How to Find Below Market Value Properties in Malaysia?
How to Find Below Market Value Properties in Malaysia?
People are always trying to figure out how to find below market value properties in Malaysia because this is what all the property gurus out there are telling them.
“Make the money when you buy and not when you sell,” is one of the things most often chanted by our favourite property gurus and it’s definitely a good rule to abide by.
If you can manage to secure a property at 10 – 20% below the most recent sales transactions for a similar property in a particular area or development, you’ve already locked in profits that others might have wait up to 5 years to achieve instantly!
To figure out what the actual market value is, you should first go to Brickz.my.
Here you’ll find the most recent transacted prices for properties and you can filter by area or development, so you’ll know what the actual value of the property in question is worth.
Being able to buy a similar property below this price will therefore be a below market value property!
So, how do we find these below market value properties?
Below market value properties can only be found in three different ways:
1. Buying properties at a property auction
2. Buying properties on a developer discount
3. Buying properties from desperate sellers
All three of these methods have their upsides and downsides and vary significantly from one property to the next. There’s never one surefire way that’s better than the other and many investors have their own preferences as to which method they like the most.
Buying Properties at a Property Auction
Auction properties are the most legit source of below market value properties that anyone can get their hands on.
The property is most certainly below market value because these properties are being auctioned by a bank because they need the money to cover a defaulted loan. Every property you see at an auction is only there because somebody failed to pay back their loan on time and has had their property repossessed by the bank.
The banks do not want to keep these properties on their books and will sell it to recoup as much as they can from the outstanding loan amount.
As defaulted loans only continue to chalk up interest with each passing day, the bank will list the property at a reduced rate so it can be sold as quickly as possible.
With each consecutive time the property is listed up for auction where it does not get a winning bid above the reserve price, the auction house will normally reduce the reserve price by another 10%.
There are property auctions going on throughout the year and in our current digital age, and under the coronavirus pandemic precautions we are taking, you’re even able to participate in one online.
You can go to:
All of these websites will show you heaps of properties that have been put up for auction and will let you know the auction dates and location.
There are some things to be aware of when purchasing an auction property however.
The first being that you will need to prepare a bank draft equivalent to 10% of the reserve price as a deposit. You will need to have this ready when you go for the auction. You will also need to have additional cash on hand should you need top up the deposit sum if it went higher than the reserve price.
If doing this online, you’ll need to submit the bank draft through post or by hand a few days prior to the auction.
The balance purchase price must be settled within 3 months of a successful bid. It can be up to 4 months in some cases.
You will lose your deposit if you are unable to settle the balance financing within the given time frame.
It will be ideal to have all your loan documents prepared so you can submit them to the bank immediately upon a successful winning bid to have extra time should any surprises come up during your loan application.
You’ll also need to bear in mind that these places are littered with what I like to call ‘Auction House Thugs’.
Basically, these Thugs will approach you and tell you that if you pay them a certain amount, they’ll make sure nobody bids on the property and you can secure it at a favourable price.
You’ll just need to pay them some cash and they’ll do this for you.
Whether or not they actually are able to do this really depends on the thug that you’ve been approached by. This is one of those times where it really just boils down to your luck.
So, just be cautious when you enter the auction house, these people will always be on the lookout for those who don’t look like a regular face.
Buying Properties on a Developer Discount
Buying properties through a developer discount is what you will often be able to do when you join these property guru investor groups after having attended one of their courses.
The guru, being heavily connected in the industry will have a large group of investors behind them who are then able to approach developers and negotiate on a below market value deal to buy units in bulk from the developer, sometimes upwards of 30 units in one go.
The group will then buy the units via compression loan, using people who still have Debt Service Ratio or DSR available under their name to be the title holder with agreements drafted between other investors to signify joint ownership.
Especially in today’s current property market where we are experiencing a huge property overhang, developers are happy to clear off balance units at reduced rates so that their development appears more successful.
Developers might also have to resort to this moving forward if the government ever does consider reinstating their plans for a Vacancy Tax.
Some of these investor groups are extremely huge and have truly substantial negotiating power.
I’ve heard of groups that have managed to get up to 40% off the market value during their bulk purchases!
The downside of getting below market value properties this way is that you are getting newly developed projects which more often than not, already priced above market value.
It’s commonplace for developers to do this for new developments as they have already priced the units in at future prices so they have wiggle room to give purchasers rebates and discounts.
So you do not exactly get as huge a discount as you might think.
Also this discount, in many cases is not given as a flat out discount (as with most new developments) but in the form of a cash rebate. This means that your loan quantum will still be based off the full price, so your loan repayments will be the same as everyone else unless you use the cash-back to pay down your loan.
What this method does give you however, is it gives you cash-in-hand which you can also choose to roll into other investments, be it another property, pay part of your renovation funds or to do so with however you see fit.
[Find Out How to Avoid Overpaying For Furnishing & Renovation]
Personally, I’d opt for setting aside some of the money for my renovation costs, keeping them to a minimum and then putting the balance into my flexi home loan so that my monthly loan repayments are reduced.
This would reduce my up-front costs and then give me an advantage over single unit buyers as I would be able to cover more, if not all, of my monthly loan repayments more easily from my rental income.
One point to note here is to not get too caught up in the hype following your property investment course or the excitement of other members of the investor group.
Make sure to do all the calculations yourself before you make your final decision though. Research the property and the possible rental rates and basically do all your own due diligence before committing to anything and not just take someone else’s word for it.
Buying Properties From Desperate Sellers
The last way that you can get properties below market value is to buy them from desperate sellers.
There are always people in the market who will need to get cash quickly and it is from these sellers that you will be able to acquire a property on the cheap from.
Just where can these desperate sellers be found though?
They’re often not easy to find so your best bet is to grow your network as much as you can and then let people know that you’re interested in a particular area or are constantly looking for property to buy.
Reach out to agents and join property investor groups, attend property courses and tell everyone that you’re in the market looking for a deal.
This will lead to you have people contacting you all the time about all kinds of deals – most of which will not be good ones.
But it comes as part and parcel of putting your name out there so that when people know someone who needs to sell the property quick and at a discount that you’ll be the first person on their mind.
Doing this might seem like something simple but it can be very time consuming as you’ll have to be sifting through lots of opportunities on a daily basis as your network grows. It can also be rather unproductive for long periods of time, as though there are many desperate sellers on the market, they often won’t want to let people know who they are.
This can lead to you rejecting deal after deal for an indefinite period of time.
You can also do this by simply going on Propertyguru and iproperty and browsing through new listings every day.
Just drop the agents a message and enquire. You can even just message them and straight away tell them the price that you are looking at.
Good agents will then help you look for properties that fit your criteria. And be another source of deals that they’ll bring to you whenever they have one.
[Remember to Ask Your Agent These Questions When Buying A New Property]
It can take up a lot of your time having people sending you deals all the time but you’ll have to decide if it is indeed worth the amount of time spent.
Considering that if you can pick up something 20% below market value on a RM500,000 property, that’s RM100,000 made right there.
Is spending the time sifting through deal after deal worth a RM100,000?
You’ll have to be the judge of that but for most of us, I’d think it would definitely be time well spent.
If you’re trying to find out how to find below market value properties in Malaysia, these are the 3 ways that you can use to find them.
Below market value properties are not easy to find and will take some work.
Making RM50,000 – RM100,000 upon purchase isn’t easy, and rightly so. A lot of people work 40 hours a week, for a whole year to make that kind of money.
If you wish to lock in some rewards prior to actually selling your property, you can always consider refinancing your below market value purchase. You can find out more about refinancing in this guide I made – https://blog.rentandreturns.com/property-loan-refinancing/
It’s important to note though that sometimes after getting these properties you may have to hold on to them for a while, so you’ll need to have a plan in mind of how you’ll be paying for your monthly loan repayments.
In light of the current coronavirus RMCO extension it might be good to consider trying to take advantage of the growing staycation trend seeing as how people will only be allowed to travel within the country for the upcoming holiday period.
Whichever method you choose, if you have the disposable income for an investment property, you should always look into acquiring one that is below market value as it will make holding on to that property all the much more worthwhile and will already put you in the green on the books, right after you sign on the dotted line.