Analyzing Mr. Lee's Financial Situation and Investment Plans

This article analyzes a question from Mr. Lee, a 35-year-old Malaysian currently working in Singapore, who is considering returning to Malaysia and living comfortably without working. We'll explore his current financial situation, his proposed investment strategy, and alternative suggestions. The advice comes from a podcast analyzing personal finance and property investment strategies in Malaysia.

Mr. Lee's Current Financial Situation

Mr. Lee has worked in Singapore for eight years and accumulated a decent amount of capital. His financial highlights include:

• Singapore Condo: He invested 80% of his stock market profits into a condo in Singapore. This property generates a positive cash flow of approximately $500 SGD per month after covering all expenses.

• Cash Reserves: He has a few hundred thousand Ringgit in cash.

• Emergency Fund: He possesses an emergency fund that generates approximately RM 5,000 per month in interest, suggesting a substantial sum (around RM 1.2 million).

• EPF: He is considering the EPF 1 million plan, targeting RM 1 million in his Employees Provident Fund (EPF) within eight years.

Mr. Lee's Proposed Investment Plan

Mr. Lee is considering using his extra cash to invest in Malaysian real estate. He is specifically thinking about buying three condos in Kuala Lumpur, each priced at RM 300,000. His plan involves:

• Down Payment: Putting down RM 200,000 for each condo.

• Loan: Taking out a loan of RM 100,000 for each condo.

• Rental Income: Using the rental income to cover the RM 700 mortgage payment, aiming for a positive cash flow of RM 500 per condo each month.

• Goal: The purpose is to achieve a passive income stream that allows him to live comfortably in Malaysia without needing to work.

Analysis of Mr. Lee's Property Investment Plan

The podcast host raises several concerns about Mr. Lee's proposed property investment plan:

• Price Point: Finding condos in Kuala Lumpur for RM 300,000 may limit the options to lower-cost apartments, potentially affecting investment returns.

• Cash Purchase Strategy: Fully cash-buying properties for investment is not the most optimal strategy.

• Leverage Credibility: It is better to use credibility to take out loans for property investment and use capital for other investments, such as EPF or fixed deposits.

Alternative Property Investment Strategy

Instead of buying three lower-priced properties, the podcaster suggests exploring alternative strategies and property buying channels:

1. Explore Different Buying Channels:

   • Buying new from developers

   • Buying subsale from the market

   • Buying at auction

   • Buying via bulk purchase

2. Consider a Bulk Purchase Group:

   • Explore bulk purchase groups like Far Capital, which offer favorable deals and data-driven insights into potential returns.

3. Start Small:

   • Instead of investing in three properties at once, consider buying one property around RM 600,000 to test the waters.

4. Focus on Ready-Built Properties:

   • Buy existing, ready-built properties where rental income can cover the installment payments.

5. Leverage Credibility, Not Cash:

   • Exploit lending credibility by taking a loan.

Elaborating on Cash Flow Concerns

The podcaster highlights the inefficiency of using a large amount of cash for a relatively small cash flow:

• Low Return on Investment: Putting down RM 600,000 in cash for a total cash flow of RM 1,500 per month would take a long time to break even (400 months).

Alternative Investment Options for Cash

• Fixed Deposit: Investing the RM 600,000 in a fixed deposit (FD) at 3% per year would generate a guaranteed income of RM 1,500 per month, without the risks associated with property investment.

• Other Investments: Other conservative options, such as blue-chip stocks, REITs or more risk investments such as crypto can be considered.

Addressing the "Why Work?" Question

The podcast host questions Mr. Lee's desire to stop working altogether:

• Purpose and Fulfillment: Instead of retiring completely, it's suggested that Mr. Lee find something he enjoys doing, even if it doesn't pay much.

• Time as a Resource: The ultimate resource is time. Financial freedom allows one to do more with one's time.

• Career Flexibility: With financial stability, Mr. Lee can afford to be selective and not work just for the money.

Recommended Actions

1. Take a Break: Give himself 3-6 months to relax, travel, and spend time with family and friends.
2. Find a Passion: During this break, discover something to pursue even if it's unpaid.
3. Delay Property Investment: Postpone property investment until he has a clearer vision for his future.

Additional Considerations

• Family Responsibilities: Consider future family plans and the desire to be a role model.

• Singapore Property: Continue the current positive cash flow from Singapore property. This is a stable investment.

• Stock Market Skills: Leverage the existing skills in the stock market.

Conclusion

The podcast suggests that Mr. Lee explore alternative property investment strategies, prioritize using credit over cash, and reconsider the idea of complete retirement. Instead, he should focus on finding a fulfilling activity or career path while leveraging his existing financial resources to achieve financial security. The advice emphasizes flexibility, calculated risk-taking, and pursuing a purpose beyond monetary gain.