There are more employees than employers – that’s just how it is. As such, there tends to be a stigma against employees. Some may call us losers, while others call us lazy sloths that are a drag on innovation and entrepreneurship. Some may even look down on us with condescension.
There’s nothing wrong with being an entrepreneur. I truly respect entrepreneurship, as two of my closest friends are successful business owners. However, the truth is, not everyone is cut out to be an entrepreneur, or enjoy being one. Some of us may not have the aptitude or gumption for entrepreneurship. If you fall into this category, there’s no shame in being an employee.
There is no dishonour in taking pride in your job, flying up the career ladder while still being a successful investor. Being an employee does not automatically disqualify you from being wealthy.
1. A great career doesn’t happen by chance
It may seem like we need to choose between honing our investment skills and our occupational skills, but believe me, we can do both concurrently.
Many people spend hours obsessing with their investments, while lamenting the lack of investment capital due to their low salary. They may spend every weekend attending property seminars, buying lots of books, attending networking sessions and being on the lookout for great property deals.
Yet, we do not spend an iota of effort in improving our careers and improving our income. Instead, we complain about how we hate the rat race and wallow in self-pity about how we are constantly a victim of office politics.
No matter what you do as a living, if you dedicate yourself to your chosen craft and invest the time, you will likely excel in your job. I spent countless hours seeking mentors and advocates, going through manuals, bugging my seniors with incessant questions and mastering the technical skills in my job.
With the extra effort, I was presented with many opportunities to climb up the career ladder faster than my peers, and enjoy the perks that come with it!
2. Your salary alone won’t open doors
Career promotions will likely follow with extra effort and excelling in your job. This will equate to higher salary. While this is true, a higher monthly salary is not going to make a huge difference in your investment. A person earning RM20,000 per month doesn’t really enjoy a tremendous lift in quality of life compared to a person earning RM10,000 per month.
Sure, the RM20,000 individual can leverage more, drive a nicer car and dine out more often; but he isn’t the next Warren Buffet.
It is that RM200,000 or RM300,000 annual bonus or stock options (numerical example only) that one garners as a high performing employee that sets you apart from the masses. This provides great avenues for you to put down payments on landed residential units, and the financial buffer for you to replicate more deals.
Do your best to position yourself in an organisation and industry that rewards performance based on merit. Get mentors and advocates that reward you shamelessly for a job well done.
Is it easy getting that big bonus? Of course not. As what my dear friend, who is also a property guru, always said, “Nothing worth having comes easy”.
3. Capital appreciation sets you free
With enough capital accumulated, most of us would turn to residential property for investment. However, will it be able to help you accumulate wealth and eventually quit your job?
I have met many new employees cum investors that want to quit their jobs and live off the rentals from their properties. Let’s be pragmatic, folks. I think that 99% of us can safely agree that getting a single RM500 positive cash flow property (rental – mortgage) is pretty challenging in today’s market.
Now, try getting 10 units like that. Even if you could muster all the Jedi Knights in the property realm to help you, your positive cash flow would only equate to RM5,000 per month (RM500 per unit x 10 units). Yes, RM5,000 may seem decent or modest, but it isn’t exactly screaming financial freedom.
I could be wrong, but most successful investors that I have met achieved financial freedom by building a portfolio of properties that have significant capital growth over time, typically over a 10-year cycle.
They let the magic of leverage, compounding and time generate a portfolio which has a high composition of equity and capital appreciation. This means, you’d become financially free from a portfolio that increases from RM2 million to RM6 million over time, compared to building a RM5,000 cash flow per month portfolio.
4. Build your net worth efficiently
The usual property investment game plan advocates smart leveraging, but please be mindful of over-leveraging.
There are many who are enamoured in learning various ways to leverage. Some of us are keen to learn about multiple submissions, we are impressed with people that managed to “game” the financial system to get more than 100% Debt to Service Ratio (DSR), and are obsessed with Below Market Value (BMV) or zero down deals (ZDD).
I have no issues with these per se, but does it make sense to have lots of assets with tons of liabilities? Debt alone doesn’t make you the winner, but a net worth built efficiently does.
My critics would say I am foolish for not engaging in ZDD or multiple submissions. They would say that I am not building my portfolio efficiently. Fair enough. However, I believe in being prudent in the management of my liabilities.
To build my portfolio “efficiently”, I did it the old fashioned way – I worked my butt off to get those great bonuses to fund the down payments of my properties. Today, most people tend to be surprised at my Loan-to-Value (LTV) Ratio (ratio of a loan to the value of an asset purchased). Using conservative estimates, it is approximately 37%, which augurs well for net worth creation.
The lower the LTV ratio is, the lower the risks and costs of borrowing will be. Accumulating wealth is not just about returns and profit, but also about managing risks.
I would suggest that employees be balanced in their investment game plan. Focus on building your career and property portfolio efficiently, as both pillars provide synergistic benefits.
The rich do not achieve financial success because they put money ahead of their job. Put your job first, and the money will follow. Then, you will be able to invest ahead of your peers with the higher income.
