Destined to Reign

Ever heard the phrase, “What I wouldn’t do to get a million Ringgit”? How many times have you heard someone say that, or perhaps, even mutter it yourself? How about making a million Ringgit within a short period of five years or less? Have you ever thought about ways to make a million Ringgit or more in real estate, with the least risk and highest gain?

If you answered yes to any of the questions above, then read on.

What I am going to share is not the dummy’s guide to real estate investment and nor is it a textbook formula. It is just something that many of my fellow associates and I have practiced with repeated success.

While some might opt for the high-risk route, I am sort of the opposite. I favour investing in anything that gives me the least amount of risk, but with good returns. Becoming a multi-millionaire via property investment is really achievable and here are the steps to achieve it.

Step one: Go for capital returns
If you are like me, holding a 9-to-5 job with limited seed funds to start investing with, then you definitely need to look into investment strategies that incorporate some sort of capital returns. You can look at simple “buy-to-sell” strategies or the more complicated “no-money-down” strategies. Use these strategies repeatedly until you accumulate enough funds to purchase bigger units that you can hold/keep for better rental returns.

Step two: Accumulate properties for rental returns
Alternate between step one and step two until you have a portfolio of properties that give you good rental returns (now and in the long term). Ideally, look at properties that give you 8% returns. These are the ones to keep. Sell the remaining/other properties that you have for capital returns, which in turn lets you buy more properties. It is important to maintain a healthy portfolio. My rule-of-thumb is that you should only have one or two properties to flip (sell) at any one time and the rest of your efforts should be focused on properties that will give you good rental returns.

When do you stop investing?
Well, ask yourself how much you need to be able to retire? For example, if you need RM10,000 per month for the rest of your life, use the rental yield formula below to find out how much you need to invest to achieve your financial freedom.

Assuming that you are getting 8% yield from your properties (90% of my properties give me returns of 8% and above), then put it into the formula below.

Assuming that your monthly desired income of RM10,000 will be derived from rentals, then put that figure into the formula below to determine the total number of properties you need to invest in.

In the example above, you need to invest in properties worth RM1,500,000 to get RM10,000 every month.

Is this achievable? Of course! The best thing about property investment is that you get the highest form of leverage with the longest loan tenure!

To achieve this figure you need to have funds of RM150,000, and service the remaining amount in bank loans for 20 to 30 years. You don’t need to do it all at once. Split your investment portfolio into several properties amounting to RM1,500,000. Once that is accomplished, you are home free!

Some of you may not like the fact that you can only truly retire after the loan is completed. True, but hey, we aren’t finished yet. This is where Step Three comes in.

Step three: Start reducing your mortgage/loan
Continue investing in properties, even after getting your millions’ worth of properties. But this time, use the capital gains to pay off your loans. A word of caution - do this only after you have reached your total property portfolio. Never try to save while investing. Otherwise, you will only confuse yourself and your banker! Invest until you have enough, and then continue to invest, with the purpose of paying off the mortgages.

Once you are done, you can finally retire. Then, it’s tee-off time!

Michael Tan conducts property investment seminars and workshops throughout the year. For details, call 03-2283 1740 or visit www.freemen.com.my