with proper cleaning. When we started the engine, it sounds like good as well. We took a round from the highway and surprisingly, we feel like we are driving a new car, without finding further problem on it. I'm totally impressed with it.

We thought it might be due to the car is only 3 years old and it's still consider very new. So we decided to call up another friend who also intend to sell his Lancer VII. His car is apparently newer than the previous one, where he only used about 2 years and 10 months, and the mileage is 72,000km. Since we directly deal with the owner, he offered us a better price than the car dealer, about SG$1,000 difference.

Please read how-to-maintain-your-tyres brought to you by Ekimkee.

Once we met him up, and we took a look at the car immediately. Firstly, we took a look at the exterior and interior, many parts of the car exterior was scratched, and the interior apparently is not as good as the previous one. From the look at it, the engine part is almost the same. However, when we started the engine, the sound was totally different. The previous Lancer is much more powerful and smooth. When we did a test drive, we can feel that the car seems like having some problems and not as smooth if we compare the previous test drive.

Well, I can only conclude that the difference is made by how well the driver take care of the vehicle, as well as how important it is to maintain the car well in order to have a better driving feel. But as we all know, many people don't know or lazy to maintain their car properly, they know how to use only. This is bad, as they did not aware that they can enjoy the great benefits of proper maintaining a car.

You should have a checklist to maintain your vehicle regularly.

With proper maintenance of the car, I believe we can drive it comfortably, but we also can sell it with higher value regardless of the mileage.

Saturday, July 18, 2009

Why Not Real Estate Investment

If you look at Hong Kees and Singaporeans today, they are very well aware and focus on investment, just because they want to bring the biggest value to the money they earned. Every investment has their defined risk, I believe you've already listened and seen how many Hong Kees make serious loss in real estate, Forex, stock market, Lehman Brothers and so many more. Of course, many of them also earn until their mother couldn't recognize them. Many of them willing to take risk (be it high or low) and go for big return. This is what we call 'daring'. If I ask you to contra $200,000 on one of the hot pick stock on next Monday morning, will you dare to? I think none of us willing to, because we are not confident on that hot pick at all.

Back to this post topic, many people invest in real estate because they think the risk of real estate is lower, or perhaps it is not as volatile as stock and Forex market. I believe it is very true, as everyone and family needs a shelter, so the demand is always there. So no matter how worst is the market, the demand will be there. That's why we dare to invest one, or perhaps as many as we can. And most of the time, real estate price is shooting like a rocket, people tend to get big return from this investment, and it is easy yet low risk.

Have you thought of build them, instead of buy them for rent/sale?

From my opinion, real estate invest wont be my cup of tea for now, perhaps I just need one for my family. My reason is pretty simple, as below:

1) Too Expensive The real estate price is overshoot in Malaysia for now, and with the paycheck I'm getting, I simply cannot afford it. I would like to buy a 'better' and 'bigger' terrace house at my home town but it simply costs me over RM400k, what's the point I need to downpayment my hard-earn money for RM40k and pay the difficult installment for every month? There must be some other investment which has lower risk and higher return than real estate? Or perhaps can I wait for the real estate price to go down? Or will it goes down?

2) Volatility
This is a common problem with real estate, where it is lack of volatility and it is time-consuming to settle your real estate transaction, either buy or sell. And to sell a real estate, you have to find buyers and provided they agree on the price you offer. Even though nowadays real estate agent will does all the jobs for you, but you need time to get your investment back. For those who require volatility from investment, real estate definitely not your cup of tea.

3) Interests Rates
I always think that real estate investment is design for rich people. For those middle-class down to poor people like me, I do not afford to buy a house or shoplot in cash, or perhaps finish the loan within 20 years. We mostly have to loan money from bank in order to invest in real estate. Okay let's do some simple calculation here ( I copied the configuration below from online loan calculator).

Loan amount: $
Loan term: years
Interest rate: % per year

Monthly Payments: $

Wow, to buy a 400K terrace house, I need to pay RM1,800 monthly installment, after RM40k down payment! Those are excluding insurance, lawyer fees etc. That's killing me. If I opt for this, let's see what I 'll need to pay for the rests of my working life for the following table.

Please look at how much you are paying for the principal and how much you are paying for the interests. After 3 years, you have paid about RM53,128 amount of interests to bank. So at that time, you better pray that your property is already shoot above RM454k in order to break-even your investment, that's about only 4.31% growth per annum. I believe you always heard people saying this guy or that guy bought this house for RM400k in 3 years back and now managed to sell it for RM450k. He managed to gain RM50k profits from this investment! But once I look at the table above, unless he paid cash, how do that guy gain any penny from this deal? Furthermore, I only take 5% as base loan interest, it might possible to shoot up to sky high in the future.

4) Growth rate
As you can see the statistic above, the annual growth rate above is only 4.31%, almost the same as Malaysia Fixed Deposit. I hope that would be the worst scenario, if Malaysia real estate doesn't collapse. If you are very lucky, you may get 10% return a year, it's all depends on the supply and demand.

Will it be wiser if we use other investment money to invest in real estate?

Human beings are always smart. To overcome such problem, we cannot rely solely on the growth rate and just let the property empty. We rent it out in order to bear the monthly installment, and we will gain net profit if we manage to rent more than what we paying to the bank! This is a brilliant and profitable idea from the beginning. I found out most of the properties do not give the net profit or perhaps less than 10% of annual return of the property total price nowadays. That's mean, we still have to pay some portion of the loan to bank, fork out some bucks to maintain & renovate the property, and bear the risk of the property price growth. We also need to pray the tenant does pay us every month.

In fact, there are many alternative investments that can give us affordable, interest-free, better volatility, and return growth rate than real estate, such as invest in a business, unit trusts, stock or Forex. If you think that because real estate lets you leverage your investment, the rate of return is much higher than a business or stock investment and is, therefore, a better place for beginning investors to put their money, think again. I believe Phil Town is with me.

Of course, there are many people managed to gain big and steady income from real estate investment. I believe the rule of thumb is, as long as you spent some times to look into the investment in details, understand the reward and risk, and work out a system and follow it, there you will be another successful investor.

Have a nice weekend, folks!

Saturday, July 11, 2009

Tun Dr Mahathir Mohamad

I believe every Malaysian should know who is Tun Dr Mahathir Mohamad (some Malaysians used to call Him Tun Ma), including the new generations. In fact, He is our ex-prime minister, from 1981 till 2003, who is the longest serving prime minister in Malaysia and leader in Asia so far, where Tun Abdullah Badawi is the shortest serving and stepped down just a couple of months ago (2003-2009).

It was His birthday on yesterday. Since Tun Ma is one of the very few leaders that I respected, I would like borrow this opportunity to recall what He had contributed to our country for the past 22 years for being a Malaysia Prime Minister. Bear in mind that I respect Him not because he is dare-to-criticize behaviour, but his leadership and competency on his job as a Prime Minister.

Tun Dr Mahathir Mohamad

Just to recall a little bit of his background, Tun Ma was born at Alor Star, Kedah. His father was a Muslim half-Indian origin, where His mum was a Malay. He is graduated from National University of Singapore as a medical student. If you haven't know, Tun Ma used to sell banana fritters and snacks to cover his family income during Word War II.

Tun Ma became Malaysia Prime Minister at 16 July, 1981, where he was the 1st PM that came from a modest social background, whereas the formers were from royal families. In 1983 and 1991, He removed the royal veto and immunity from prosecution. Prior to this amendment, royal assent was required in order for any bill to pass into law. Great.

As for economic contribution, his pet projects included biggest local steel producer in Malaysia (Perwaja Steel), local car manufacturer (Proton), and satellite television service (Astro). All he is trying to do is to follow what South Korea and Japan are doing in their succeeded industries. In addition, he also embarked many large scale national projects, included Multimedia Super Corridor (MSC), North-South Express Highway, Putrajaya IT City, Johor's port, used to be largest airport in Asia - Kuala Lumpur International Airport (KLIA), Bakum dam in Sarawak, as well as used to be tallest building - Petronas Twin Towers. Although some of the projects are known as failed today and not success at all, we just cannot blame the leader alone, I believe they were due to the management which having big issues. Our country need big correction here.

He admitted to the public that his biggest mistake was to appoint Tun Abdullah as PM.

During Asian financial crisis in 1997, IMF had prescribed a recovery package for Malaysia but it was rejected by Tum Ma. Indeed, after the crisis, IMS and World Bank acknowledged Tun Ma's approach had worked. Although there were some losses speculations for the country on financial during 1981-1990, it doesn't matter anymore, as we all learn from mistakes.

As for education contribution, SPM and SRP where fully introduced as national exam for all secondary school. To cater lower income population education, boarding schools were constructed as well. And government also offer scholarships to tens of thousands of students for further studies in Australia and UK, which he aspired to achieve par development with. Before he retired, he also promoted liberalization of univeristy start-ups locally, leading to branch campuses being built and tie-ups with some of the most prestigious universities in the world, such as University of Nottingham, MIT, Monash University, Curtin University of Technology and so on.

He never let go the polictics even though he is officially retired.

Even after he retired, he also not forget to concern about the country economy and politics. He even setup a blog to concern and offer his precious opinion on the current politics, education and economy issues. Even though his blog has been banned by goverment indirectly and repeatedly, he is still finding ways to do it. Such outstanding actions indicating he is really like to contribute of what he is doing for the country, bravo! I believe this should be the behaviour a real leader should possesses. Please support his blog if you have free time.

Happy 85th Birthday, my beloved leader!

Friday, July 3, 2009

The Failure of My Investment

Is investment really important? When I was teenager, I always thought investment is something which able to bring me greater return than normal savings, with certain risks applied. Perhaps investment can make me rich, or at least ready for my retirement. When I listened to my teachers and relatives, investment is very easy, just dump the savings into somewhere offers more interests than your bank savings account for short or long term. Perhaps they are right, because I know nothing about it at that moment.

When I grow up and enter to the society to work, I tried to do what the oldies have told me. I've started to invest my savings into insurance and unit trusts since 2003. I got about average return of 10% a month from unit trusts, which is good. After few years back, my unit trust portfolio average return dropped to -30%, due to economy recession. Furthermore, the unit trust company is sucking my 5-6% of investment amount per entry. What a thrill! I was very unhappy about it, as after few years time, I've got negative, might as well I put the money in the fixed deposit!

I started to avoid diversification after I know how it increases my risk.

I continued to look for alternative investments which able to offer me higher annual return, which were foreign exchange and stock market. Sorry, I burnt my hand for these investments, due to I know nothing much about them. I proceed to look for other more solid and stable investment like real estate, unfortunately, the real estate price is already at the sky-high level nowadays in our country, and a person like me with average monthly income of RM1-2k should not be afford to pay the installment. Furthermore, I found out real estate is not worth to invest for me, for 3 main reasons. Perhaps I'll explain about it in detail in my coming post.

So what's left now? Marrying someone for her money? No, I'm not handsome and cheeky enough. Buy the lottery with return of RM20 millions everyday? No, I lost interest to do it for now, it's kind of wasting my money anyway. Invest my self to become a movie or rock star? Not potential enough. Fixed deposit and live frugally? No, I can beat the inflation and I want to bring a better living standard to my family. The more i think, the more I pissed off, because I don't know what should my plan be, while my age is growing.

Is real estate investment designed for the rich? Pls wait for my next post.

Until lately, I realized investment should be very simple. Not to blame unit trust or real estate anymore for now, as they can make good money very well too, provided we understand and know how to. To invest, we just need to know some basic rules, understand the investment we want, and come out with a system to do and monitor it. I should be invest without any risk! That's what we looking for, isn't? And investment should be just like a starting-up and managing a business. As you already know, business should be the ultimate investment we should look for. If the business is built successfully, it can gives us the good return perhaps until we are off from this world. If you already know what I'm talking about, very good for you. If not, please try to read 'Rich Dad, Poor Dad' again.

So for now, I'm working on my investment plan with a draft system, perhaps I need a couple of years time to prove it works. I really hope it will works and let me have the good return for the remaining of my life. If I'm success, perhaps you'll see me posting up my result here. If I'm failed, well, at least I've tried my best. You won't laugh at me, right.

Is there any giant rich ass in this world doesn't do investment?

Have a nice weekends, my friend.

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