CROSS BORDER REAL ESTATE & SEMENYIH LAND OWNERS

CONTRIBUTOR: SEAN NIVEN

SEAN NIVEN
My name is Sean Niven, I am of British and Irish ancestry, my parents emigrated to New Zealand where I was educated and at the age of 22, I moved to Australia where I began in earnest my career in the property industry. I am now 47 years of age and have been involved in selling and developing property in Australia for 25 years. I hold a current Real Estate License in Australia and have sold more than 15,000 properties to Australians predominantly for investment purposes. I have sold more than 4,000 investment properties to non-residents from Singapore, Malaysia, Hong Kong, China, India and Indonesia over the last 17 years. My expertise lies in Marketing and Finance and I have longstanding connections within the Australian Property Network, it is no surprise therefore that my business interests centre solely around property and investment specialising in the Australian market. In recent years, I have become more involved as a partner in developing more than 1000 apartments over many projects in Melbourne, Gold Coast and Brisbane. Within Asia, I own a marketing company with an office here in Malaysia (Australian Premium Property Sdn Bhd) and there is also a finance business with my business partner in Singapore and Malaysia, (South East Capital Pte Ltd). I have also continued to maintain a presence in Australia with a finance business (Metro Finance Pty Ltd), property management business in Melbourne to manage all the properties we sell

CROSS BORDER REAL ESTATE & SEMENYIH LAND OWNERS

CONTRIBUTOR: SEAN NIVEN

and a development company which develops our own projects. I am married with 3 children and have been living with my family in Asia for coming up 6 years now. My wife is Eurasian, of Anglo-Burmese descent and this has helped me enormously in understanding the differences between the Asian and Western cultures, particularly when it comes to family! As a result, I am very familiar with the unique investment requirements of Asian Investors. With this background I have a very good understanding of how to make money in Australian Investment Property. In this article I will share with you my experiences in selling Australian property to Asian investors like yourselves and some of the mistakes I commonly see you make and how you can ensure you make better choices in the future. When we buy foreign property the most logical step is to understand the market we are buying in which in this case is the Australian Property market (APM). Knowledge eliminates risks, maximises gains and puts us in a position to make informed decisions, so our first step should be to understand all of the aspects of the APM. The following are just a few of the key points we should have a good understanding of;

How the various types of properties such as House and Land, Town
Houses, Apartments, Student Accommodation, Serviced Apartments and Hotels operate within the overall Australian property climate so you can determine the right investment for your needs and expectations.

Who rents these different types of properties and what are the yields
for each type? The depth of the rental market to have confidence in the long term income and yield?

Why such a large percentage of the Australian population rents and

what underpins the rental market.

The differences between buying in the CBD, Inner suburbs and outer
suburbs.

CROSS BORDER REAL ESTATE & SEMENYIH LAND OWNERS

CONTRIBUTOR: SEAN NIVEN

Local Supply and demand for the various types of properties as this
affects our capital appreciation bearing in mind we have to sell to an Australian citizen or Permanent Resident.

What are the finance and leveraging options available on all of the
various types of properties available and all the various Banks credit policies on each type of investment.

Finance risks on foreign currency loans? The differences between buying off the plan and completed.
The first challenge we have is how to get this information. There are many organisations, mainly Real Estate agents and marketing agents who run seminars promoting that they will educate you on some of these subjects. The problem with this from my experience is that they all have an ulterior motive which is to sell you something so the information is twisted to put a bias on what they are selling. Let me give you an example on the most common one I see on a regular basis which is Malaysian marketing companies selling Australian serviced apartments or Hotel suites for investment. These properties have VERY poor local demand and therefore are very difficult to re sell with very poor if any capital growth. They are difficult to finance as the Banks classify them as commercial and therefore the lending ratio is much lower than residential. The interest rates are higher on this security assuming you are able to get a Bank to offer a loan at all, which is more likely the case as many Banks will not lend on this security. In addition they are typically small units under 50m2 which means that you are not able to use a foreign currency loan assuming you didnt want AUD interest. The head lease is often not asset backed which means that if the operator experiences difficulties in the business operation you are exposed and there are many cases where the guaranteed income is not received due to operator issues under the lease. Now if it were me given all this knowledge I would find it difficult to sell these types of properties (of the more than 19,000 properties I have sold

CROSS BORDER REAL ESTATE & SEMENYIH LAND OWNERS

CONTRIBUTOR: SEAN NIVEN

to Australian and overseas investors I have not sold any Hotels or serviced apartments), and yet you may be surprised to find that these are one of the most common types sold here in Malaysia over the last 20 years. I have to say that due to buyers becoming more knowledgeable that less of these types are being sold in more recent years nonetheless still many investors are gravitating to this investment type so how do the marketers and agents do it? These agents focus on your lack of knowledge and most importantly your fear. The fact that many overseas investors do not understand how the rental market works they therefore have a fear of not receiving rental income. This fear gravitates them towards the guaranteed rental incomes offered. The marketers are very experienced and clever in their presentation to focus the returns and how you can build a portfolio of properties with this positive cash flow. If on the other hand you understood that the rental market and knew that the residential vacancy rate is below 3% on average for the last 10 years and has been below 1% in many locations then there would be no fear of rental income and no reason to buy something that was not going to perform well in terms of resale demand, capital growth, yield, leveraging and finance options and overall strong returns on investment. Okay so this shows you how we need to be careful with the information we are given by people who have an agenda to sell you a certain project or type of property. Another aspect I believe you need to be careful of when you dont have all the knowledge you need to buy Australian Property is to take your experiences in buying and selling property in your local market with you when you buy overseas. I see this ALL the time and whilst it is a very natural thing to do as we all learn from our experiences whether good or bad it is a very dangerous mistake to make. Lets take the Malaysian property market as an example. The rental market is entirely different whereby many condos remain un tenanted for months and sometimes years and yields are very low. The rental market in Malaysia does not have the depth of the Australian market whereby the majority of tenants are expats and the locals do not rent or if they do they do cannot afford to pay the high rentals. When many Malaysians are

CROSS BORDER REAL ESTATE & SEMENYIH LAND OWNERS

CONTRIBUTOR: SEAN NIVEN

looking to buy Australian property they take this experience with them and assume the rental market is the same and this fear of not having a tenant is what drives them to buy the wrong type of property. The lesson to be learned is to take the time to understand the rental market you are investing in and not to take local experiences with you and assume that other counties are the same as the one we live in. Another mistake is the fixation Malaysian investors have with buying investment property with so called views. Firstly this is an investment property that you will most likely never live in and secondly you need to be aware of how the resale market will value the property remembering that you can only sell this property to an Australian or Permanent resident of Australia. Many developments will increase the price for the same apartment between $3000 to $10,000 per level which means you are paying $120,000 to $400,000 more for the same apartment! The resale market will not pay this kind of price difference and the tenant will

CROSS BORDER REAL ESTATE & SEMENYIH LAND OWNERS

CONTRIBUTOR: SEAN NIVEN

definitely not pay 50% more rental so you need to be careful. Also you need to be conscious as to what constitutes a good view from an Australian investors perspective as they are your resale market. Many Australians prefer lower floors for convenience of speedy access to their apartment in what you might consider a good view they may well not share the same opinion. Another fixation is a preference for buying in the CBD or to buy near the universities. This also comes from a lack of understanding of the rental market in Australia and what locals prefer and why. Firstly lets look at the CBD, I am not saying that the major CBDs are not a good place to invest it is just that there is an imbalanced perspective on a CBD investment verses Inner or outer suburbs. This perspective comes from investment experiences in your own country that are taken with you when buying overseas and again this can be dangerous and again you have to be aware of the local demand not the overseas demand. The same applies to buying

CROSS BORDER REAL ESTATE & SEMENYIH LAND OWNERS

CONTRIBUTOR: SEAN NIVEN

near universities whereby the lack of knowledge on the rental market can steer us towards looking for students as tenants and therefore buying near universities. This may not attract us to the best investment that is going to be achieving the highest rental and the best resale value from local demand. My advice to anyone buying Australian Property for investment purposes whether Australian or a foreigner is to do the following; List down the reasons you are buying and what you are expecting to achieve in terms or returns.

Ensure you look at investing for a minimum of 7 to 10 years. Decide how much capital you wish to invest. Decide how much debt or leveraging you are comfortable with
including how much currency risk you are prepared to take if applicable. With this information you can then prepare a finance and cash flow spread sheet that you can fine tune until you are comfortable. I suggest a capital growth annual increase of between 4% to 5% and an annual rental increase of between 5% to 6%. After you are happy with the financial outcome I suggest only then you go about your education process and to learn as much as you can on the points I have listed above. Once you are comfortable you have a good understanding of these points and more you can then find an agent you can trust that has access to all the different types of properties and then finally and only then start to look at the properties that meet your investment strategy. Too many times I see clients go about this process the reverse way usually by being sold by an agent on a project for one reason or another and then starting the education process and lastly by finding out how to finance the property. Too many times I hear clients stories of not being happy with their experience and it is nearly always due to the process they have adopted. If you are the type of investor that doesnt like to do all this work yourself then the other way is to select your advisor first and work with

CROSS BORDER REAL ESTATE & SEMENYIH LAND OWNERS

CONTRIBUTOR: SEAN NIVEN

them to help you with the strategy and structure of your investment/s and learn through them how this can be done to suit your best interests. Once this is agreed you can then work with your advisor on the education process until you feel comfortable that you have enough knowledge and confidence to select your property/s.

Sean Niven
Australian Premium Property Sdn Bhd Malaysia Singapore China Australia India Indonesia Mobile:Malaysia +6 01112313070; Singapore +65 92351995 Office: +603 77260044 Email: sean@approperty.org Address: C706 Metropolitan Square, Jalan PJU 8/1, Bandar Damansara Perdana, Petaling Jaya 47820, Selangor, Malaysia. URL: www.approperty.org

Definition of Success : The continuous journey towards the achievement of predetermined and worthwhile goals ! Risk comes from not knowing what youre doing. Every person who invests in well-selected real estate in a growing section of a prosperous community adopts the surest and safest method of becoming independent, for real estate is the basis of wealth. -Theodore Roosevelt (1858-1919) Real estate cannot be lost or stolen, nor can it be carried away. Purchased with common sense, paid for in full, and managed with reasonable care, it is about the safest investment in the world. -Franklin D. Roosevelt (1882-1945)