Behind the bid (Part 2): From losing to winning an auction property — at 25

• What happens when you lose your bids in the auction property market — one time, two times, three times? Do you keep eyeing the same properties? Persist on the same path? Or take a different route towards your homeownership dream? A young investor shares his ruminations.

Editor’s note: If you are buying a property for the first time, the logistics, technicalities and processes can be as intimidating as your first day at work. And if you join the game through the auction arena, the complexity notches up — it’s not just your first day, but your first day in a big corporation employing hundreds. So, when an average wage earner as young as 25 managed to score a goal in this relatively tougher playing field, EdgeProp caught hold of him to tell his story. 

(Read Part 1 here.)

The auction day has passed, leaving behind a deep sense of hollowness. Now what? Should I pursue another auction unit in the same project, or shift my focus to a different project? 

Emotionally, I often leaned towards the former, dreading the daunting prospect of starting my research from scratch all over again. Not only so, I could not bear the thought of all my previous efforts going down the drain. Although I have never been a gambler, the gambler’s fallacy also creeps in at this moment, making me believe that if I stuck to the same project, I would have better luck next time. There can’t be so many people aiming for this project, right?

Dealing with the dilemma

However, this sentiment presents a dilemma. Sensible investors would prefer to broaden their scope of research to increase the chances of finding better opportunities. It is like how a fisherman uses a bigger net to increase the chances of reeling in a better catch.

Besides that, clinging to the same project brought a different kind of helplessness. When would the optimal reserve price present itself again? Even if it did, would the unit be in such a shabby state that it would require major refurbishment? Would the unit be vacant or free from caveats? Would it be a non-bumi unit? Would the outstanding maintenance fees, utility bills, and taxes be within my financial means? The chances of all these criteria aligning perfectly seemed dishearteningly slim.

Further, every auction defeat inevitably prompted a reflection on strategies. Should I lower my standards — maybe I didn’t need a property with a nice view? Maybe, even if the property were occupied by existing owners or tenants, I could take the risk in negotiating with them to pay rent? Or perhaps I could accept a lower return on investment for a quicker purchase? After all, the higher the perks, the more contenders there will be. 

To make it worse, thoughts like, “I’ve been surveying for months to no avail” and “Will I ever end up with my own auction property?” linger, making it all the more tempting to give up.

More work, but more certainty too

Another thought rekindled following every defeat — would it be better to just buy a developer’s property? Just filter out the less reputable developers, find a good location, pass the loan screening, sign the sale and purchase agreement and wait for a few years before getting the keys. Less work and exertion.

But as a risk-averse investor, I know myself too well. If I go down this path, I will undergo many sleepless nights, wondering if the construction will ever be completed as promised, worrying about potential defects, and fretting over whether the house can be rented out in the future as well as how best to renovate and market it. Should I engage a property agent already? How many should I engage? More importantly, will I end up as a mortgage slave if anything goes wrong, working for the rest of my life only to pay off the mortgage? 

These worries are enough to kill my appetite for any investment in the primary market. Let’s not even talk about starting to pay loan interests before the construction has even begun — the anxiety gets worse. To me, every (potential) problem needs an immediate solution.

At the same time, the auction world also opened my eyes to properties whose market prices dropped significantly just a few years after the handover of keys. Of course, the property market is subject to fluctuations, and no one can predict the future, but at least with auction properties, the sub-sale trading prices assured me of a more predictable pattern. In the context of stock investment, it is akin to shying away from IPO (initial public offering) shares — preferring to observe the pattern of fluctuations over a period of time before making a move. It offers a tad more certainty for better nights' sleep.

The fact that sell-then-build properties will only be constructed several years later also terrifies me. I would be financially restrained from making other commitments during the waiting period, knowing that in a few years down the road, I would have a fixed burden hanging over me for 35 years if it turned out wrong. Worse, if the wrong investment were made, I would not realise this until several years later, meaning I would have lost crucial time to make up for the losses. True, these risks are present in auction properties too, but I would rather face a bad deal sooner, learn the lesson, and promptly react and re-strategise rather than lose a few precious years of non-action.

Post-auction-defeat reflections took a toll on my mental strength, driving me away from auction property at first. However, taking occasional breaks really helped clear my mind and eased the stress. 

Fourth and final try

Subsequently, I found another auction property that I genuinely liked, and I approached it with the same diligence and intensity, albeit with a slight change of strategy. 

And I am happy that, on my fourth attempt, it eventually paid off.

At the fall of the hammer, my maiden house was secured at about 38% below market value. I officially stepped onto the first rung of the property ladder with a condo unit in Seksyen 22, Shah Alam, Selangor. 

Property management has since become my lifelong learning, but I had started off on the right foot. The unit had already been tenanted when I got it, and after breaking some sweat, I managed to engage a property management company to handle the rental affairs. 

In hindsight, this feels like the masterstroke in the real estate investment chess game — liaising with the company has proven to be infinitely less stressful than dealing with the tenants directly, but this is a story for another day.

For those keen on auction property investment, have faith in the process. An auction may only give you three calls, but in life, there is always a fourth chance waiting. With the right way, it is a matter of time before ending up with the right result. Never compromise the right way for a result, so that the end is exactly what you desire. 

Treat property investment not as a passive income, but an active income. The former makes you think that you are entitled to the income, while the latter pushes you to work harder for greater gains.

Lee Ji Yong is a junior in-house legal practitioner with a law degree from the University of London and the Malaysian Certificate in Legal Practice. He specialises in contract drafting, reviewing and negotiations. He is keen on property investment and enjoys reading the “Rich Dad” series.

Disclaimer: The views expressed are the writer’s and do not necessarily reflect EdgeProp’s. 
While every effort has been made to ensure that the information provided in this article is accurate, reliable, and complete as of the time of writing, it is for general information only, and should not be relied upon to make any financial, investment, real estate or legal decisions. The information should not substitute advice from trained professionals, and we accept no liability if you use the information to make decisions.

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