What if these owners refinance to invest because they don’t have enough cash?
In that case, they could refinance but they have to be careful with the loan’s terms.
Do elaborate on “loan terms”.
This is how it should be. If the environment is of low interest rate with rising property prices, then take as much loan as you can. This is because you can multiply your net worth very fast, assuming that you can pay every month. That formula of taking as much loan as you can and buying as many as you can was correct one or two years ago. The environment has changed and will continue to do so. Interest rates have increased. There’s the LTV (loan-to-value) ratio of 70% for third property onwards. There are more things to come, some of which you and I have never seen or faced before.
Anybody with monster mortgages will be in serious pain. So back to your question of “If you have almost paid off but do not have the capital to buy other properties, should he/she refinance?”. The answer is yes, but don’t take too much and more importantly cap the interest rate. Don’t use the current fluctuating rate, based on BLR (base lending rate). It won’t be low forever. Just to share, I have one RM1.5 million loan. The rise of 75 basis points in 2010 has caused my payments to rise by RM500. This is only 75 basis points. Can you imagine if the interest rates rise by 2 or 3%? I also will feel the pain.
Do you go for residential or commercial properties?
For me, it has been residential all the while − both condos and landed. I know that the big money is in commercial properties – higher rentals and capital gains. You need to have some knowledge of the commercial market because if you choose incorrectly, it could be empty for years. So you must really do your homework. But where there is danger, there are also opportunities. Now, I am looking at below market value properties. There are a lot of options now.
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"I do not only teach people on how to be rich. I teach people how to get rich, how to live rich, how to stay rich and how to die rich," says Ali. |
When did you start investing in auction properties?
Before that, I was buying from developers. Now, my staff cuts and highlights the interesting auction properties. I can’t take them all. The quantity has increased significantly.
Are these auction properties in good areas?
Having said that, 95% are not interesting to me. But lately, the quality in good areas has also increased. In fact, I don’t even do this full time. I only spend 10 minutes every morning to look at it and go for the interesting ones. I share some with my clients.
Do you concentrate in certain residential areas?
I go for PJ. It saves me a lot of work because I am familiar with the area, the supply and demand, and the prices.
Do you do no-money-down strategies?
Yes, the whole concept is find one below market.
Are no-money-down strategies very difficult to apply with the LTV ratio of 70%?
Yes, it is hard, but it can be done. I think the LTV of 70% is good for most people. Otherwise, they might end up taking too much loans, which they can afford now but as situation changes, they might not be able to afford it. So this might save their life.
What are the common myths about auction properties?
Despite the quantity of auction properties, I would say that 90% are not appropriate for investors. One, incorrect locations. Two, nature of auctions – the first auction might be market value, therefore it is not appropriate.
For auctions, you must do homework. Actually, in all investments you must do your homework. Whenever there are opportunities to make lots of money, it also comes with opportunities to lose a lot of money, like gold. The price of gold is rising. I put much of my money into gold in the last couple of years, which I am happy about. At the same time, gold is also full of traps. If you buy the incorrect form of gold, you may not benefit even if the price is rising.
What do you mean by “incorrect form of gold”?
Jewellery. Is it gold? Yes it is. When you buy from shops, you pay more to cover for the workmanship and profit. In that case, you already overpay, already in the negative. When you sell back to the shop, you cannot sell at the same price you bought. At best, they will buy it back at market value. They will usually buy at market value, minus 25%. That’s two negatives. Three, you can only sell back to the same shop you buy from. Fourth, if you do not have the receipt, they won’t take it back and most people don’t know where they kept the receipt. Fifth, when you go back to the shop, you cannot get cash, but instead you can trade it in for another piece of jewellery. So, five negatives. From an investment point of view, it is useless. So despite the rising price of gold, you may not benefit from it. That’s one of the traps. To know more, you can read my book – Get Into Gold.
Do you conduct a lot of seminars?
About one in every three months.
What are your seminars about?
All about money − property investments, investing in gold and information marketing.
Are they one-day seminars?
Yes, one day. I will cover the critical success factors for property investments. There are a lot of things to talk about properties. What you want to know is the critical success factors. One of them is buying below market value. Then you have to know the three elements of property investment which is physical, financial, and legal rights and obligations.
Financing is extremely important. Most landlords don’t make money from investments. So I share on how they can reduce these risks significantly. I share on how to reduce work, automate processes and system of doing this. An average investor takes loans that amount to a few hundred thousand, so they cannot afford to get it wrong. What more if the loans are in the millions. I am not only a businessman. I am also a qualified financial planner. So I look from both sides. I feel concerned for my fellow Malaysians when they lose their houses. When they search for mortgages, they only look at one thing, the lowest interest rate at that point in time.
What I do now is the personal coaching programme.
What are the terms and conditions that borrowers should take note of?
Flexibility of loan.
Are you referring to types of loans?
No, beyond that. The actual terms and conditions of the individual loan. For example, most banks have a lock-in period. That’s fine, but on top of that, some loans don’t allow you to pay extra. For some, you can pay more, but the extra payment doesn’t reduce the principal amount, which defeats the purpose. Some of them allow you to pay extra, but it must be in multiples of RM1,000, for example. I am not saying that interest rate is not important. But that’s just one of the criteria.
How much is the personal coaching programme?
The personal coaching programme is RM590 per month. When you sign up, you have to pay for five months in advance. After they sign up and meet me personally, we have one tele-seminar (seminar via telephone) for one hour per month. I will talk about specific subjects, for example, auction, estate planning, investing in gold, and so on. It is a conference call where all members will call in and listen. From time to time, I will also invite industry experts to talk. It is just like a seminar but through the phone. This is my inner circle coaching programme. Members can choose to continue after five months if they want to.
For urgent matters, they can contact me. They also get a free book every month and every four months, we have a mastermind meeting, where the whole group comes together and meet here (Azizi Ali’s office in Kelana Jaya). I do not only teach people on how to be rich. I teach people how to get rich, how to live rich, how to stay rich and how to die rich.
Most of the information that I share, I am doing it myself. So I know that it brings results. For example, investing in gold, I did the research and then I share. It is not just theory.
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