Tuesday, October 30, 2012

Uncommon wisdom from a young investor

YOUTH POWER: Twenty-something young investor turned author reveals foundation of his success in property investment

At first glance, Faizul Ridzuan, a nine-to-five employee, does not seem extraordinary, except perhaps his good looks and charisma which would not be out of place in a Bollywood movie. To those closely following the property investment industry, however, this man is known as
the rising star of property investment with his first book “WTF? 23 properties by 30” which has been selling like hot banana fritters and was at the top five MPH bestseller list for weeks. How did it all begin?

Fateful beginnings: Faizul reveals that it all began near the end of his studies at University of Malaya. Studying computer science, he needed to take an elective subject and he opted for Financial Planning 101. In hindsight, the choice proved to be life-changing. “The lecturer kept on advising us to invest in properties,” Faizul reminisces, adding that one day a fellow student asked the lecturer how many properties does she herself own. “She answered that she has over 20 properties.”

The revelation shocked Faizul as lecturers are generally well-off and do not need to buy so many properties. “That was my lightbulb moment.” “Even after I graduated and started working, property investment was always on my mind,” he confesses. “I spent the first two years of my working life just learning about property investment by browsing and asking around in online forums.”

The two years of learning and gaining knowledge from the forums thoroughly prepared Faizul for the crucial first step for any aspiring investor — buying the first property. “After I got my job confirmation in 2006, I immediately went and bought my first property — a condominium unit at Kelana Puteri in Kelana Jaya.”

The rest, as they say, is history. When asked about his goal of having a portfolio worth RM3 million outlined in the book, he reveals that he had passed the benchmark a long time ago. Long-termism and conservative: Being successful at such a young age, Faizul is surprisingly humble. “I still ride the same scooter from four years ago and have an unused car that I plan to sell off soon,” he remarks.

His practical approach to life is perhaps one of the keys to his success. The scooter allows him to save time navigating through the nightmarish jams of the Klang Valley. For Faizul, time is money. “In the two hours that I am caught in the traffic jam, I could be researching on properties,” the young investor exclaims. He reveals that he spends an average of two hours a day at a local property forum.

That, a persistent and hard-working attitude, street smarts and a longterm view to everything he does (well, almost) are the foundation of his success. Being very conservative and “cheapskate” help too. You could almost feel that this young man somehow speaks the same language as the old school Chinese tycoons!

Somehow, despite being born into an average wageworker family, Faizul possesses many of the traits of successful world class investors. Admitting to being very cautious when it comes to investing, he narrows down the contributing factors of his success to good fundamentals.

“It is important to understand who is going to be renting from you before buying a property,” he points out. “If you cannot answer that question, then you haven’t done enough (research).” Faizul admits that he sometimes spends hours in front of the entrance of an apartment just to see what kind of occupants dwell in the building. “If I see factory workers being the main occupants, for example, then I will just target my advertising to this group of people. That way, I get my unit filled up very quickly.”

Revealing that mass market units (below RM400,000) are the easiest to rent out, Faizul has so far populated his portfolio with medium-cost units where he has no problems finding a tenant. ‘Accidental’ flipper: Commenting on the tendency of some investors to ‘flip’ properties, i.e. buying with the intention of quickly re-selling to realise quick capital gains, Faizul stresses that he does not advocate the practice.

“To me, if you buy purely to flip, then you are speculating and if you are speculating, the risk of losing money is very high,” he points out, adding that he has always bought property for cash flow reasons. “I have only been what you might call an ‘accidental’ flipper on rare occasions.”

Explaining further, Faizul notes that he only sells his properties when the price appreciation is such that the benefits of selling can never be matched by the cashflow generated. “For instance, I bought a property in Puchong three years ago and was able to sell it a few years later for a gross profit of RM220,000.”

“If I rent it out, my cashflow revenue is about RM6,000 per year and it would take me 40 years to get RM220,000, so it didn’t make sense for me to keep it any longer.”

“But for other properties that I cannot sell, I always have rental income from them.”

Inspiring: Having inspired many with his success story, there are fears nevertheless among aspiring young investors that it is becoming more difficult nowadays to start investing than it was when Faizul started his own journey. In view of the tightening of financial lending policies added on by the recent Budget proposals to increase real property gains tax, at a glance it would appear that the playing field has changed, but Faizul disagrees.

“The ‘how’ part of starting to invest would still be the same, but people are normally emotional when it comes to investment. For example, now there is talk of the coming general election, so a lot of people take a wait-and-see approach. But for myself, I have always followed this belief: don’t wait to buy good property but buy good property and wait.”

As for the impact of the tightening of banks’ lending policies, Faizul feels that it boils down to the asset value itself.

“For example, I sold two properties this year and both were in the market for two months, but in the end the buyers paid twice what I paid for the properties,” he remarks. “For good properties with good fundamentals, people will keep buying even if there are limitations in terms of borrowing.” What would he advise aspiring youngsters looking to follow in his footsteps, especially fresh graduates just entering the workforce?

“Get a decent job with a decent income, then find ways to quickly increase your income,” he says. “As soon as you have saved enough and can afford to buy a property, go ahead and buy one — don’t wait.”

Martin Koh | 86666 944 | R020968Z
Sherry Tang | 9844 4400 | R020241C
Senior Sales Director
Email: marshe_inc@yahoo.com.sg
DTZ Debenham Tie Leung (SEA) Pte Ltd (L3006301G)

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