So you've bought an investment property. Now what?

She screamed in excitement as she thought to herself, “My keys to my new apartment! FINALLY!”. The day she was looking forward to over the last 3 years has finally arrived. With a grin plastered from jaw-to-jaw, she collected her keys, signed all necessary documents, thanked the handover office manager, and rushed home. She couldn’t wait to share the news with her parents!

“They will be so proud of me. My first property!”, she thought to herself as she was driving home.

This is Lisa. She graduated from a local university 6 years ago, and she has been working hard to build her career ever since. Her parents worked hard for her education, and she knew she owed it to them to build a successful career, in order for them to retire without any worries. As with most Asian families, she grew up listening to stories about how properties are the safest investments ever.

“Don’t save money. Buy a property instead.”

“Property price will surely go up. If you don’t buy one now, you’ll never be able to afford one!”

“The rich park their wealth in properties. Just do as they do.”

Lisa grinned as she jokingly thought to herself, “I’m playing with the big boys now, I too have an investment property”. She parked her car and ran inside the house to share the exciting news.

“Mom! I finally got my keys! Look!”

Her mother was in the kitchen preparing dinner. She dropped everything she was doing and ran over to give Lisa a big hug.

“Congrats, Lisa! I am so proud of you. I always have been.”

“Thanks, mom. I could never have done it without you and dad supporting me.”

“So what’s the plan?”, her mom asked.

The words suddenly struck her. What’s the plan? What’s the plan??? Lisa knows that this apartment was meant to be an investment – she hoped that renting out this apartment would generate sufficient income to sustain her monthly mortgage repayments. The only problem was: She has no clue where to start!

“Errrr, I’ll just rent it out I guess.”, Lisa said meekly.

“Ask your dad. He used to have a small apartment which he rented out. It was the biggest headache ever. Every month he will complain about how difficult it is to collect rent. He finally sold it off because it was too much of a hassle. I still believe it’s good to own a property, but you better be prepared.”

Lisa’s father had purchased a medium-cost flat in the 90s, just before the Asian Financial Crisis without much knowledge of what was hot and what was not. He didn’t have nor seek knowledge about property investment – it wasn’t intended to be a rainy day fund, as a matter of fact, he loathed the entire process of leasing out the property. His biggest fear was the fear of tenants not paying up.

Lisa’s father walked down the stairs, as if on cue.

“I overheard you and mom talking. You got your keys today? Congrats, girl!”

“Thanks dad! So what should I do now?”, Lisa asked hopefully.

“Just call some agents and get it out in the market. I know a friend who can help you install some cheap lights and second-hand furniture.”

“Err, second-hand furniture?” Lisa felt heavy disappointment as she said that. She was hoping she could decorate her new apartment like the new coffee places she frequents.

“Yeah, just put some cheap furniture inside and rent it out. In fact, let me call him now.”

Lisa’s excitement suddenly died down. She was not convinced. She knows her father’s advice was from his heart and he was looking out for her interest, but she somehow found a piece inside her that doesn’t believe what her father just told her. Just like any young adults her age – she needed some form of validation. But who can she consult?

Lisa snapped out of her thoughts as her dad ended his phone conversation.

“Pass me the keys. My friend will help you install lights and put in some second hand furniture tomorrow.”

With a heavy heart, Lisa passed her dad her set of keys. She knows she shouldn’t spend so much money furnishing and decorating the place. It’s supposed to be an investment, right? Moreover, she knew she didn’t have a plan. Dad’s plan was the only plan she had.

And that was that. Lisa’s dad got his friend to install basic fittings and furnishing the next day. He provided fluorescent lightings, foldable tables and plastic chairs, anything cheap enough for them to be replaced without much cost. Air conditioning has never crossed their mind – and refrigerators are usually small, old and reconditioned units.

Four months passed, and Lisa still has yet to find a tenant. Lisa has had so many property viewings, but none of them made a reasonable offer. In fact, most of them don’t even make an offer. They show up to view the property, only to walk away and to be never heard from again.

“Mom, I’m having problems renting out my unit.”, Lisa said to her mom during breakfast.

“I told you, it’s not as easy as you think it is. Hey, why not you consult Uncle Faiz? He’s a seasoned property investor, he should be able to give you some pointers.”

Lisa’s eyes lit up. Uncle Faiz! How could she forget that she could ask Uncle Faiz! He is a close family friend, and she used to play in his house all the time.

Uncle Faiz is one with quite a character. His life journey is a remarkable one, coming from a background of poverty and hardship, having to work from the tender age of 14 to support his family and now turning into one of the most well-respected man in the property industry. Lisa knew there was nothing to lose – she remembered most of the dinner table topics during the gatherings when Lisa was growing up involved pretty much around properties, properties, and more properties.

Lisa immediately calls Uncle Faiz.

“Good morning Uncle Faiz, I’m not sure if my parents told you, but I recently collected the keys to my new apartment – and I was really excited about it. I furnished it to rent it out, but it has been 4 months and there have been no decent offers”.

Uncle Faiz let out a hearty laugh. “My dear Lisa, congratulations on buying your first property! I’m so proud that you have started your journey investing in properties. Most people just talk about it, but have no real desire to learn. Let’s have coffee and you can share your property woes with me.”

“Okay, Uncle Faiz! I’ll be right over!”

Lisa felt hopeful as she rang Uncle Faiz’s doorbell. “How could I have forgotten to consult Uncle Faiz? He has so many properties and I remember hearing that all his properties are rented out.”

Uncle Faiz opened the door. “Hello Lisa. That was quick!”

“Uncle Faiz. Help me. Do you have any ideas to share with a fresh investor like myself?”

Lisa caught a glance of Uncle Faiz grins but sensed that he wanted to know more.

She continued, “My father suggested that I keep my expenses as low as possible and to furnish it with the cheapest stuff I could find. His friend helped me go to a couple of shops around the block to buy re-conditioned furnitures and electrical appliances. He also said that there is no point in spending on expensive furnitures as the tenant will damage it”, Lisa said in a tone that is almost good enough to convince herself that this is the right way, but left a tinge of curiosity lingering in the sentence.

“But..?” said Uncle Faiz.

Lisa abruptly continued “But.. I think there is more to this than shopping for cheap furnitures and old appliances. I’ve heard that you have successfully rented out a few small apartments in the city – I’ve seen the pictures and it looks fantastic! I’d like to know how you work around the costs and what are the considerations you have”.

Uncle Faiz first words were, “You have to treat property investment akin to running a business. When you decide to start a new business, you have a product, but what do you do? You must first differentiate yourself from your competitors, right?”

These words made so much sense to Lisa as she nodded to Uncle Faiz in agreement.

Uncle Faiz continued with a grin, “If your unit is no different from your neighbours, why would a tenant pick your unit? Is it because you are cheaper? Your neighbour can be cheaper too, you know.”

Lisa was dumbfounded. She looked at this whole thing from the wrong perspective. Her view was limited and revolved only around her, and she totally neglected the needs of the people that are actually paying for it.

Uncle Faiz explained, “The key here is to differentiate your offerings in order to attract better tenants. In every high-rise development there will be hundreds, if not thousands of units being sold to hundreds of people like yourself. The key question here is to ask yourself, what do you need to do to get tenants to like my unit instead of the rest?”

Lisa nodded while quietly making mental notes in her head.

“Used furnitures, tacky-coloured curtains, old electronic appliances. You have to stop treating your tenants like second-class citizens. The most common mistake property owners think is that the tenant is out to harm you. Yes, we have all heard of the horror stories of tenants who doesn’t pay up on time, but there are also plenty of good tenants out there. Rental properties should in fact be treated as your business, generating income for you. And what tenants will pay for is value. And what you need to do to minimize your risk is tenant profiling.”

Lisa suddenly remembered the ever-so-cliché but wise quote from Warren Buffett, “Price is what you pay, value is what you get”

“Exactly! If you want people to pay you for something, you need to provide value in return. And if you differentiate your unit enough and provide value, you get to choose your tenants. If your unit is like everything else, you’ll have to wait for a tenant to choose you, and often, they will choose the cheapest. Waiting will also cost to you because nobody is going to pay for your bank interests.”

“But Uncle Faiz, I’m not familiar with what the tenants are looking for, and neither could connect to any of the renovation contractors or interior designer’s advise on cost efficiency. How did you learn this?” she asked.

“It took me a lot of time and experience. But I manage to learn this and through each tenant viewing, I will always ask the prospective tenant: What are they looking for? Is this what they want? Are these unnecessary? Are they willing to pay for convenience?”, Uncle Faiz explained.

“But wouldn’t that be expensive?” Lisa asked.

“Isn’t it expensive for you now, leaving it empty and hoping and praying someone will make you an offer?” Uncle Faiz said.

Uncle Faiz continued to ask, “Where’s your property located and how much rental are you asking for it?”

“It’s a small apartment in PJ and I’m asking for RM2,000 in rentals”, Lisa answered.

“If you were personally looking for a place to stay in PJ, will you pick your own unit?” Uncle Faiz asked.

Lisa started thinking from the customer’s perspective. “I think I have quite a few options if I have RM2,000 budget for accommodation in PJ. Plus, if my budget was RM2,000, I should be earning at least RM6,000. With that kind of income, I believe I would prefer something which would suit my lifestyle preferences. I wouldn’t want to share an apartment either, because I value my privacy as a working adult.”

Uncle Faiz laughed. “See, it’s not that hard right? My next question is, would you consider yourself to be a good tenant, should you ever rent a unit?”

“Of course! I’m an honest hardworking adult and I’m not out to cheat anyone!”

“Then you should be strategizing to attract people like yourself. Honest hardworking adults genuinely looking for a place to stay. Someone who makes enough to afford a RM2,000 rental. And yes, it can be done cost effectively. All you need is a little strategy. I’ll share that with you next week. Of course, you’ll also have to be reasonable and consider the market rates of surrounding properties.”

Lisa was happy. She ticked all the empty check boxes to the questions that was bothering her over the last few months. Before she left, she also managed to squeeze a last question while Uncle Faiz was walking her out: “Another thing I’m worried about is, I have to used up my annual leaves to supervise these contractors. I’m afraid I do not have the time to give my unit a makeover to attract these people after you share your strategies with me.”

Uncle Faiz replied: “Lisa, these are not problems if these can be solved by service providers. Nowadays, there are providers out there who specializes in rental property makeovers. They even identify your potential tenants and strategize the makeover to attract them. They are seasoned property investors themselves too, so you can be sure they know what property investors want, cost effective strategies that work.”

“How do I get in touch with them?” Lisa asked excitedly.

“You can check out their past projects and see how they deal with rental properties at their Facebook page at www.facebook.com/themakeover.my. I’m sure you’ll be able to relate.”

“Wow. Thanks for the tip, Uncle Faiz!” said Lisa as she left.

Not long after Lisa’s meeting with Uncle Faiz, she went on to meet her friend, K, who has just recently moved to Kuala Lumpur for a new job. Throughout the coffee session, all K said was horror stories of terribly furnished apartments that looked like it has been furnished by someone who doesn’t intend to live there. K fits the bill of the most desirable tenant profile, early thirties young executive with a multinational company, who has been stationed in Kuala Lumpur for a two-year stint.

Lisa smiled, knowing what she had to do now. She can’t wait till next week to hear more of Uncle Faiz’s strategies.

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