ASKING SEAN #312 | GIVING UP ON PROPERTY INVESTMENT

Hinzugefügt: 2026-05-19

[00:00:00]What's up guys? It's welcome back to the E-Hung podcast and today we will answer a question from email. This is from Jay.

[00:00:06]Hi E-hung. I'm Jay 27 years old this year. I am holding a jointly owned land and my own stay property. Last month I wrote an email to you regarding whether a bad reputation property is a reason to consider it. In the end I visited a unit physically. The condition of the property is not as bad as people describe online. So I decided to proceed and pay the booking fee. unit price which is 210,000 for a 750 square ft Soho duplex in Damsara still under master title loan markup which is about 230,000 expected 85% loan because it falls under a commercial unit maintenance fee is about 180 ringgit expected rental is,200 to 1,400 estimated 900 ringit in installment after paying a 6,300 booking fee the agent checked with the management back and forth in the end I was only able to submit to public bank on the second week and got my loan approval in the third week after signing the OTP. The reason it became 70% is because under public bank's guideline, Soho is treated as a housing loan and this has affected my third property loan margin. However, the rate I got is 4.3 which is a commercial rate. I felt a bit off because at the beginning I only considered this unit because it was a commercial unit and able to get 85% loan. In the end, I had to forgo my 500 ringgit processing fee because there was no point in putting in so much upfront cash for an investment purpose. I have followed your channel for the past few years and learned a lot about the property investment. I did a lot of research, but in the end, I still make this mistake regarding the risk of losing my booking fee. Public banks treating Soho as a housing loan was out of my expectation. After this incident, I felt like I may be more suitable for stocks and crypto investment because it is tiring dealing with different parties in property investment. My inner thoughts like is the agent trying to scam my booking fee? Why does banker approval take so long? Why agent watch pushing here and there came into mind.

[00:02:07]My question is what is the safest process and things we need to take into consideration when booking a subsale investment unit and how can we avoid losing the booking fee if we cannot get a good loan. Besides that in your property investment journey, how do you invest in your third property and above?

[00:02:22]Because after calculating upfront cash, stamp duty, lawyer fee, one month rental for agent and miscellaneous cost, the rental yield keeps dropping and most of the time cannot even beat EPF. After this experience, to me it seems that property investment is mainly for portfolio diversification. From your previous videos, you mentioned that in the worst case scenario, you can sell the property at the same price you bought after 35 years and it is like free money. But after I calculated the 30% upfront cash is the main issue. If property price does not appreciate 2x after 35 years, it may still be worse than putting the cash in EPF. I would like to hear your thoughts on this.

[00:03:02]Thank you very much for reading my email. Regards, Jay. So, thank you very much Jay for writing in. Uh, well, too bad I couldn't get to your email in time before you proceed with the booking fee already. So, it means you're a action taker. That's good. That's awesome. But just to get everybody in the same page, uh Jay here, he placed a booking for a commercial unit that he thought was a commercial unit in Namsara. And within a previous email, he mentioned that why the whole world have stigma towards this property. But after he checked, right, actually not too bad one because based on his research, he's getting a 210,000 unit. Loan can get up to 230,000. In result, you'll get 900 ringgit in terms of installment. But the rental is about 1,0002,04.

[00:03:48]So you get about 200 ringit cash back if everything goes in accordance to plan.

[00:03:53]So within the email, what's the few mistakes? Right. Number one, he thought Soho is a commercial unit. What does Soho means? Small office, home office.

[00:04:07]Once you put the word home within the title for the typology is considered under home by financiers. Okay, this one may sound a bit blur. So now if we look into what's around the market a lot of small micro units that is about 280 ft, 380 ft, right? They sell you as if it's a home that comes with their own toilet, right? Most of them are not under the home category. Most of them are under office suites category. So the whole question is now why Sean why they want to make things so complicated office say office home say home why you want to blur the line the reason is if the market as office sweets would you buy you won't and now within the city the over supply condition for offices are actually worse off than residential and people will be more responsive to buying a home than to invest in an office that's what the whole pitch came about so what's the main difference between these two the loan margin as mentioned by Jay here the first unit for residential unit you get 90% loan second you get 90% loan the third residential project if you want to buy as a Malaysian you can only qualify for maximum 70% loan so how a lot of people get over this is to get a project under commercial title why that enables the buyer to get up to 85% loan that's like 15% more in other words as As long as the developer provides, for example, 12 to 15% discount, you don't have to cough out anything already. That's the main difference. And just to point out a very obvious example, a lot of projects that are short-term stay oriented, Airbnb oriented, most of them are commercial title. Again, to complicate the whole situation, within the land title, there will be agriculture, building and industrial. Within the building title there will be different usage residential, commercial and mixed development. So within mixed development there will be a mixture of for example retail, office, hotel and a residence tower. So within mix development you can have both commercial and residential which means under the strata title you will have retail units where you can take up to 85% loan if you are buying but for the residential you can take up to 90% loan if you're buying. Coming back to Jay's example he was taken back because bank only gave him 70% loan. Is it the bank's fault? No, because Soho clearly is under residential. That's why you can only qualify for 70% loan. As a result, he need to pay out more cash up front because it's already his third residential property. So the entire calculation and logic for property investment just couldn't make sense and as a result he need to forfeit his 500 booking fee. But also I want to take this opportunity. What's the difference between Soho and Sooho and Sofho? Those are all commercial title. Meaning SOHO as long as you put home is under residential title. You cannot just chinchai put a typology to your development one because the local authority takes that very very seriously. So for marketing sake they put small office, versatile office, small office, flexible office and etc. It's just a small office. Although the title can be that as a result right you can have Airbnb projects such as the very famous Arte Monkara if you look into the title actually those are all office suites and to a certain level then this becomes like a benefit especially if you're in Pinang because now only commercial titled buildings can run Airbnb or short-term stay if you're in a residential building you cannot run Airbnb at all so unfortunately Jay here has to pay the price for all of us to learn what's the difference between commercial and residential title. Okay.

[00:08:08]The main confusion now is hey I'm buying I'm buying an apartment service apartment but the agent tell me is a commercial title but then later I can apply for my utilities to be under residential rates. Is that true? Yes.

[00:08:26]But that requires a conversion to be applied by the building management or the residents altogether. This differs from state to state. But then some might require 80% of residents needs to prove that they using it for own state purposes before they allow the conversion. Then for the residential units, yes, it will fall under residential rates, right? But for the management for your swimming pool, gym girl, toilet at the facility all those will be under commercial rate. H then for commercial titled buildings actually can people stay one or not? Technically technically you shouldn't right technically last time you shouldn't but now if you look into the entire land plots available within the city right no more residential title land ready. Why?

[00:09:15]because everybody built it already or developed already. So now all freehole one developed all residential title developed now left commercial title and leaseole titles. That's why now you rarely see freehole low density projects already. If got still they will be very very expensive and since we are already here right let's get a little bit more technical with it. There are difference between commercial and residential lands in terms of units allowed to be built.

[00:09:44]So how do land authorities approve a particular project for development? In layman terms we call them density. Okay.

[00:09:52]But actually within the development world what do we call them? It's either you calculate by density or you calculate by plot ratio. Density pretty straightforward. It means that one acre you can only build 60 units. Regardless small unit big units you do yourself like you do your own math. And to think about it, 1 acre 16 units is actually very very rare in today's context. A classic example that I always mention is twine developed by my friend next to Eco Aran Sha Alam. Right. So within 3 acres they only develop 180 units. Then a developer will need to figure out do I build small units? Do I build big units?

[00:10:30]But if I build all big units, not everybody will want big units. And the selling price for big units will also be more expensive. Can people afford? Those are the things I need to think about.

[00:10:39]The other side will be plot ratio. Plot ratio then will be an example 6 to 8 within the city center major CBD is about 10 to 12. That is ultra high density already. How do we calculate this? So let's say you will have 1 acre of land. 1 acre is 43560 ft². Let's say 43,000 ft² are for ease of calculation. So 43,000 ft². Let's say you get a plot ratio of 10. You're going to build 430,000 square ft as your gross floor area for the project. So for example, if you have a land like this, okay, land 1 acre after you deduct the setback, after you deduct the roads, you left the plint area, there's about 45% to 50%. So this plint area, which is the building size, right? So this one is going to be about 20,000 ft². So just now, as we mentioned, is 430,000 ft². It means you get to build 20 floors upwards. This is then the magical part of the entire situation. Gross floor area is entirely up to you how you want to dissect the units. You can build 1,000 ft for one unit. So you get about 430 units, but in city center per square ft, that's about 2,000 per square ft.

[00:11:56]Per unit is going to be 2 million. So maybe I can dissect 500 square ft per unit. So instead of 430 units now I can build 860 units at 1 million each. Or do I want to dissect further? I shrink some of the unit to 380 ft². I enlarge the corner units to be,200 ft². Then suddenly you will see the projects that we have within the city. Now after that local authorities will impose building height for certain areas especially like for Aradamanssara that's closer to the airport. Then in some areas where there's already a cluster of high-rise, right? Then they will have special requests and things like that. And the next crucial thing to think about will be the car park requirement. If you are a residential title building, the number of car parks required is tied to the number of units. Which means every one unit I need to give two car park. But for a commercial title building, these are within Slango KL. So it will be 1.5 car park per 1,000 ft². So for ease of calculation first let's say two units both same size 1,000 ft² 1,000 ft² residential title you need to give two car parks service apartment under commercial title you need to give 1.5 car parks what's the difference bro and what is the.5 wait first okay if I were to build 300 units here I need 600 units of car park already then later you need to plus another 10% for visitor which is 660 okay this is when it gets crazy for the commercial title building for the 300 units built. I only need to provide 450 car parks plus 10% is 495 only. I would save 660US 495 is about 165 car park base. That's about a floor or two floors of elevated car parks already. And this greatly affects the pricing for the unit. And how developers plays this game further?

[00:13:49]What if 500 square ft for one unit? It means for the same number of car parks for the commercial title ones I get 600 units. Now meanwhile if I were to do this for the residential title buildings I will need to immediately double the number of car parks required because the car park requirements is tied to number of units not built up area. This episode is like a lecture and that's the main reason why we have a lot of complication during the sales process of description because a lot of sales agent don't even understand this don't say sales agent a lot of developers executives also don't understand this because it's not normal to discuss about all these kind of requirements unless you're within the development industry. So the whole mistake here for Jay is not very serious actually is a mere misunderstanding of this project being under home or under commercial that's all because when it writes soho again it's under home got it now the next question will be how do you get around the 70% loan because bro if you put up so much money right then how do you make sense from your investment portfolio point of view which is very interesting as we discussed thoroughly within the channel there's four buying channels right you buy new buy up sale buy auction buy purchase as you buy the first two right it depends which one makes the most sense in terms of return and yield but beyond the second one just like Jay he's buying the third what will be the main criteria is upfront payment required if you are buying a 1 million project for the same four channels right only when you deal directly with developers, you're able to craft up deals and you don't have to cough out upfront deposit because if you to go up sale, you need to pay 3% earnest deposit 7% later during spa in total you need to pay up front of 18% including all the miscellaneous fee just for ownership. Yeah, just for ownership.

[00:15:52]It means for 1 million project you need to cough out 180,000 renovation. Okay, for auction pretty much the same. Your bank draft needs to be 10% already. You need to put in 100,000 to bid for 1 million project that's under auction. And if you don't get the loan within three months time, 90 days, the booking fee will be burned.

[00:16:13]Unlike subsale one, your one just merely got cancelled. So within this unfortunate incident, you are still considered lucky one. If you to go for the auction one, 10% burn just like that. Even yeah, some may argue you can ask for extension of time 30 days. So within 120 days it's either you qualify for the loan within the expected loan margin but if you cannot cough out the whole amount but that's why I don't encourage first timers to actually go for auction only via B purchaser because B purchase ultimately also deal with developers you can cough out deals as my famous saying goes good deals are found great deals are crafted so if you are familiar with the channel I've always mentioned about this that how am I still adding properties to my portfolio right we clear is beyond that Second property already is I'm getting properties from far capital. So this is a bulk purchase group. I'm merely a client. This is not my company. But what they do is they deal with developers for group buys. It means they are buying units in very big quantities. For example, 50 units, 100 units, 200 units. That's one project in they bought 400 units altogether. And when you have such buying amount, you can demand special price compared to us Kim going into the sales gallery alone.

[00:17:32]Hey, I want extra discount at most 1% for you, right? But for them, they are able to turn out discounts. They are sometimes too good to be true. You will need to really see it to believe it. And just like my project in Jaw that I just rented out recently, the project I get about half price. Yeah, half price.

[00:17:52]Imagine the property is at 1 million for example example at 1 million you can qualify for 90% loan but you actually get 50% discount so you will have extra 40% as cash back which is the trauma for a lot of newbies right wow massive cash back ohh so we use that to renovate the unit nice then the remaining we either put into our savings account or we put into the housing loan to knock off interest okay that's the SOP for investors within our community. But if you can only qualify for 70%, you can still have about 10 to 20% cash back.

[00:18:29]And again, we use that for renovation and to put in the remaining into the housing loan to knock off interest.

[00:18:35]Actually, some use it as buffer during the renovation period to pay the installment. Yeah, but you get the whole picture. Okay. So ultimately when I buy property now using our investment strategy, we are still applying the same strategy which is to buy properties using credit. Then with the capitals that we have, we invest in other different assets that we like. You want to put in ASB, you want to put in SMP, you want to put in Vanguard, you want to put in Pokemon card, you want to put into crypto, entirely up to you. But in terms of credit, this is how we use it because you are right. You are 100% right. If we were to use cash, let's say if I put in 100% cash to buy the property, real estate will be one of the worst confirm. Again, as pointed out by Jay, if I will cash buy the property at 1 million and it gives me 6% return after I minus all the maintenance fee, repair, agent fee, pin after all that right, might as well I put into EPF and get 6%. Correct. You are right. But if you just switch your perspective a little bit, okay, just switch a little bit. How we do it is this 1 million property. We didn't put out anything at all. I merely need to have an income to qualify for that 1 million. Okay? And the criteria in the first place to buy such property. It means that the rental needs to at least cover the installment. So let's use my Monara project as an example at 1 million SBA price and for example, you get 20% discount. So after you sign the papers, you qualify for the loan. And by the time you get your units, you will get about 100,000 in cash, right? And when I bought the unit, it was during lockdown. So the expected rent was 3,8 proposed by the team also. Hey bro, if you buy right, for the first 6 months, right, there will be negative cash flow. So are you okay with it? I said jalan because Mona during co was affected really badly.

[00:20:33]That's why we get that price. So when I signed the SBA, the rental rate was about 3,8. Then after I completed my unit my rental was 4,0002 but end up finalized the first tenant was 4,05 second tenant 5,0003 third tenant 6,000 and this happened within 2 years time because got one halfway ch they call it absconded never mind let's let's just take the moderate average median 45 so you qualify for a 900,000 loan your loan amount is about 4,2 you put your cash back with into the unit Let's say about 60 to 80,000 to furnish the unit. Then you rent out at market rate 4,5 that also covers the maintenance fee. So you break even every month, right? Every month you break even in the median case. But within a year then it's about 5,000 then 5,000 3 then 6,000 already. So that one will be all the bonus as a result of the heavy research work that we do. But what I'm trying to say is within this one whatever that you deem as cost which is like agent fee you need to fix the unit like fix the air con plumber cleaning all this kind of thing if you declare your income all these cost can be written off as expenses. Even the interest that we pay to the bank is written off as expenses.

[00:21:53]But the banks will recognize this income during the calculation for our next loan application for the next property.

[00:22:00]That's the beauty of this. It means the property investor gets to outsource the loan to tenants. So tenants will pay everything. And to operate this business, you get to enjoy incentives from a tax perspective. It mean you can write off all the cost and ultimately by renting out one unit do we earn a lot of money? Not really on an annual basis. So then what do we earn actually the equity built by the tenant then the capital appreciation if it's the right property of course if it's the right property. So for example now my latest tenant I rented out for about 6,000. What would be the right market rate that I can fetch? If I were to sell at 1.1 million, the new buyer who buys the unit still gets to enjoy 1,000 positive cash flow.

[00:22:49]So, if you reverse calculate that for a 6% yield, gross yield, not net gross. I can sell the unit at 1.2 million, but the price that I've got is about 900,000 only. So indirectly, you see the picture. Indirectly, I've made about 2 to 300,000 in market value or equity. Okay? Whether got people want to buy or not is a whole different thing. Also, what's interesting is why would I sell a property where my money installment is about 4,0002 and I'm getting 6,000 monthly rent. Why would I want to sell such a property? And all these operated without me coughing out money. So you like stocks, you like crypto, you like index funds or whatsoever. Me too. I'm also playing that with the existing capital that I have. Meanwhile, the credit here is the beautiful part because as Malaysians, we are truly blessed. Such schemes are only available in Malaysia. One, no other locations you can play this kind of game. Only in Malaysia also because we are still in that over supply stigma. Everybody still complain about hey Malaysia market cannot over supply one too many units only we get opportunities like this imagine which I think is going to be the very near future imagine if we are no longer in a over supply situation because of the energy crisis new supply currently is very very slow there's very very little new projects being launched right now because every single parties is fearful of the cost uncertainty of materials and energy. Nobody wants to commit to the price to the time because later if I cannot compete on time my whole reputation as a developer gone that I need to pay less some more and we all can see that from the previous lockdown. Yeah. And that is the reason why rental rates currently is going off the charts like from the portfolio year on year our return rates are actually increasing about 20% to 25% year on year. Why? very little new units being completed. And for those who are willing to launch, who are willing to take the risk, how much do you think they will price their project? Of course, at a premium to buffer all these risk. That's how we are playing the game. Well, this is the strategy for people that is limited in resources. Our philosophy is we want to use as little of our money as possible for property investment because we want to preserve our capital for the other investment assets. Now, you guys like stocks. What makes you think we didn't buy stocks? You all like VO, you all like Max 7. You all like tech stocks. What makes you think we don't get it? It's never a discussion about whether property versus others. It should be a conversation of N. Property and crypto, property and stocks, property and Pokemon. Well, PMP, not bad. You get what I mean? So don't punish yourself too hard just for a mere misunderstanding of the title which is SOHO that is considered under home loan.

[00:25:52]Yeah, I think you're being a little bit too harsh on yourself. That 500 too bad.

[00:25:56]But I seriously thank you for sharing the story. How I wish I could get back to you faster. I'm busy checking out a lot of projects lately. So hopefully this clarifies the matter. And for those who still have any other questions regarding real estate, do just email me at tn i h e r t i h e rgmail.com or you can just DM me on Instagram I H E R N.

[00:26:17]And I'll see you guys on the next one.

[00:26:19]Ciao.