How to become a MILLIONAIRE LANDLORD

Finished reading this book 2 days ago (guess what? I've finished reading this one in the toilet again!).

First question, why should you involve with property? Is there any better investment that can give you these criteria:

1. give a decent return (above inflation rate)
2. requires minimal work on my part
3. requires minimal time
4. finance by other people's money
5. within my control
6. has acceptable risk
7. gives tax reliefs
8. gives peace of mind

Great isn't it? If you can suggest other investment that similar like this I'd greatly appreciate.

Yes, I hear you. Some mates asking me about what kind of house is the best for investment? I'd say medium cost flat or apartment (low cost is great deal but often has problem with maintenance and they are hard to sell because of the agreement stuff). Why not semi-d or terrace? I won't say you cannot buy those house, but for investment (rental) the best is you get yourself an apartment or medium cost flat (Azizi says condominium and apartment... but I know that many of you can't afford to buy one with the average salary between RM1,000 to RM3,000 and other debts around and I know the condominium price in big cities like KL, JB and Penang are simply impossible) because we are talking about the best way to rent.

If you have to move to somewhere let say Penang for work purpose, will you rent a terrace house or apartment? Based on the rental price you will definitely rent an apartment. If you do that, do you think others will do otherwise? Plus, with busy schedule working from 8am to 5pm everyday they surely have no time to go some other place for sweating themselves. So, apartment has always provide some facilities like pool and gym. Not to mention tennis and basketball court. What's better than this?

You must always make sure your rental give you a positive cash flow. That means, you are not paying for your property but the tenant does. Let say you pay bank RM500 monthly for the housing loan and your tenant pay you RM600, this is a positive cash flow. Ok I hear you saying what about the maintenence fee? Nowadays the maintenence fee is 10cents per square feet. That means if let say your apartment is 900 sq/ft then it will be RM90. Still you get RM10 for the positive cash flow. Better than negative right?

Now, when we are talking about positive cash flow what criteria do you need to look at before buying a house? The answer is simple. LOCATION. Most people buy the wrong location and then whining why it is hard for them to get tenant and worse they get negative cash flow every month. Example of good locations are near to school and office, shopping malls just nearby, in town, near to hospital and near to public transport such as bus and train station. These are good example to be considered before you buying it. Again I'd suggest KL, JB and Penang are the 3 best cities for you to buy (bear in mind, do not buy properties that are too far from you as it is easier for you to look after it). Do not buy properties in Sungai Petani as example as the price is very slow to go up and the rental is so cheap. But if you are looking for a house to live, then go for it. Cheap and spacious. Many of my colleagues complaining that the rental is way too cheap and they simply can't make money out of it!

Another good thing is buy the property below market value. You can get good deal at the auction! I haven't tried this one but my friend did and Azizi would suggest us to buy through auction too. Before you go into auction, you must check on the house you are interested about the market value. If the house value is RM150,000 and you buy it at auction with RM160,000 then you have lost RM10,000 in a blink. Usually peoples in the auction will have some groups that will keep rocket up the price and please don't be fooled by them. Get your fact right. Get some info and books before you jump into auction ok?

Financing your property. Most peoples hate debt. I know, I'm having the same problem. To me, if you don't afford to buy thing cash, meaning you are not afford to buy it at all. But it is not the same with property. It is fine if you buy house for living but if it is for investment then it is other way round. I you rent the property you can claim interest portion of the mortgage as tax deduction. This is a significant deduction as the interest of the mortgage is extremly high during the early year (as much as 90% of the payment). For example, if the mortgage is RM1,000 a month some RM900 of it will go for settling the interest portion only! This mean that you can deduct RM900 off from the rental income received when calculating the tax due.

Other than the tax deduction buy financing your property, you can also buy more properties. Let say you have RM100,000 in hand. Instead of buying 1 RM100,000 property you should just pay RM10,000 for the down payment and you can finance your property for RM90,000. That means, you can have 10 properties by doing the same thing instead of buying only 1 property. But that is only an example to give you a clear picture. Do not do that! Remember you must have at least 3 months salary in your bank account ok? 4 or 5 properties is more than enough as you can rental as your business income for income tax. Meaning, if you have less than 4 houses, you will be listed under 4A section and get taxed but if you got 4 houses, you will be listed under 4D section and you even can claim money from them! Life is wonderful... isn't it?

You are a millionaire landlord when the tenants:

1. pay rental on time
2. pay rental automatically
3. handle all minor problems themselves
4. happy to have you as the landlord

The most imprtant thing is the Tenancy Agreement. You must have this in order to make sure everything is going smoothly. Most of my friends say that it is a waste of money when you have to pay for stamping and you will get taxed when they know you have rental as your side income. Mate, listen... if you do not have this Tenancy Agreement, you are not only risk yourself when they tear apart your lovely apartment like what tsunami does but they can also stay there for free! What prove do you have against them? Let make it as simple as it could be. My dad has experienced this before and so does my colleague's mom who didn't get rental payment for a bout a year simply because the tenant is in financial problem and need sympathy. Ouch!

There are more keys that will lead you to be a Millionaire Landlord but you need to get yourself a copy of this book. It is worth it! (ah RM39.90 for a great book like this? you spend more than that for your retail theraphy! liability!).

Where wealth is concerned, direction is more important than speed
-Azizi Ali-