THE 9 CRITICAL MISTAKES 95% OF INVESTORS MAKE! (And How To Overcome Them)

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1 THE 9 CRITICAL MISTAKES 95% OF INVESTORS MAKE! (And How To Overcome Them)

2 THE 9 COSTLY MISTAKES 95% OF INVESTORS MAKE (And How To Overcome Them) As a property investor, it is very important to know the Mistakes that others have been through and not to fall into them. Even seasoned and experienced property investors at all levels do make some basic mistakes in their early years of investing but some mistakes should be avoided at all cost. The following report would describe what are the 11 costly mistakes that are most often overlooked... 1) Thinking you are smarter than you actually are. This is self-explanatory, isn't it? Most people tend to think that by earning more money, or having more savings in the bank, they suddenly become smarter. And equate More money in the pocket = More brains So when they go for viewings, and when the agent(s) start sayings things such as You are a smart investor for choosing this location because... Or words to that effect, their egos are boosted, and especially if the agent is an attractive person, in order not to lose face.. Motivated buyer buys. Agent get commission, buyer wondering if the purchase is really worth it, or did he/she make a mistake in the purchase.. Buying properties is about getting good value properties, with good rental returns, and also potentially, good capital appreciation. You make money when you buy the property, not buy the property hoping that the price would appreciate... eventually...

3 Make sure you do all necessary research and due diligence before deciding on a purchase. And... it is okay to walk away from the deal.. 2) Impulse purchase. As value property investors always say, Fall in love with the numbers, not with the property. Many people are tempted into buying very nicely furnished units, with nice furniture, contemporary design, but overpriced. They tend to think that all the extra furnishings are worth a lot, but it is perception more than a reality! If it's in a prime area, with lots of other buyers viewing at the same time, emotions tend to run high. It could be that it's a really really good deal, and everyone wants to get a piece of the action. Or it could be due to the owner being available to open the door on a specific day, usually during the weekend. Or it could be a ploy by the agent to earn slightly more commission. Whatever the reason, when there are a lot of buyers in the same unit a the same time, the buyers become motivated to win at all cost. If the property's selling price is RM250k, and the market value is at RM280k; do not be surprised that it could suddenly turn into a bidding war, and the price finally closed at RM320k, with the most successful bidder walking away with the 'prize'. Instead of purchasing a below market deal, this buyer has just walked away with an overpriced property! Bringing emotion and ego to view properties is a sure-fire way to become a motivated buyer!

4 3) Bad credit rating. Do you pay your credit card on time? Be it full payment or minimum payment? Or are you like a lot of people who, somehow or rather, don't keep track whether payments are made on time, or even make payments? This is very important for property investors as the bank assesses each facility that a person has with the bank. In Malaysia, it is called the CCRIS (Central Credit Reference Information System). If your payments are prompt, the report would show lots of 0's. The more 0's, the better. Problems start when 1's, 2's and 3's crop up, as it shows how many months in arrears your account(s) is in. Make sure you pay promptly, be it minimum payment, or full payment. 4) Paying off fully your investment property mortgages. As asians, we tend to think that owing money to the bank is not good, especially when it is making the banks rich. And we would want own the property 'debt free'. This is very limited thinking as the bank is one of your best partners in property investment. Where else would you be able to find a partner that would put in RM9 for every RM1 that you put? Or in some cases, for every RM3 you put in, the bank puts in RM7? If you purchase correctly, your rental returns should more than cover for your mortgage and put money into your pocket every month. Your tenant would be helping you pay off the bank while you enjoy the capital appreciation from your property, and also take good care of the property for you every year!

5 There's good debt and bad debt. Good debt is what would bring you money and accelerate your wealth creation. Bad debt is what takes money out of your pocket. So invest in good debt and let the bank share more than half the risk with you! 5) Avoid passing keys to tenant before execution of tenancy agreement plus collection of all deposits. Property investment is a business, and in business, it's the numbers that count. Make sure you collect all the relevant deposits and execute the tenancy agreement before passing the keys to your tenant. Back in 2009, Dexter made the same mistake in the first property that he rented out to the first tenant! They were husband and wife, and the wife was around 5 to 6 months pregnant. They needed a place to stay, it was very near chinese new year, and the tenant had supposedly banked in a cheque for the relevant deposits. So he gave them the keys to the unit and it turned out that they had lied! Find out what happened next in the book Start from 0! 3 Years to RM10mil property portfolio, co-authored by Dexter Lim and W.T. Kam! As I've just mentioned, property investment is a business, not charity. If you want to do charity, there's a lot of charitable organizations that would love your contribution! 6) No tenancy agreement. Why would there be a no tenancy agreement issue? Some tenants do not want to pay for the agreement, they are staying only for short term, or whatever the reason, never agree to waiving the tenancy agreement!

6 But what is a tenancy agreement? It is a legal contract that draws out the responsibilities of each party concerned (the tenant and the landlord). In a nutshell, it is to make sure that the landlord provides a good place for the tenant to stay in, and that as long as the tenant do not do illegal things, and pay promptly, he/she will not be evicted. And it is to highlight to the tenant that their responsibility is to take care of the unit, not to do illegal things, and to pay promptly. Even if the owner were to sell the unit, the owner has to make sure that the tenant still gets to stay in the unit, or gets adequate compensation. From the outset, you would know that it is vital to have a tenancy agreement in place! If your tenant turns out to be a bad tenant, you need to have the necessary proof and documentation to show what rules/laws breached, and why he/she needs to leave. Without proper documentation in place, what can you do? Verbal communication is very subjective. Each can claim anything as there's no proof. Why subject yourself to any potential ordeals just because of such a small issue? If the tenant refuses to sign a tenancy agreement, look for the next one! 7) It s better to be vacant than to rent to a bad tenant. For some properties, especially new properties, there might be a certain time frame before the unit would be sold or rented out as there's just too many available options. It is certainly best if your unit could be rented out as soon as possible so as to stop any negative cash-flow.

7 But make sure that you are comfortable with the potential tenants that wants to make an offer to rent! Talk to them, screen them, make sure that you ask as many questions as you like. Find out if they have a stable source of income, or sufficient funds to rent the unit for the whole tenure. How many people would be staying? Where are they working/studying? Location of their work/study area? Ask a million and one questions if you so desire. If you do not feel comfortable in any way, tell them that you'll think about it. Don't rent out just to stop the 'bleeding'. It is much better to keep it vacant for slightly longer than to rent out to potential headaches. Bad tenants are a fact of life. You would need to diligently screen through in order not to suffer later on. 8) Never own a property in an area where you are afraid to go and collect the rental. Many people make the mistake of wanting to invest in low cost housing because it is... low cost. Or medium cost housing in industrial areas in a very remote area. Big mistake! If you are used to the slums, you don't mind buying in the slums and collecting rental in the slums. If you are a white collar worker with a steady job, very geek-looking, it is best to stay away from the slums. It is always better to do something that one is familiar with. Same goes with tenant management. If you are not used to dealing with people whom you would never deal with in your daily life, stay away!

8 9) Buying without a game plan (Buying what you want rather than what properties that help to achieve your goals). Most people perceive that in general, the price of real estate would appreciate over time. So it doesn't matter what properties is bought, as long as you can hold on to it long enough, the price would appreciate. It's like steering a ship in the middle of the sea without a compass! My friends, this is a very dangerous way to invest! By investing in a haphazard manner, not only would your limited bullets be spent fast! Yes, most of us work with limited bullets, so it is vital to make sure that the deals that we do go into is money well invested. (Oh, with the Property Fast Track system, you work with Unlimited bullets, but use it only on Good deals ya!) I have a friend who bought 1 unit of condo, 1 unit of office, 1 unit of landed property, and they have no idea what to buy next! If he had a game plan, then he and his girlfriend would know what they want to achieve in their real estate investment game, instead of putting it as part of their portfolio. Without a specific game plan, anywhere could also be a good buy. And not to mention the potential headache for tenant management... Bonus 1! Buying properties facing an empty plot of land earmarked for future development. This is another danger of buying from property fairs, where all the models and mocks on display show only the best sides of the property.

9 You would not know what you are getting into. Empty parcels of land could be developed into schools, mosques, cemetery, low cost projects... You get the picture. Take the risk out by investing only in mature places where there's no more lands for development. Or find out about what the land use is for. This would save a lot of headache later on. Bonus 2! Did not bring cheque book Imagine this scenario. You've found good deal 30% below market, the returns are around 8%, and there are other investors around as well. You know that you must have the unit, and you know that the other investors want the unit as well. You reach for your cheque book, and realize at that time... I Did Not Bring My Cheque Book! No matter what you tell the agent I'll issue you a cheque in ½ hour's time. I've got to pick up my cheque book from the house, or I'll deposit cash into your company account later, the agent is unbudging, and the unit is sold to another investor who immediately issues a cheque on the spot. In real estate investment, fast action is required when you locate good deals. And the trigger-happy cheque issuer gets the deal! So make sure you bring along your cheque book when you go for viewings (Caution: Do all necessary due-diligence and research before being trigger-happy. It does not pay to be fast but clueless about the deal you want to get into!)

10 Armed with these simple, but often overlooked tips working in your favor, have fun Property Hunting! Click on Property Fast Track fan page and like us on Facebook! Co-authored by: Dexter Lim & W.T. Kam Directors of Property Fast Track Sdn Bhd Contact: