MY 1ST PROPERTY PURCHASE, Using only RM2000 own capital

We often hear people say that your 1st deal is the make or break deal. It will shape your future asset class preference. If you have a great 1st deal in props, very likely it’ll be your key asset class in your portfolio. If you had a bad 1st experience, most likely you’ll sworn never to touch real estate anymore. I was lucky enough to experience the former for my 1st time. To summarize my 1st deal :

1. A subsale zero down deal – In the end, I didn’t pay a single cent of my own cash to buy this property.

2. Not only I didn’t pay anything to buy this property, I was paid/rewarded approx 20k to buy off this property.

3. The seller unknowingly helped me to raise funding to buy his property.

4. Raised capital from 2k to 23k in the space of 4 months despite only able to save 1k per month from monthly salary.

5. Today tenanted at double digit yields

6. Didnt used a single cent to market the property yet it was tenanted within 3 weeks after it was ready.

7. Never had a single day of vacancy period throughout my ownership. It’s been 5 years now and still occupied by the same tenant.

8. Has doubled in value if based on today’s asking price.

I’ve broke down the deal into few key topics, namely :

1. Raising capital –From 2k to 25k in just 5 months.

2. Hunting for the right deal – Patience

3. Structuring the deal – How do I get the seller and the banks to pay me for buying the property?

4. Executing the deal – Time is money

5. Finding tenants – The zero / low cost way, to quickly find tenants

6. Regrets / What could I have done better.

This is basically the Chapter 1 of my book, “WTF? 23 properties by 30”. Hope you guys enjoy reading it please do feedback your thoughts wink.gif

Added on May 4, 2012, 2:33 pmIt was early 2006, and I had just got my confirmation letter in my fourth job as a management trainee in a foreign bank. I had changed careers in the two years before – from a software programmer, I became a salesman and finally a banker. Yes, it’s an odd job combo, but I like doing whatever feels right. The confirmation letter I had just received from my employer was the licence I had longed for – the licence I needed to start using other people’s money to make my millions.

Employment confirmation doesn’t mean much to others, but this was the ticket I need to walk into most financial institutions, demanding that they lend me their money, and start building my wealth. It meant that I could now apply for mortgages, cards or personal loans. I know there are many old-school thinkers out there who would rather die than pay interest to banks. I’d rather pay interest to banks as long as I can make my millions, than die poor. Banks are a necessary evil. There’s an old saying I love that goes something like this:

“If you are born poor, it was not your fault. If you die poor, it’s 100% your fault.” 

As long as you don’t bite more than you can chew and can make more than what you need to pay, you’ll most likely be fine. I don’t mind borrowing through my nose as long as I can gain an advantage.

At the same time, the best friend I have known since I was eight years old had just bought a house with his fiancée. It was an under-construction apartment, located next to a LRT station in Sentul. I was happy for him as he managed to buy a property at only 24 years old. I thought it was a great achievement for someone so young but at the same time I was jealous as he beat me to the punch by buying a property before I did. I’m a competitive fellow, and his purchase spurred me on. Since I also planned to get married in the near future, it made perfect sense that I should also start looking into buying properties. I was thrilled at the prospect of home ownership, but reality set me back as I realised that I only had RM2,000 in savings!

Raising capital 

Typically, a normal property purchase will require one to have approximately 15% of the purchase price as capital. This means if I want to buy a property worth RM200,000, I need to have at least RM30,000 cash capital. To illustrate this:

A 200,000 property purchase example
1. 10% down payment RM20,000
2. SPA legal fees + loan legal fees RM 7,000
3. Other incidentals RM 3,000
TOTAL RM30,000

Unlike my friend Wan, I hadn’t saved enough capital yet to start investing. Two years of self-discovery, three low-paying jobs and excessive spending left hardly any savings. So at the time I decided to buy my first property, I only had RM2,000 in savings. Realising this, I took drastic measures to reduce my expenses and managed to start saving around RM1,000 per month. With my existing RM2,000 in savings, I will need to save RM1,000 every month for 28 months to reach my RM30,000 target. It was a reasonable time frame for others, but I just couldn’t wait that long. “There has to be a faster way,” I thought.

So I started exploring my options. Borrowing from my dad or mum was out of the question, as they didn’t have that amount of cash. My girlfriend back then had saved considerable sum, but I knew she would be reluctant to lend me her hard-earned savings. She wouldn’t have RM28,000 to begin with, anyway. A personal loan was out of the question, as the 14% annual interest rate was just too ridiculous to me and I didn’t (and still don’t) like making the banks richer. Let’s not even talk about “ah longs” here, I don’t fancy having someone chasing me with parang while paying interest with my life.

However, I got my lucky break. One day, Wan called me up to ask for a favour. He wanted to purchase a Dell laptop online, but since he did not have a credit card for the purchase, he wanted to use mine in exchange for full cash payment. When he gave me the Dell brochure to indicate the exact laptop he wanted, I saw something on the brochure that represented a glimmer of hope for me to raise the RM28,000 at zero interest:

“12 months interest free instalment available with bank XXX credit card”

That’s when I realised that credit cards could be extremely useful, and I could use it to raise my RM30,000 capital in no time. I agree to take up Wan’s offer and purchased the Dell laptop, took RM2,400 in cash, and converted the purchase into 12 interest free monthly instalments. I thought that if I could replicate this multiple times, I would have my RM30,000 capital in no time.

I also learned that some electronic shops offered up to 36-month interest-free instalments on certain credit cards. One card also offered to convert any purchase of any item into 36 months of interest-free monthly instalments subject to a small processing fee. I quickly signed up for all these fantastic cards. Within three months, I had more than eight credit cards amounting to approximately RM35,000 in credit limit. While I didn’t need all of the cards I applied for, I didn’t see any harm keeping them when they didn’t cost me anything.

I replicated the same modus operandi several times more within the next three months. After two more laptops (RM5,000), a fridge (RM3,000) and my girlfriend’s family’s overseas trip (RM14,000), and RM3,000 from my own salary, I had accumulated over my RM288,000 in capital, almost at zero interest. My credit card monthly commitments now stood at close to RM1,200 per month at zero interest. Technically, it was a force-saving method. If I wasn’t being creative, I need close to two years to raise the close to RM30,000 capital, but thanks to credit cards, I got there my RM30,000 capital within five months.

Who says having too many credit cards is often a bad thing? wink.gif

Important disclaimer: I’m not advocating anyone to follow in my footsteps and start racking up credit card debts to build capital. This method of accumulating credit card debts comes should be used ONLY IF you can manage to ensure that you can meet the exact monthly instalment demands from the lender. I would like to highlight the potential risks of using this method to obtain capital:

• Paying unnecessary high interest to lenders
• Impact your CCRIS (Central Credit Reference Information System)
• Affect your borrowing capacity as you accumulate short-term borrowings
• Please seek professional and expert advice before embarking on this to understand the risks involved


One thought on “MY 1ST PROPERTY PURCHASE, Using only RM2000 own capital

  1. there is a very good chance that your muscle structure has been affected by years of postural strains and you can still find help.
    So rather than hoping that you will find a single exercise that will fix all your problems, you must understand
    that to remove these issues you must use a combination of back pain exercises.
    So now that you are aware of what chronic back pain is and the many conditions that cause it, let us move into how
    you can deal with it.

Leave a Reply

Fill in your details below or click an icon to log in: Logo

You are commenting using your account. Log Out / Change )

Twitter picture

You are commenting using your Twitter account. Log Out / Change )

Facebook photo

You are commenting using your Facebook account. Log Out / Change )

Google+ photo

You are commenting using your Google+ account. Log Out / Change )

Connecting to %s