Things I learn from IQuadrant and Markoandfriends

I was intrigued by the Facebook ads which show how one can own multiple properties and create passive income from them. This is the key objective when I attend not one but two workshops. The first one is from IQuadrant and the other is with Markoandfriends.

Germaine Chow is the lead trainer at IQuadrant. With her ex-air stewardess look and figure, it is the key reason when she stands on the stage, she captivated all the men’s attention. Sorry for digressing and hope that my wife doesn’t read this section. She started to moonlight as internet marketer when she was working as an air stewardess with SIA. That’s how she met her husband. She explained that she went through some adversity when her business went bankrupt.

Through desperate situation, one becomes very creative.  Perception is not equivalent to reality. She emphasized that she wanted an investment vehicle which put her in control and it is passive. That was the reason why she chose property.

She asked the crowd what is the ideal passive income required to retire. The crowd gave an average of SGD 9,000/month.

Assume 1 unit of property produces $1,500 per month
We will need 6 units to produce the required income.

Due to all the various restriction, it is no longer viable to flip residential properties in Singapore and the rental yield of both commercial and residential units are not attractive enough. Furthermore for residential units, you will be subjected to Additional Buyer Stamp Duties and penalties (tax) if you sell earlier. Therefore it is not a viable investment strategy for passive income through rental yield.

The more attractive is industrial properties which can have better capital appreciation and rental yield. Hope and pray is not an investing strategy. You need to buy undervalue units. Asset is defined as gaining positive free cash flow whereas liability is taking money out of your pocket.

One rule of thumb is minimum rental yield required is 4% for industrial building. This is after less maintenance fees, mortgage and property tax.

As it is a preview only, Germaine only shared one strategy which is go for an industrial building with 95% occupancy rate. If it is 95% occupied, it indicates that there is demand for the property and you can determine who your neighbours are already. For new project, you pay upon completion of the unit, it will take 3-4 years for tenants to fill up. New unit does not mean it can capture tenants. You will not know who are your neighbours.

There are good and bad debts. If you buy an unit for 1m and sell at 1m 30 years later, do you make money or lose money? It depends. Germaine presented the following:

Rental $4,000/month
$4k x 12 months x 30 years = $1.44m

On surface, you make money right? However, she did not consider interest expenses.

She further elaborate on using Debt. For a 1m unit, you use down payment of 200k.

Rental $4,000/month
Mortgage $800k -> $3k/month
Cash flow = ($4k – $3k) x 12 months x 30 years = 360k
$360k + $800k = $1.16m
$1.16m/ (200k x 30years) = 19.3% ROI

Mr unlucky scenario
Buy at 1m and 30 years later sell at 800k
downpayment 200k
Rental 3,600/month
Mortgage 3000/month
+ve cash flow = (3,600 – 3,000) x 12 months x 30 years = $216k
$216k + $600k =$816k
ROI = 816k/(200k x 30 years) = 13.6%

She explains this is the power of leverage, make our money work harder for us. She showed one of her personal investment as below:

Bought the unit @ 488k
Cash outlay 97.6 k
4 years of passive (rental) income = $1616/month x 48 months = $77k
Principal paid = 874/month x 48 months = 41,952
Assume 15% capital appreciation = 73,200
Less (stamp duties, lawyer, company maintenance fees) = 40k
Net Profit = $152,720

5 components to be successful property investors

  1. Really want to own a property
  2. Practical optimist
  3. Earn 2k – 5k/month
  4. Safe and predictable path
  5. Team player

Spot Gold Location – Germaine explained how an industrial unit can be craved out into 3 sub-units with 2 separate entrance for the two main unit and an individual door for the 3rd unit.  This way she increased rental income from original $2,300 to $3,450 (from 3 units). She further explain it is important to add value through renovation and decoration. Always value add others. This is the biggest take away.

She touches on negotiation tactics through creating long term win-win situation. When you want to buy an unit, you need to give what the owner wants.

She briefly touches on raising fund, using Other People’s Money is the key to own multiple properties. You need a legitimate entity to return money, a legally binding contract needs to be in place, it is important to position yourself as someone credible.

At Markoandfriends’ preview, I paid $27 for the session.  The only thing I learn is FAST. FAST stands for Furnish, Advertise as Owner, Seed and Take. Advertise as Owner means you advertise as Owner and pay commission to the property agent, he will be incentivized to look after your interest as well. Seed represents different tenant will have different needs, you need to know what is in the market. Take means just take the first decent offer because any waiting will be opportunity cost and loss of income. For example, if you are looking for $3,000/month and they counter offer $2,800/month just take first.

Strategy – group together, setup a company and buy properties
Story – Mindset
State – Belief

Germaine is an ex-student of Marko. She came out to start her own training which replicates what Marko taught. I will say Germaine did a better job to teach more during the preview but Marko is the original teacher.

12 Comments

  1. Hmm so essentially, you’ll be pooling $ together to set up a company & this gives you leverage to get a loan from bank. Then invest in industrial properties? Very interesting.

  2. I think on their personal example they bought in early when the industrial market just picked up, its quite saturated now, I also bought in quite early and good rental is not easy to come by. That said if you get a good tenant then its great as they tent to be with you for 3 – 5 years.

    From their scenarios the selling price seems too optimistic, most of these industrial are 30/60 years leasehold was depreciation accounted for?

    Mr unlucky scenario
    Buy at 1m and 30 years later sell at 800k

    • Thank you for your comment, I went for a Scam Buster free seminar by Douglas Chow. What I learned coincides with your observations, their view on the market is overly optimistic to attract yield investors. People are sold on the idea of passive income through properties rental.
      I asked the question what if interest rate rises, the answer from Germanie Chow was rental income will rise accordingly. Do you agree with her?!
      Property investment ties closely with economic cycle we are in. I feel that they are making their money from conducting the course and using the money to quickly pay down their properties if they do own them. Always DYODD.

    • Apologies I missed your reply, on the below I don’t agree with that. From what I have observed rental in a development tents to stagnate around a particular level (due to many empty units) if the owner renovates for the tenant its money out of their pocket, generally industrial unit tenants do not do intensive renovations as they move around quickly so locking current tenants in is also a challenge (hence increasing rent is also tricky) – both of which I have experienced before.

      “I asked the question what if interest rate rises, the answer from Germanie Chow was rental income will rise accordingly. Do you agree with her?!”

      Adding to this buying a undervalued unit at a development which is 95% occupied is very unlikely (no one will sell a good yield unit cheap), also the “Spot Gold Location” approach is also skirting BCA regulation of Industrial usage by likely renting out as full offices to maximize revenue which is actually not allowed.

      I thought I reply to close this out, the debate on this approach is never ending. DYODD as you said.

      Keep up the bloG!

      “I asked the question what if interest rate rises, the answer from Germanie Chow was rental income will rise accordingly. Do you agree with her?!”

      • Thanks for your reply! We just hope our friends and family members can be prudent with money. Take good care of money and it will take good care of you.

  3. Can you explain where does the (200k x 30) come from in your ROI calculation?
    $1.16m/ (200k x 30) = 19.3% ROI

    And this one too:
    ROI = 816k/(200k x 300) = 13.6%

    Thanks.

    • Hi Don,

      This is based on what I copied from their explanation back then.
      //
      Can you explain where does the (200k x 30) come from in your ROI calculation?
      $1.16m/ (200k x 30) = 19.3% ROI
      //
      If I remember correctly, 200k is the down payment and they explained that it is for 30 years. They are presenting this in a way as opportunity cost of $200k.
      $1.16m/ (200k x 30 years) = 19.3% return

      //
      And this one too:
      ROI = 816k/(200k x 300) = 13.6%
      //
      Apologies, there is typo, I will correct this in the main text. It should be 816k/ 200k x 30 years = 13.6%

  4. Rental $4,000/month
    Mortgage $800k -> $3k/month
    Cash flow = ($4k – $3k) x 12 months x 30 years = 360k
    $360k + $800k = $1.16m
    $1.16m/ (200k x 30years) = 19.3% ROI

    This is so naive , there are so many hidden factors for a property loan , interest will rise and that does not mean rental will rise as well , interest might rise while rental rates might drop , for a 1 million loan does not mean $3k instalments per month , it depends on your age when you take the loan and commercial interest rates tend to be higher and fluctuates after 2 years, if you are lucky enough to get a $4k rental , and paying a $3k bank loan instalments , there are property tax , bldg maintenance fees , hidden maintenance fees you might did to fork out especially the older properties plus agents fees , average out per month easily $500-$700 dollars per month , on top of that there might be vacant period where you are paying the entire monthly instalments in full for a month or more , the only benefit if you purchase the right property , the price might appreciate to an certain extend or it might also depreciate , quite common for commercial properties .

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