How How YouYou Can Become Can Become a a Multi-Millionaire Multi-Millionaire Real Estate Investor!!Real Estate Investor!!

by Milan Milan DoshiDoshi Best-Selling Author &

Independent Financial Trainer

Mastering the 6Mastering the 6 GoldenGolden Success Success

Rules in LifeRules in Life

11stst Golden Rule Golden Rule

In order to In order to

EARNEARN & INVESTINVEST MoreYou First Need to

LEARNLEARN More

22ndnd Golden Rule Golden Rule Another Way to

LEARN & GROWLEARN & GROW is by

NETWORKING NETWORKING with other like-minded with other like-minded

peoplepeople

EARNEARN As Much as You Can,

As FASTFAST As You Can

33rdrd Golden Rule Golden Rule

SAVESAVE (not necessarily min 10%) As Much as You Can

44thth Golden Rule Golden Rule

BORROWBORROW (always ensure Potential Returns >

Borrowing Costs) As Much as You Can

55thth Golden Rule Golden Rule

INVEST WISELYINVEST WISELY

As Much as You Can

66thth Golden Rule Golden Rule

In the Long Run, it’s not How Much Money You Make that will determine Your Future.

It’s how much of that Money You Put to Work

by SAVING It, & by

INVESTING It (wisely)~ Peter Lynch

RISKS RISKS versus versus

RETURNS RETURNS of Various of Various

InvestmentsInvestments

Where Does Where Does REITs REITs andand PropertiesProperties stand vis-à-vis stand vis-à-vis

Other InvestmentsOther Investments

Offensive InvestmentsOffensive Investments

Potential

Return

Risks* Fixed Deposits (3% pa)

* Endowment Policies (2-4% pa)

* Bonds/Bond Funds / REITs (6-8% pa)

* Property * Equity Funds (10% pa)

* Stock Market (20-30% pa)

* Hedge Funds (>30% pa)

* FOREX/Options/ Commodities/etc

Inflation

A-REITA-REIT(listed Nov’02)

Appreciation of = 45% pa over Appreciation of = 45% pa over

1 year (Rights/Divids excluded)1 year (Rights/Divids excluded)

Appreciation of = 21% pa over Appreciation of = 21% pa over

10 months (Rights/Divids excluded)10 months (Rights/Divids excluded)

KLCCP BhdKLCCP Bhd – the – the closest to a REITclosest to a REIT

Benefits of Investing in REITsBenefits of Investing in REITs

Portfolio Diversification - REIT’s own Multi Properties,

Diversified Tenant Pool, Different Lease Lengths, etc

Income Distribution - 90% of Net Income is distributed

to unit holders as dividend. No Tax on Rental Income.

Benefits of Investing in REITsBenefits of Investing in REITs

Participation in the Property Market

- You can own small stakes in big properties

Professional Management

- No worries about Tenant and Property Management

Benefits of Investing in REITsBenefits of Investing in REITs

High Liquidity

- Can buy and sell as normal shares

Low-Risk, Stable Investments. Low Correlation profile against other asset classes

Low Transaction Costs

- Same as per shares

Market Capitalization of REITsMarket Capitalization of REITs

Singapore: 2% to 3% (S$4 billion)Singapore: 2% to 3% (S$4 billion)

Australia: 8% to 9%Australia: 8% to 9%

Malaysia: High Growth ProspectsMalaysia: High Growth Prospects

Upcoming REITs:Upcoming REITs:

Axis (Offices + Warehouse) Axis (Offices + Warehouse) - listed- listed

YTL (Hotel + Shopping Center), YTL (Hotel + Shopping Center),

Sunway City, Landmarks Sunway City, Landmarks (Sg.Wang), MRCB, KPJ (Sg.Wang), MRCB, KPJ HealthcareHealthcare

Official Inflation Rate:

“Unofficial” Inflation Rate: 6-10% pa

2 - 4% pa

Official Official versus versus ““Unofficial” InflationUnofficial” Inflation

Types of Types of

Property Property

InvestmentInvestment

StrategiesStrategies

1.Buy from Developers and Resell Upon Completion

Important to Buy the …From the Right Developers

Right Property Type in the Right Location

at the Right Time & Price

Sell on Completion

2-3 years at

20-30% higherRepeat the

Formula!

Book Apt @ 500K

D/P = 100K (-)

Loan = 400K

ExampleExample

Sell @ 600K (?)

Loan @ 6% = 435K

Profit = 165K (+)

Sell on Completion 3 Sell on Completion 3 Years Later …Years Later …

GrossGross 165K – 100K165K – 100K

ProfitProfit = ------------------ %= ------------------ % = 65% over 3 yrs = 65% over 3 yrs 100K 100K = 18.1 % pa = 18.1 % pa (compound)

Price is Cheap but the RISKS you take are extremely HIGH

Makes Sense to Pay Slightly More to Buy Ready Made. You know exactly what you

are getting + the Risks is much lower

Disadvantages !!

Structuring

Your

Property

Portfolio

5. Raw Land/Development

4. Commercial Properties(Shops, Offices, Factories, Warehouses)

3. Ready Made – Buy for Appreciation(Landed Houses)

2. Ready Made – Buy for Rental Returns(Medium Cost Apartment)

2. Buy Ready-Made Medium Cost Apts – Buy for Rental Returns

Rental Returns: 7-9% pa

Appreciation: Poor (< 2% pa)

Easy to Buy with Zero D/P and +ve C/F (suitable for beginners)

Tenant Mgtm will be challenging

3. Buy Ready Made Landed Houses – Buy for Appreciation

Rental Returns: Poor (3-5% pa)Appreciation: Good (3-5% pa)Total Returns: 6-10% paWith minimum D/P, you will have –

ve C/F (Rental < Installment)

Timing is very importantHIGH RISKS due to –ve C/F

4. Buy Commercial Properties

Rental Returns: 6-8% pa

Appreciation: Good (3-5% pa)

With minimum D/P, possible to get Zero C/F (Rental = Installment)

Location extremely important

Possible to get “Lifelong” Tenant

Suitable for Wealthy Individuals

5a) Raw Land – good way for the super wealthy to “park” their surplus funds for their future generations

Tip: Buy in Areas where the growth is heading towards

b) Plantation – expertise needed

5c) Homesteads

d) Property Development – your ultimate aim to make profits of 30-50% per project

6. Buy Basic or Run Down Properties, Renovate, Sell Off

Example: Garry bought a run-down bungalow in Bangsar @ RM1.5m

Tear Down + Rebuilt + Furnish = RM1m

Sold 6 months later @ RM3.3 m

Gross Profit = 800K for 1 year work

7. Specialize in Abandoned or Haunted Properties

…. if you can find the owners. Restore the property back and sell it off.

8. Specialize in AuctionsAll auction properties are sold on a “as is,

where is basis”. Clause in the Proclamation of Sale stating “Prospective Bidders are advised to inspect the subject property and check on the issuance of separate individual titles/strata titles, seek Legal Advice on the Conditions of Sale, conduct official parent Titles search at the relevant Land Office and make the necessary enquiries with the Developers and/or other relevant authorities on the terms of consent to the sale prior to the auction sale”.

9. Buy in Areas where Accessibility is being Upgraded

Example: Old Klang Road, Kesas, new Guthrie highway, etc

How You Can How You Can Retire a Retire a

Multi- Multi- MillionaireMillionaire

via Propertiesvia Properties

Goal:Goal:Become a Millionaire by

the time you Retire by

a) buying 1 medium cost Apt worth RM100K every 5 years

with

b) Zero to Positive Cash Flow with the Potential for Long Term Appreciation.

Assumptions:Assumptions:1. D/P = 25K (25%) so that C/F=0

=> Saving of RM416/mth x 5 years

2. Loans @ 8% for 20 years

3. First Apt @ 30 years is own use

4. 1 Apt bought for Investment every 5 years starting at age 35 until age 55 years

5. No Inflation & Compound Interest

Property Investment Time LineProperty Investment Time Line

Age: 30 35 40 45 50 55 60 FV

Own 1 F 250

Investment

2 F 225

3 F 200

4 F 175

5 F 150

6 F 125

1,125

RM69.90RM69.90 RM49.90RM49.90

RM39.90RM39.90

Prices of Milan’s Books:Prices of Milan’s Books: