WANTED: A Loan Consultant Who UNderstands What I Need!

Since this is the forum for Property Investors or those aspiring to be one, I'd like us to share what our requirements are for loans and mortgages. When one is taking out a loan to buy a property, especially if it's for investments, one should opt for those flexible package, with a good interest rate plan.

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Interests Rate Plan:

Usually, one would be short on cash in the early years of the acquisition, and through the years, one would have increased one's salary, have more cash, collected more rent and hence, have more savings, one can pay up the loan in a large part or full. So, one should go for the lowest interests rates in the early years e.g. 3 to 5 years and subsequent years rates can be higher because it is likely one would not need to be paying much or any interests in the later years.

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Redraw Facility:

It is also very likely that, being a Property Investor, one would become itchy again when one sees good real estate on sale. So, the loan package must allow for as much cash available as possible when one needs it. Preferably, the redraw should be within a short notice in case one sees a good deal and need to snap it up immediately.

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Lock-In Period:

Most loan packages have at least a 3 year lock-in and usually it's 5 years. So, if you are buying for speculation, try to negotiate the lowest lock-in period if possible. However, in my opinion, 5 years is a good time for prime properties because it allows 3 years for construction (if it's a new launch) and a further 2 years for further appreciation and rental collection. 5 years is also the holding time if you want to be exempted from paying property gain tax. So, one should not be too bothered about Lock-in period unless one only has the aim to make a quick gain. Instead, one should look at a good redraw facility from an earlier loan package and use that for the quick gain transaction.

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The Wrong Package:

One should not get stuck with a long term fixed-term loan no matter how good the interest rate is. One such loan is the OCBC fixed-term loan. Sorry for picking on OCBC because I am not sure how the other banks do it. It works like this...using a RM400,000 loan as an example:-

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The monthly repayment based on today's BLR is about RM1800 and the lock-in period is 5 years. So, if you have the money and want to "zero-rize" the interests, you can't dump in RM400,000 because you will break the lock-in terms and will have to pay huge penalties...in this case 3% of the loan amount which is RM12,000!! Nor can you dump in RM399,999.99 because the term loan requires the RM1800 monthly repayment (or the fluctuation according to the current BLR to be paid monthly without fail). So, while you are OK for this month, the moment you pay RM1800 into your loan the following month you will be penalized.

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So, the only way to "zero-rize" your interests under this package is to pay 5 years worth of "Advanced Repayment" (5 years being the lock in period), i.e.

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5years x 12 months x RM1800 = RM108,000.00

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The balance is paid as "Capital Repayments" i.e. RM400,000 - RM108,000 = RM292,000 is "Capital Repayment". The crap is, when you want to redraw, you are only allowed to redraw RM108,000. You can't redraw the Capital Repayment. So in effect, the bank loans you RM108,000 for your property which is worth more than RM440,000!!! Clever Bank.

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To make it worse, you have to give the bank 1 month notice before you are allowed to re-draw. Funny enough, I told the Loan Consultant exactly what I wanted and he offered me this crap. Being the nice guy I am, I signed on it without reading the details.

New Sky-scraper Warisan Merdeka from Budget 2011

The Budget 2011 has given us a 100-storey sky-scraper called Warisan Merdeka. This blog is not going to dwell into whether we need more office space in a very saturated market and is this the time to spend RM5b? Especially when we have witnessed every project that our GLC's are involved in are suffering from 50% to 150% cost over-runs... That's a job for another forum... However, in a KL city center property market where prices increases against the distance from the current tallest sky-scraper, the Petronas Twin Towers, this new project and it's sorrounding real-estate will be closely watched.

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The tower will be completed in 2015 on the current land where 2 of KL's historical landmarks sit - Stadium Merdeka and Stadium Negara. If one actually paid attention in class, Stadium Merdeka was where the 1st Malayan Prime Minister, Tunku Abdul Rahman Putra Al-Haj proclaimed the independence of Malaysia on 31st of August 1957.

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The site is actually a hill dominated by no other commercial or residential property. The Hang Tuah LRT and monorail stations serve the area which has 4 schools including the reknowned Victoria Institution. The notorious San Peng low cost flats and Choo Cheng Khay apartments are just across the road. The closest condominiums are Casa Mutiara, Swiss Gardens Apartments and Sri Emas, although they are separated by the LRT tracks. KL's China Town, the famous Petaling Street is also adjacent. Although the government has announced that the 2 historical stadiums will be preserved within the project, the other existing buildings, including the 3 schools that sit on the same hill, the Scout's BP House and the Chin Woo sports complex may suffer demolition in favour of high value commercial development. The same way that the historical Bukit Bintang Girls School had to give way to the Pavilion, I think it is unthinkable for VI and Methodist Boys to be located right beside the next tallest tower in Malaysia.

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Also to be watched, is the hill behind Dewan Bahasa Pustaka.

Sunway PJS7 Stepping Backwards

Since the Taylors College Lakeside Campus opened, traffic has been a real nightmare in Sunway PJS7. Well, PJS7 is land-locked and the traffic situation has not really been thought out. To make things worse, the knee-jerk reaction from PJS7 residents has now caused some really stupid decisions being taken and not solving the situation at all. In fact, it is making it worse.

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Since this week, the PJS7 entrance to Taylors College is now closed to both vehicles and pedestrians!

As a result, students who live in PJS7 now have to go out to the LDP highway to enter the new entrance of Taylors that was constructed not too long ago. For example, for residents of Mutiara Perdana who used to be just 250m walking distance to the gate now have to walk over 1.2km.

It is also impossible to walk. As you can see from the picture below, there is no pedestrian walkway. Students have to risk their lives to walk along vehicles to get into college.

Which leaves the only one option, which is to get Daddy to buy a car and drive to college.... This will add more burden to the Sunway inner-roads, parking problems and worsen the congestions on the LDP highway.
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The PJS7 residents demand the Taylors PJS7 entrance to be closed for both pedestrians and vehicles because there are still parents or friends dropping off students at the gate. This means cars that should not belong to PJS7 are still entering the roads. But is this the solution?

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I can understand the predicament of the owners of houses in PJS7. Their once peaceful life has been disturbed by this campus. But they should also understand, that without the Taylors campus, their properties would not even have a chance in hell to appreciate. Over the past 2 years, there has been an over 200% appreciation in prices of properties and rentals in PJS7. If they do not welcome this, they should have protested the plans to build the college at that location in the 1st place, not after. It's hard to have the best of both worlds - to celebrate the development of your area and at the same time, condemn it with unreasonable demands.

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There is of course ways to solve the traffic problem:

1. Limit the students who are allowed to drive to college - encourage them to take public transport. This is what most universities in Australia are doing!

2. Improve the shuttle bus service to the KTM and LRT stations and neighbouring Sunway areas

3. Immediately, Re-open the PJS7 entrance and encourage students to walk! Not drive!

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If the steps above are taken, there will be further appreciation in the property prices in PJS7 because in order to walk, one would rather be on this side of the LDP and NPE highway.