Invest in the future



IT has always interested me to see how the different selection of words sent varied messages to readers and listeners.

Of late, I’m intrigued with the use of oxymorons, a combination of words that have opposite meanings and which usually produces an incongruous, seemingly self-contradictory effect.

Some daily expressions such as “open secret”, “seriously funny”, “deafening silence” and “pretty ugly”, are good examples on how the completely opposite meanings of words create dramatic effect.

Among other oxymorons come an expression often heard among condominium owners to their management corporations (MCs) and management offices: “We want you to lower costs and improve quality.”

Just like any other oxymoron phrases, the statement above makes me puzzle and ponder. It is prudent to manage costs, but unrealistic cost cutting over the long run will lead to decline in the quality of facilities and services.

Based on my experience, quality always comes with cost especially in property management. It is impossible to achieve higher quality standards by reducing expenditure.

I have heard of occasions where homeowners’ representatives in MC set high benchmark for the property management team, but expect them to cut down on the number of workers and cleaners in order to reduce spending. Needless to say, we can imagine what the outcome would be without looking at the property itself.

In reality, MC and homeowners must invest, not spend less for better quality. While developers and property managers play the important role of ensuring the upkeep of properties, the property owners themselves are the main stakeholders in deciding the fate of their properties. They are the party who can approve the budget and usage of their service charge and sinking funds.

In my previous article, I mentioned it is important for homeowners to participate in property management, such as attending AGMs and EGMs to exercise their right to raise concerns and approve the budget during such meetings.

In addition, homeowners and MCs must be bold in making decisions to invest in their properties with the reserved funds they have in their account.

Hence, while it is important to manage cost, it is also important to spend wisely for the future. Inflation is a fact of life, so MCs and homeowners should factor the inflation rate into their service charges, and use the real inflation rate, typically higher than the officially sanctioned rate anywhere in the world.

Typically, service charge is used for the general maintenance of the building. Sinking fund, on the other hand, can be used for the painting and the repainting of the common property, acquisition of movable property, the replacement of any fixture or fitting, the upgrading and refurbishment of the common property, and any other capital expenditure deemed necessary.

Managing a strata property is like maintaining a car. We must service our car regularly and replace its parts when they are due for change according to mileage. If a car is serviced less often, it gets more expensive to fix later when the equipment falls apart, and sometimes it may be too late to change.

Hence, when we reduce spending on maintaining a property, the decline of quality may be slow but sure. It takes time and additional cost when homeowners want to re-invest to restore the property later.

Invest in the future is just like doing exercise. It is hard to do, but if done regularly it will build health, strength and happiness.

To invest in a strata property means to increase, not cut down services such as cleaning, maintenance, security and landscaping. It also means to spend the sinking fund regularly not just on replacements, but also on upgrades, as the world doesn’t stand still. New projects would make existing projects old and even obsolete if we don’t manage our property well.

Investor’s nightmare

How well a property is managed can make or break the value of the property. A quality property management will allow the value to increase; while poor management could translate into an investor’s nightmare.

Active management and upgrading of properties is an important approach to protect our homes and investments. As such, whenever homeowners or property management companies tell me they are able to increase quality and cut cost at the same time, I would wonder whether, “Is this a short-term gain at the detriment of long-term benefits?”

By Alan Tong

Datuk Alan Tong was the world president of FIABCI International for 2005/2006 and awarded the Property Man of the Year 2010 at FIABCI Malaysia Property Award. He is also the group chairman of Bukit Kiara Properties. For feedback, please email feedback@fiabci-asiapacific.com.

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Leaving a legacy by buying a house first before a luxury car …


 

DURING big festive celebrations such as Hari Raya Aidilfitri, Deepavali and the recently celebrated Chinese New Year, it is common to see families with a few generations gathered together.

Our grandparents, parents, uncles and aunties would talk about the legacies left by our ancestors, and the stories often attract a lot of attention whether from the young or old.

Perhaps, the topic of leaving a legacy is something worth sharing as we embark on a brand new year.

For years, I have been touched by the catchy tagline of a renowned Swiss watch advertisement, “You never actually own a (the watch brand), you merely look after it for the next generation”.

While most of us can relate to the thought, not all of us can indulge in such luxurious watches or be interested in buying one. However, at some point in time, we may be looking at buying a property to pass down to our younger generations.

Whenever the topic of leaving a legacy is brought up, I would recall the lesson that I learnt from my late father. My father embarked on a long journey from China to Malaysia at the age of 16. With years of hard work and frugality at his peak, he managed to own a bus company, the Kuala Selangor Omnibus Co.

Other than his bus transport business, he only invested in his children’s education and real estate. He financed seven of his eight sons to have an overseas university education, and when he passed away, he also left four small plots of land in Klang and a company which had 34 buses.

As I look back now, what my late father invested in unintentionally was very beneficial to me when I came back from my studies as an architect. With the land he handed down and the knowledge he equipped me with, I intuitionally got myself involved in small real estate development, and later founded my property development company, Sunrise, in 1968.

Many people have thought of leaving a legacy. The crucial questions often asked are, when should we start planning for it, and how should we go about it?

For financial planning and investment, I always believe that the earlier we start, the better off we are. The same goes to leaving a legacy.

If you plan to buy a property, it is advisable to start earlier as it is more affordable to buy it now as compared to 10 or 20 years down the line especially with rising costs and inflation in mind. You can start with what you can afford first and focus on long-term investment.

It is proven that property prices appreciate over a period of time, especially when we plan to hand over assets to the next generation that easily involves a 20- to 30-year timeline.

As a developing nation which enjoys high growth rate, Malaysia’s property values will also appreciate in tandem with the economic growth in the long run.

Nowadays, we often hear youngsters comment on the challenges of owning a house due to the rising cost of living. I believe that besides starting with what you can afford, it is also important to plan your financial position wisely and to differentiate between investment and spending.

Investing in properties, commodities, shares, etc. is also a form of savings which can help to grow your wealth and to leave a legacy. On the other hand, money spent on luxury items may depreciate over time from the day you buy them. If we can prioritise investment over expenditure, it is easier and faster to achieve our financial goals.

So, if you haven’t already started to plan, do consider leaving a legacy by buying a house first before a luxury car, branded bags or expensive gadgets, as the latter are considered ‘luxury’, not necessity.

Even if you may not have a spouse or children at this point in time, it’s better to start now than later, as our financial commitments tend to grow bigger as we progress into the next stages of our lives.

Most of us hope our lives matter in some way that can make an impact on our loved ones. The idea of leaving a legacy can take many forms, such as equipping the younger generations with knowledge and values, or leaving them fond memories.

Those are all important to work on and they leave a footprint to those lives you touch. If you are also planning to hand over physical gifts, always remember to start earlier with what you can afford, and focus on long term investment.

By Food for Thought Alan Tong

Datuk Alan Tong has over 50 years of experience in property development. He was the world president of FIABCI International for 2005/2006 and awarded the Property Man of the Year 2010 at FIABCI Malaysia Property Award. He is also the group chairman of Bukit Kiara Properties. For feedback, please email feedback@fiabci-asiapacific.com.

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