Primary Vs Secondary Housing Market

Anything developed or introduced by human-being in this world has its own pro and contra in applying it. Similarly goes for buying houses; what are available in market for us to venture? YES!! Either new project by developers or sub-sale in secondary market would be the choices to choose when buying a house.

What would be the benefits and/or risks buying new house from developers? How about secondary market? Is there any benefits buying houses from secondary market? How we as a buyer can benefit from these two options? WHAT??!! Benefits from both market? YES! How about risks? Only for new projects? NO. Both have their own risks and obviously can be reduced or mitigate so that we are safe when do the transactions.

Generally for new projects there will be potentially two (2) risks where the completion of the project could be big doubt and the supply – demand curve is not really matured. These two (2) could be the nightmares for the purchaser and they are really hoping these will not happen. However, all the risks can be mitigate by applying some check on the developer background and survey on the supply – demand curve.

What would be the benefits for the new project or primary market? There are so many promotions are being offered by developers to attract more purchasers. There are discount or rebate being promoted where there is no requirement on down-payment and there is a case even getting cashback once the project is completed. Furthermore, there’ll will be waive for the legal fees with discount for maintenance fees (for apartment and condominium) for at least a year.

Secondary market or sub-sale houses are mainly very subjective because on how good the lawyer we hired to do the transaction. If the appointed lawyer is well-known on the transaction then we are safer side or else some nightmares will come soon. We will discuss further on this secondary in upcoming article on “Secondary Market”.

Employee Provident Fund (EPF) – Part 3

We have discussed about the impact on the profit rate charged by banks is normally lower for higher loan amount and vice versa. Before we further, let us see what are available withdrawal types for housing loan so that nothing is missed out in our discussion here.

•          Withdrawal to reduce or settle outstanding housing loan
•          Withdrawal for buying house
•          Withdrawal for monthly installment on housing loan
•          Withdrawal for flexible housing loan

Again as highlighted earlier, withdrawal to reduce or settle outstanding housing loan will be the best option based on criteria for less hassles and for better profit rate on our financing products. Withdrawal for buying house is very common for the first time purchaser because of the down-payment issue if can get something attractive deal from the developer or owner.

The next one is on monthly installment on housing loan where our monthly installment will be paid via our money from account two (2) in EPF based on total amount available when submitting our application. Let me illustrate from monetary value, say we have RM 12,000 in our account two (2) and our installment is RM 800, then EPF will pay on standing instruction by depositing into our saving/current account so that can be paid to our housing loan account. This is how it takes place on withdrawal for monthly installment.

Last but not least on withdrawal for flexible housing loan where this is almost similar to previous to pay on monthly basis and it has very tedious procedures and not all banks offering through this scheme. Since there is not much benefit from this withdrawal, no further discussion I want to highlight here.

In conclusion, I may say that the best option could be withdrawal to reduce or settle outstanding loan based on all the justifications we have seen earlier. You may judge accordingly and choose whichever the best suit with your need.

Employee Provident Fund (EPF) – Part 2

Let us focus on withdrawal of EPF savings to pay-off housing loan where I have highlighted earlier in previous article. How to choose among all four (4) types to be the best option? Let us discuss further on we can manipulate so that we can benefit. Not to forget, all these are legitimate and halal to be executed and it depends on how and what we choose on the withdrawal type.

Very common for new buyer to withdraw for the new and/or first house to avoid any down payment with own cash. However, have we ever noticed aware something not good by using or cash? Again this is based on case by case where if it’s required or mandatory to pay down-payment of 10% then no choice besides to pay the amount. If we’re buying with some rebate by the developer or by the owner, there might be some scenarios where we’re not really required to pay the down-payment besides some charges and fees for lawyers. So what would be the scenario where the purchaser normally still withdrawing the EPF account 2 amount to pay as down-payment? Let us discuss further about this scenario to have better clarity.

As discussed earlier, new purchasers for the first house don’t have any experience in purchasing a house, hence, end-up with some technical issues which will make the decision made is not beneficial for them. Our mentality to reduce as much as possible for housing loan must be removed from our mindset. Some may say that our house to be stayed must be loan-free property because it takes money from our pocket. YES! I agree with you but let us manipulate first so that we can manipulate for our benefit. There are some winning points I would like to share for our benefit mainly on documentation required, financing profit rate, and loan amount. There might be some area I missed out you may leave the comment for further discussion.

The most significant benefit is mainly on the financing profit rate where as everybody aware the concept for housing loan, “higher the loan amount, lower the profit rate” and this is very common in most of the banks. This is not something I’m sharing just by reading but based on personal experience where profit rate for loan below RM 100,000 is BFR – 1.6 and above RM 100,000 is BFR – 2.2 (this is before new mechanism on profit rate is introduced). Just to share in term of monthly instalment, my monthly instalment for housing loan of RM 108,000 is same as my housing loan of RM 91,000 which is approximately RM 500. Let us read and digest first before we go further discussing other types.

Investment - Savings

I believe most of us believe that the key element to start investment is start with investing in knowledge. I have written about investing in knowledge in previous article(s). What would be the next step or next level of investment after we started some research on knowledge either by reading, listening, attending seminars, etc.?

I also have written on savings which really important before start investing in something halal and legitimate. It is really important for us to have some savings before we start our investment and I believe most of us know the importance of it. What? Not really sure? Then, I suggest to read again on my previous articles on savings Part 1 and Part 2.

My personal opinion before we start invest, we should have our reserve fund for at least 6 months to sustain without any source of income. All these are not something to be developed overnight but it is possible if we practice very “healthy” Lifestyle over the time. Whoever really willing to start with some investments but there is none of savings then it’s like to construct a house without the pillars. How is it possible to have a house without the pillars? So, answer to yourself honestly before you take any further action. Always remember that better to be not-rich than poor! Why?! Spare some time and think about this.

I know there are people will claim that we can’t go far just by saving and I totally agree with this statement. I also believe in that where we can go nowhere just by saving. Again, remember that savings is one of the foundation before we start investing after we invested in knowledge. Why all these are important? Spare some time and read Real Investment.

Lifestyle

Why lifestyle is very crucial towards achieving our financial freedom? How exactly it affects our process to achieve our goal? How does rich practising their lifestyle and how about the other side? Not clear about the other side? Well, the poor I meant.

 

There are always myths are about the rich and the poor. Rich always are blamed to be too greedy and stealing money from others to become richer and richer. Poor always claim that they are always being discriminated by rich in most of the places. As long we believe that this myths are true then definitely we cant be the rich because we always see the rich is the villain and the poor is the hero.

 

Personally I don't agree with all the myths because I want to be rich and want my family, relatives, friends, and whoever reading this to be rich. Why don't you go back on some history of the rich people where they started with very poor family but ended up with indefinite wealth. No need for me to mention it here because almost all of the top 100 richest person in the universe are from poor family background.

 

 

So, what exactly the main criteria is differing between rich and poor? YES!!! The lifestyle of these two (2) different people is totally different! I believe that some might be thinking that "obviously different because rich spending like nobody business and the poor is spending wisely".

 

If we analyse wisely of this rich people's lifestyle, they have very systematic or proper recording of all their expenses. Why? Spend sometime and read some of my previous articles on Saving, Earning Vs Saving, Levels of Financial Freedom, and lot more. You will find the key elements on how to be rich slowly and steadily. The rich people also practising very systematic book keeping to monitor what is in and what is out. Most of the time, active income from rich people are untouchable or recirculated for investments. Last but not least, rich always allocate some portion of their wealth to be shared with others via charity.

 

How about the poor? Hmmmm.... They don't have proper recording at all, no book keeping, no traceable records, and always rely on active income only for their life. Hence, spend more time to invest on knowledge prior to take action to avoid unnecessary mistakes. Best of luck for us buddies! 

Importance of Networking

Why do we need connections for this finance subject matter? How exactly can we benefit by having all this networking or connections? How many connections normally in general we have to have when dealing something related to investment subject matter?

 

First of all we must have our friends or/and relatives which practising very good personal financial planning where we can start developing our network from them. Why is from them? It's simple because they must have somebody more professional dealing with this subject matter. Normally they should have they financial planner where most of their actions are guided by this professionals to minimize the risks based on their personal experiences or lesson learnt from other clients.

As our skills is being developed in this field even we are not the experts but slowly you'll see that more skilled people are surrounding you where can be benefited from them. Start with products from banks, you'll see bankers start becoming your friend or network. My point here is that make friend with them even sometime can be annoying because of the sales skills from them. Hehe! Don't worry because they are professionals and fully aware if you have any specific products that you are looking for. Remember that we want to get rich a bit faster by using all this products offered by the banks.

 

As you go further, you'll find more people will become your contacts and more importantly this professionals will be part of our team in developing our wealth. Who are these professionals? Do you want me to name it here or in future articles? Alright folks, let me list them here but will explain further in upcoming articles so that we can team-up with them in future. Other professionals that we must have connections are lawyers, real estate agents, investors, and valuers (I might be missing some professionals that might crucial in developing our wealth).

Consistency - Part 2

We have discussed on acquiring knowledge and experience consistently by reading, sharing, and asking. So, now it’s the time to take action! We have discussed about Savings in previous article which is key element before we start develop our investment portfolio. Hence, how it can be done and materialized? And more importantly is consistently!

I believe almost all of us are earning salary or monthly income consistently and why not we reflect it into our saving too! It has very powerful element in order to success with consistent saving. People always emphasizing on steady (or consistent) income but hardly people emphasizing on consistent saving. Hence, again as highlighted in my previous article on Earning Vs Saving where I emphasized on the percentage of saving compared to the actual amount because it shows the CONSISTENCY. Again I would like emphasize here that we must consistently allocate our hard-earned money (steady income) for steady saving to ensure we can expedite to develop our investment portfolio.

Our way forward towards financial freedom is mainly to develop consistency on saving from our consistent active income. By having this steady income, must ensure that we can have consistent saving too on monthly basis. When we can develop our consistent saving automatically we can generate passive income consistently (with assumption no money is spent from saving dividends). As we develop further, there will be consistent passive income higher than our steady active income (please read Levels in Financial Freedom). You’ll see the miracle when we do it consistently from beginning, where financial freedom is just ahead of us and it’s possible to achieve.

If you notice, this CONSISTENCY will actually develop attitude to achieve our goal toward financial freedom. Anything we want to develop must develop from attitude, not specifically only finance subject matter but anything on earth. So, key element to success is attitude which has to be developed from habit which actually CONSISTENCY. Hence, when we can do it consistently you’ll see that you’ll slowly, steadily, and consistently will develop your investment portfolio. Let us start do it consistently!

Levels of Financial Freedom – Part 3

We have seen from level four (4) to level three (3) was like a magic where suddenly have some passive income but very minimal amount and cannot be used as our core income in our life due to insufficient amount. So, we can move ahead for higher level?

Again to achieve higher level is not something can be achieved overnight but will take some time and efforts to reach there. Now, to be in level two (2) where our passive income could cater our expenses or is higher than our expenses will be more challenging because we have trained ourselves to spend more than 50% of active income (very common scenario). Remember that our passive income still lower than our active income in this level two (2) but somehow able to cater our expenses. In this level, our passive income not possibly from dividends only but should be some other means like in property investment, businesses, etc. Bear in mind that all these must be halal and legitimate so that we are seen as the most handsome or beautiful person financially.

Similar to level three (3), we could reduce first our expenses so that we can develop our confident level to go ahead for sourcing some means of passive income. There so many means where we can get passive income but ensure we are well equipped with knowledge so that risk and loss can be minimized. Don’t simply attempt without knowledge, and the worst part is don’t simply acquire knowledge without taking any action (I hope you can get my point). Once you’re taking action, then experience will follow and you’ll find your skills much better than the beginning of your involvement.

Great! Now we have reached level two (2) and eager to go for level one (1) where anyone in this earth are looking to be in this level. What is the main difference? Obviously, passive income more dominant than active income and it could be passive income is much higher than total of active income and expenses. How it could happen? This is something like from level four (4) to level three (3) where the skills play a role to acquire more means of passive income; you’ll experience once you have reached level two (2). Many more to come on this passive income in future articles. So, stay tune with me!

The key element to be financially free here is that we must be very passionate and patient in achieving our target because there will be so many challenges along the way. Always remember “where is will, there are multi-ways”.

How to Start Saving – Part 1

Key element to start to be financially free is discipline to do saving from the active income. If a person doesn’t has any saving then it is difficult to get along the right track for financial freedom. Why it is very important to start with savings prior to investment or to achieve financial freedom?

Whoever we are, how old we are, it is not too late as long as we just started a minute ago. The key point is that we must start have savings. It could be very difficult for us if we never practised to allocate our salary for the savings with so many monthly commitment to pay. If we have done it before then it is very practical for us. It would be much more helpful if we could make it as a habit to allocate part of our salary for the savings. For those who started career with less than a year could be much simpler to discipline ourselves by assuming no commitment in place yet.

It is very simple to start saving if we can follow our plan by listing our net salary with all the monthly expenses. Again it is not about the amount but percentage and consistency throughout our life towards our goal to achieve financial freedom. By listing the numbers, we can easily illustrate our savings because most of the time will not lie to us unless we lied to ourselves on the numbers. Clear? Or not really clear? Or totally blur? What I meant here is that we should be honest with listing so that more reasonable plan can be implemented. Let say we just started our career with no experience in savings, then don’t be too optimistic to put more than 50% of our net salary. I’m not saying it is impossible but we don’t drive start with higher gear to drive faster but we should start with lower gear to get speed and then slowly we’ll speed by changing to higher gear.

For instance, take an example to get better picture on it. Case study; Afnan started career as an engineer with salary of RM 2,000 and force himself with saving of RM 1,000 whereby the living cost itself could be more than RM 1,000 with current market price for rental, transportation, foods, etc. Hence, he has to be realistic when giving driving force to allocate his salary for savings. So, what would be the saving percentage? I would suggest to go for 5% or 10% first then slowly develop skills to increase the portion as time flies. As time flies, don’t increase lifestyle but increase the saving portions and we can see the effect really tremendous without we notice it.

As highlighted earlier, when we allocate our money for savings, consistency play a big role towards our goal to create our investment portfolio and ultimately to achieve financial freedom.

Knowing the Rules

One of key element to achieve financial freedom is via knowing the rules to be rich. We must fully aware and knowledge about the rules in financial matter including banking, taxation, etc. How we can benefit from knowing the rules?

To answer on how we can benefit is mainly on how we can fully utilize the rules to protect our savings or investments. As a footballer, he must know the rules on do’s and don’ts when playing for a team. Before ahead with skills, we must fully aware all relevant rules in any fields. Similarly, we must know the fundamental in finance subject matter then develop the skills as experience grows.

Experience in finance subject matter could be developed directly from own experience or indirectly by reading, attending talks, etc. Gaining experience not necessarily would be something positive but negative as well from both ways either direct or indirect. However, applying both experiences appropriately could lead to awesome results where almost all risks taken are measurable risks and able to minimize it. Rule of thumb in finance subject matter or developing investment portfolio it is recommended to gain as much of negative experiences from secondary sources.

How can we define our secondary experiences to avoid this happen to us while executing our tasks towards financial freedom? As highlighted earlier, we must able to gain somebody else experiences via reading books, attending talks, seminars, chatting, etc. which normally this well-known investor have published their books to be shared publicly so that people can benefit from their previous loopholes.

Gaining secondary experiences can be one of the way knowing the rules in developing investment portfolio where there could be something totally new to us since we are not familiar with the particular investment area. Hence, whatever investment portfolio we’re developing we must know the rules which is must be obviously legitimate in our country and it is halal for Muslims. Again, educate ourselves with knowledge so that we’re always up-to-date with latest rules and always conscious with any potential opportunities.

Define Your Basis

What we know about our basis? Why exactly we need the basis? In whatever scenario when comes to execution then we must have very clear basis so that we know what are we doing instead of what others know what we’re doing.

People always want to be rich and super rich. Very little people want to be not-poor because they don’t have clear basis in their financial goal. It’s good to be rich or super rich but it is essential to be not-poor so that no body hurt either physically or emotionally.

To be rich we must define our basis or step-by-step way forward to be rich or at least to reach financial freedom. In order to reach that, we must develop our basis to be followed along the way. How can we achieve this if we don’t have saving to start investment. How to get start saving if we don’t have proper to basis to follow? So, we must first define our basis prior to start saving which later lead to our investment portfolio. The basis could be modified and updated further once we start getting our minor goal based on our basis.

Let say we want to start with some investment in property but have no capital to start and what would be the strategy to define our basis? Definitely the property’s price will be the first basis for us to follow then will dictate the next basis which to acquire the amount of fund for the down payment of the property. Later the amount for down payment will be the following basis which we have to follow so that we’re on the track to get materialize our first investment portfolio. When defining the basis, the duration to accomplish the goal is a vital basis. So, we must define the basis how long we need to accumulate the down payment amount. From the duration we can define the monthly saving to be allocated for this investment portfolio.

To illustrate the scenario let us consider an example of case study. Let say Afnan want to buy a property worth of RM 120,000 as the first property and the first basis will be the property’s price. Then second basis will be the to accumulate down payment amount of RM 12,000 which later dictate following basis which is timeframe. If Afnan wants it to be materialized within a year then he needs to discipline himself to allocate monthly saving of RM 1,000. Hence, when Afnan follows step-by-step of his basis that he developed earlier obviously it’s not impossible to achieve his dream towards financial freedom.

Always remeber that when defining our basis, it must be rational so that it is feasible to follow and implement. So!!! What are you waiting for if you can define your own!