Buyers turn to Kajang as KL home prices rise

By THEAN LEE CHENG

http://biz.thestar.com.my/news/story.asp?file=/2012/10/27/business/12185858&sec=business

THE past couple of years, in tandem with the rise in property prices in major towns and cities in the country, Kajang's property market has generated quite a bit of interest among both developers and house buyers.

Located about 20km from the city of Kuala Lumpur, Kajang is benefiting from its second-tier location status as Kuala Lumpur and Petaling Jaya prices move beyond the affordability of ordinary salaried workers.

Two property negotiators based in the area say much of the interest of late is due to improved accessibility with the various highways that have been completed, and not so much because of the soon-to-materialise MyRapid Transit system (MRT).

Says one of them who declined to be named: “The spike in prices in Cheras properties has resulted in people from Cheras buying into Kajang as housing is cheaper over there. Unless it is very old and run-down, it is not possible to buy into Cheras with RM500,000 and below,” she says.

The other factor is schooling. Yu Hua Kajang, which offers both Chinese primary and secondary schooling, will only consider applications from a Kajang address, she says.

“Saujana Impian and Prima Saujana, by virtue of their proximity to Cheras, enjoy good demand, with Saujana Impian having more tenants than owner occupiers.”

She adds that projects in that vicinity by the Naza TTDI group have received good response from buyers and investors. As for Kajang-based developers MKH and private developer TLS Group, she says the Kajang and Cheras population are familiar with both.

She says the issue is not so much a lack of housing, but the scarcity of bread-and-butter double-storey housing.

“Developers, in their search of higher profits, are building three-storeys housing, semi-detached and bungalows in Kajang. What people really want are double-storey terraced housing,” she says.

Because of the challenges in getting land in and around Kuala Lumpur, developers are also scouring other towns and Kajang seems to be within their radar.

Three developers who have bought land in or close to Kajang include Mah Sing Group Bhd, SP Setia Bhd and the Dijaya Corp Bhd. The Sunway group has moved into that location several years earlier. These newcomers will be competing with developers who have built a strong following over the years.

Says MKH group managing director Datuk Eddy Chen Lok Loi: “We have no trouble competing with anybody. We are doing everything that other developers are doing.”

Chen says that at the marketing level, the mid-sized developer, formerly known as Metro Kajang Holdings Bhd, has a strong reputation there, having built 30,000 units ranging from residential to commercial properties over the years.

Financially, having accumulated land at between RM8 and RM9 per sq ft would put it at a great advantage compared to newcomers who have paid considerably more. In areas like Semenyih, some of its land bank was acquired at less than RM5 per sq ft.

“I believe MKH is about to make a huge leap forward. Our strategic land bank, which we bought at a very good price when compared with newer players, and the emergence of MRT will give us a strong advantage over our competitors.”

The third factor is the RM135mil turnkey project comprising about 550 acres in Puncak Alam, Selangor, with Puncak Alam Resources Sdn Bhd, he adds.

Over the next seven years, MKH plans to build projects with an estimated gross development value (GDV) of more than RM5bil.

As a result of the Sg Buloh-Kajang MyRapid Transit line, MKH is tweaking its plans for some of its commercial projects. The 51km Sg Buloh-Kajang line will have two stations in Kajang. One of them will be sited at the town centre, about 500 metres from the police station, which is next to MKH City.

The second MRT station will be located along Jalan Reko at the Sekolah Menengah Kebangsaan Jalan Bukit.

MRT will provide additional public rail transport to the current Keretapi Tanah Melayu (KTM) line. There is also a proposal to have a KTM station next to Kajang 2, another MKH project.

Improved rail transport, says Chen, will benefit the company's new developments like MKH City, MKH Boulevard and Kajang 2. It will also give a boost to its older projects Plaza Metro Kajang and Metro Point.

Chen says the value of Plaza Metro Kajang will be enhanced considerably as the station will be about 400 metres from it. The company is also considering building a walkway to connect to it.

“We had wanted to built a small complex on one of the new sites with a gross area of about one million sq ft. With the MRT line entering Kajang town, we are now considering doubling that to two million sq ft because the MRT line will take care of parking issues,” says Chen.

The line will pass close to MKH's new and existing properties MKH City, MKH Boulevard and Kajang 2.

Chen says the company has between 500 and 600 acres of land, with the bulk of them in Kajang and Semenyih, excluding its 550-acre turnkey development in Puncak Alam, Selangor. Semenyih is about 10km from Kajang.

Besides its base in Kajang, MKH also has projects in Petaling Jaya, Old Klang Road and Kuala Lumpur.

On affordable housing, the current buzzword in the property industry, Chen says its projects in Semenyih are priced at between RM300,000 and RM400,000, which is today categorised as affordable. Kajang double-storey housing, by comparison, are now priced about RM500,000.

MKH's nine-month earnings for financial year 2012 has risen 124% year-on-year to RM47mil, driven mainly by successful key projects in Kajang, Semenyih and Bangsar. A HwangDBS Research report says the three locations collectively achieved a commendable 77% take-up rate.

Land – the bread and butter of housing developers

HOUSING INVESTMENTS
By THEAN LEE CHENG

http://biz.thestar.com.my/news/story.asp?file=/2012/10/27/business/12234097&sec=business

INCREASINGLY, the number of new developments being advertised and marketed of late are located further away from Kuala Lumpur closer to Rawang, Cyberjaya and Putrajaya with the projects undertaken by some of the larger Bursa-listed property developers.

The trend of such developers moving into periphereal locations started a couple of years ago due to the scarcity of large pieces of land between 50 acres and 100 acres close to or in the city which explains why there is so much interest in the Sg Buloh Rubber Research Institute of Malaysia (RRIM) land.

If the core business of a company is property development, then land is virtually gold to them. Without land, they will not be able to develop anything which means no sales and no revenue. This is why, every year, developers have to launch new projects.

The replenishing of land bank has be to be done consistently and constantly, unless they already have a large land bank. This objective to have steady revenue year after year can be a challenge when there is a property downturn, which also explains why it is extremely important to avoid a property bubble.

In the last several years, developers have had multiple launches in order to cater to demand. The need to show a consistent stream of income may explain why some of our larger developers are also involved in the plantation sector. Plantation land can be converted into property development if and when the need arises.

Besides the availability of land, the next important issue is land price.

Some of the larger players which have purchased land in the Kajang, Semenyih and Bangi areas over the last couple of years include S P Setia Bhd, Mah Sing group and Dijaya Corp Bhd.

Last year, S P Setia bought 272.5ha, or 672 acres, of freehold land in Semenyih for RM381.26mil or about RM13 per sq ft.

A couple of years ago, Dijaya bought the 200-acre Kajang Hill Golf Club for RM228mil or about RM26 per sq ft. The price a developer pays for his land is important because at the end of the day, this will be reflected in his selling price.

Mah Sing Group Bhd is the other new player in the Bangi area. In May, it bought about 400 acres in Bangi for RM333.25mil or about RM18.50 per sq ft.

When a developer buys land that is not slated for property development, there is conversion cost. For example, if a piece of agricultural land is bought for RM10 per sq ft, it has to be converted into land for development. The land office will consider the price of other development land in the area. If the market price is RM20 per sq ft, there is a difference of RM10. The developer will be charged a premium of 25% of RM10 which is his conversion cost.

That means, in order to change the land status from agriculture to development land, he will have to pay an extra 25% multiplied by his land size. There are various factors that determine the cost of conversion.

The price Mah Sing is paying is benchmarked against rival developers. In this case, S P Setia's RM13 per sq ft versus the current land price of between RM25 and RM28 per sq ft in Kajang, according to RHB in May. This takes us back to the 2,330-acre RRIM land, which was sold to the Employees Provident Fund for RM2.28bil, or RM22.46 per sq ft. This is unconverted agricultural land compared to S P Setia's and Mah Sing's land in Semenyih and Bangi respectively

A developer who wants to build on the RRIM land will have to first convert it to development land. There is a different price range for commercial and residential land, with commercial land being more valuable.
Apparently, Mont'Kiara land is already between RM600 and RM700 per sq ft, and the Tropicana land is RM200 to RM300 per sq ft.

Because some parts of RRIM land is next to Tropicana, when the land was parcelled out, the price may be rather prohibitive to smaller and less capitalised property developers.

Considering that large-scale developers have been land-hungry and have been buying into places in Semenyih, Kajang and Bangi, and the RRIM land being far more strategic, it is hoped that the Government, by virtue of the fact its cost of funds is cheap, will parcel a considerable portion of it for affordable housing.

The Government could also help by releasing other land under its plan to provide affordable housing for the people but as it stands today, it may, in all likelihood, also be further away from the city with places like Kajang, Semenyih and Nilai mentioned, among others.

Deputy news editor Lee Cheng is of the view that housing issue can become a social problem if not dealt with expediently.

Are you ready to follow Robert Kiyosaki’s advice?

Money & You by Yap Ming Hui | September 1, 2012

http://biz.thestar.com.my/news/story.asp?file=/2012/9/1/business/11927075&sec=business

I am thrilled that my last article, What Robert Kiyosaki Didn't Tell You, garnered positive feedback. It shows that many people are thinking about the impact Kiyosaki's work can have on their finances. As such, I would like to continue the discussion about investors taking on and managing risks (or investors being unable to manage such risks).

Kiyosaki is right to say that we must take an active interest in how we manage our wealth and assets. Rising inflation and the high costs of living are proof that we can no longer afford to be lackadaisical with our personal finances.

That said, in a book he co-authored with Donald Trump, Why We Want You to Be Rich: Two Men, One Message, Kiyosaki said this: “If you do not decide to become rich, the chances are you will become poor.” I feel that this is simply untrue: I don't think that if you decide not to become rich, you'll be poor.

The problem is that Kiyosaki's statement evokes fear in many people, especially the middle class. Petrified that they are going to be poor, many take a leap of faith by either investing aggressively in property or starting their own business. Many people do this in the belief that they are conforming to another of Kiyosaki's fundamental points and that is to take on a good debt.

According to Kiyosaki, there are two types of debts: bad debts and good debts. Bad debts are those taken to finance your lifestyle and enjoyment. Good debts are ones taken to fund your investments that will grow your wealth. Naturally, Kiyosaki advocates you taking on more good debts. However, remember that when you take on good debts, you are also exposing yourself to financial risks. In addition, there's no such thing as good risk or bad risk. So, when you take on good debts, how much risk are you being exposed to? Also, are you ready to manage such risks?

It is the failure to consider these questions that have led people to follow Kiyosaki's advice with disastrous consequences. Those who invest in properties are usually excited by the high possibility of becoming wealthy. However, those who fail are often the ones who rush to take out loans from banks without giving their actions careful thought. Unable to rent or sell these properties, many can't service their loans and suffer financially. In some cases, their suffering includes their mental and physical health.

I personally benefitted from Kiyosaki's advice as it gave me the assurance and encouragement to start my own business more than 10 years ago. I thought it would be smooth sailing all the way and business would pour in. After all, I had created a workable business plan, saved enough money and believed that people wanted to know the services offered by independent financial advisors. In no time, I realised that starting and managing a business wasn't going to be easy, especially when independent financial advisory services were relatively new and unknown. However, I was lucky because I had the necessary support, knowledge and experience to manage my business risks by virtue of being involved in a business that emphasises risk management. I was able to avoid some of the traps that people fall into when they don't manage their risks properly.

Let me give you a real-life example: a 28-year-old engineer is frustrated in his job. He sees his bosses driving fancy cars and going on annual holidays to exotic places and wonders if he'll ever be in the same financial position. He decides that the only way to become rich is to become his own boss. So, he quits his job and opens a restaurant. Only, he has not prepared a written business plan, has little capital, no idea how to manage cash flow or his staff and knows nothing about the food and beverage industry. After three years, he is still struggling and now borrows money from relatives and friends to keep the restaurant afloat. Two years later, his business has completely failed and he's declared a bankrupt. When he falls back on the only thing he knows, which is engineering, he's already 33-years-old and has been out of the job market for five years. He'll be hard-pressed to find an employer willing to employ him.

If this same 28-year-old engineer were to approach me, I would tell him to optimise what he has now to achieve financial freedom first. In the process, he will learn about managing and minimising the financial risks he may be exposed to. In particular, I would tell him to continue working, but not give up on his dream to become wealthy and start his own business. Then, when he's comfortable, he can take on more risks.

Planning process

The rationale behind the advice I give this 28-year-old engineer is this: the process of planning and preparing for a successful business might take a few years. What is important is that throughout this process, he continues to have a steady source of income, thereby, reducing his mental stress and any strain on his finances. He will also be able to invest his savings and accumulate his wealth. When the time comes for him to assume the risk of running a business, at the very least, he will be financially secure. It may appear to be a slower and more conservative approach than Kiyosaki's, but it is, by far, a safer way to achieve wealth.

So, are you ready to follow Kiyosaki's advice? In a nutshell, you're ready if you feel comfortable taking various business and investment risks. This will mean being in a position to manage and minimise possible stress that can come with such a move.

Naturally, it is an added advantage if you know how to adapt Kiyosaki's money-making ideas within a Malaysian context. You must also be equipped with sufficient knowledge and experience about your investments. Most important of all is to have a back-up plan in place to support you and your family financially in the event such money-making ventures fail.

No doubt, this is a lot for the average Malaysian to consider if he wants to start on the journey to becoming wealthy. It is possible for him to become lost along this journey. Bear in mind that every journey begins with a single step and you should take that wisely. In my new book, Set Yourself Free, I emphasise how important it is for you to have clarity about your present financial position. Then, by using a new tool I've created called “The Money Matrix”, I show you how to successfully plot a safe path to wealth, with minimum effort and risk.

Estimating your future net worth

Recently, I’ve been thinking a lot about my net worth in next 10 or 20 years. But sorry, I’m not going to share my net worth with you. What I’m going to share here is the way you can estimate your net worth. Most of my net worth is kept as investment in properties. For simplicity in estimating my net worth, I’ll ignore other (much) smaller investments such as fixed deposit, EPF and investment linked insurance.

I’m NOT going to build a complex financial model here to impress you. What I’m going to share here is a simplified method to estimate your future net worth; especially if you are property investor like me. Before you can start estimating your future net worth, you need to understand a basic principle call time value of money. Value of your money (or net worth) will grow if you invest in right instrument. The rate your money grows is appreciation or returns. On the other hand, value of your money will depreciate in future due to inflation.

There are 2 rules of thumb that you can use in estimating your net worth if most of your money is kept in properties like me.

1.       Property value will DOUBLE every ten years  (assume  appreciation of 8% / annum)

2.       Value to money will be HALF in 20 years  (assume inflation of 3.5% / annum)

To understand underlying principle for rule #1 above, you need to understand how long does it take for your property to double its value? – Based on my experience and research, most of the times; property value will double in 7 years to 12 years. I did a simple excel simulation to validate this. From table below, you can see property value double in 16 years if the appreciation rate is 5% / annum. If the appreciate rate is 12% / annum, property value will double in 7 years. For simplicity and fairness, I like this rule of thumb à property value should double every 10 years – provided you bought properties at correct location, location, location. I personally feel this rule of thumb is a fair rule of thumb although we can see many properties double in value in less than 5 years due property boom in last few years. For property value to double in 10 years, you need to find properties with appreciate rate of about 8% / annum which is always possible as long as you invest in right property type and right location.



To validate rule #2, I simulate how value of money depreciate with inflation. From table below, you can see value of money will be half in 35 years in the inflation rate is 2.0%. On the other extreme, value of money will be half in just 14 years if the inflation rate is 5.0%. Base on releases from Bank Negara (BNM), inflation rate in Malaysia is hovering between 2% to 3%. However, this figure is always debatable, especially if you are living in Klang Valley. For simplicity let assume inflation rate of 3.5%, your value of money will be half in 20 years. 

With these rules of thumb, you can easily estimate your future net worth.

Case 1: If total value of your property is RM 1mil currently (and assuming your rental can cover bank installment for balance of 20 years mortgage)

Property value in 20 years = RM 4mil, Value in today’s currency = RM 4mil x 50% = RM 2.0 mil

Case 2: If total value of your property is RM 2.5mil currently (and assuming your rental can cover bank installment for balance of 20 years mortgage)

Property value in 20 years = RM 10mil, Value in today’s currency = RM 10mil x 50% = RM 5.0 mil

Case 3: If you purchase a shoplot in PJ for RM2.5 mil with down payment of 30%, your down payment is RM750k. With rental yield of 6%, your rental should be able to cover your monthly installment for 20 years. So your RM750k will become RM10 mil in 20 years (today value of RM 5mil). This is the beauty of property investment – you will grow rich slowly but surely.

Are developers really making too much?

Food for thought
By DATUK ALAN TONG

http://biz.thestar.com.my/news/story.asp?file=/2012/8/11/business/11821521&sec=business

LATELY, there have been many ongoing discussions on the topic of high property prices. It made me ponder on the various causes that might have contributed to the situation, including the question of whether developers are making too much.

As I took a sip of tea, many thoughts came to mind which I found interesting and worth sharing before we dwell further into the real factors of rising property prices.

Based on annual reports (see chart) of three major property developers in Malaysia, namely SP Setia, UEM Land Holdings and Mah Sing Group, they are generating an average of 18% profit margin from their projects, and at the same time incurring a staff cost of about 7% of their total revenue.

These companies are major developers in mass residential properties which have high sales turnover, and therefore a good reflection of the average developers' profit margin in the residential market.

These findings may contrast with people's perception of the profitability of the property development industry.

Though it may sound like a fantasy, assuming I could convince these three property developers to give back their entire profit to their customers, it would mean an average of 18% discount on property prices for the year in question.

This would seem like a fantastic bonanza for the buyers of the properties in question. But would a 18% discount really make these properties affordable? I would imagine that people will still find these properties expensive.

Let's take an example of a terrace house that costs RM700,000 in Petaling Jaya. It would be priced at RM574,000 after the 18% discount.

If a home buyer is able to secure a 90% loan with a maximum repayment period of 30 years, the monthly loan instalment for RM700,000 and RM574,000 would be RM3,081 and RM2,526 respectively (based on a BLR-2.4% loan package with current BLR at 6.6% per annum).

From the above example, while the discount may seem substantial at absolute price, it is not significant in terms of monthly loan instalment for home buyers.

The debt commitment level for the latter is still considered high and out of reach for most people especially those who have just started their career.

Now, let's take a hypothetical scenario that the property developers decide to make their staff work for free that year.

It would mean another 7% discount to customers after deducting staff cost. Even with this total discount of 25%, property prices in many areas would still be considered unaffordable to many.

Anyhow, back to reality, it is impossible for any commercial enterprise to work for free or give up its profit if it was to run a sustainable business, as well as to satisfy its shareholders' expectations.

For the property development industry which has a product life cycle of four to six years (starting from land acquisition to handover of keys to customers), it is a challenge to further compress the profit margin after taking into account the risk and inflationary factors involved in such a long product life cycle.

Let us look at other industries as a comparison and review their profit margins.

For the banking industry, the three largest local banks that were selected are Maybank, CIMB and Public Bank. Likewise, the three major players from the mobile telecommunication services were Axiata, Maxis and Digi.

The results showed that the average profit margin for the banking industry is 35%, while the mobile telecommunication industry is enjoying an average profit margin of 26%. So, back to my question “are developers in Malaysia really making too much?”

Compared with the average profit margin of the banking and telecommunication industries, the profit margins of property development companies are significantly lower and definitely not on par in terms of the actual profit before tax figures.

Putting aside the profit margin for property development which is already relatively low compared with the other two industries, what are the other factors that are causing high property prices?

Many other underlying factors could be looked into in relation to the escalating property prices, instead of merely contemplating the issue as a market trend or as a result of developers' profits.

The Government, property developers, home buyers, as well as NGOs (non-government organisations) will need to work together to identify the root causes of inadequate supply of affordable homes in Malaysia.

Let's ponder this issue over the next few weeks and I welcome any suggestions and feedback to shed some light on it as I dwell further into this crucial topic in my next article.

FIABCI Asia-Pacific chairman Datuk Alan Tong has over 50 years of experience in property development. He is also the group chairman of Bukit Kiara Properties. For feedback, please email feedback@fiabci-asiapacific.com

Is Your Home an Investment?

Many treat his or her home as an investment while others not. If my memory serves me right, Robert Kiyosaki not only didn’t treat his home as an investment; in fact treat his home as a liability. For him, investments suppose to generate income for owner but owning a home incurs expenses to the owner.

From my perspective, whether a home is not an investment is really up to you.

Are you likely to move out in the future?

If your answer is NO, your home is definitely not an investment because it don’t generate income for you nor your can reap profit from selling it in the future when price increased.

If your answer is YES, you may reap profit from selling your home at higher price in future. But where are you going to live? Prices tend to rise across the entire market. So if you sell your current home and getting another new home, you are merely rich for a while before dumping profit from your old home to new home. In this case you can’t really enjoy profit from your first home. Hence, we shouldn’t treat your home as an investment. UNLESS you willing to go significantly downscale for your next home, move to a less desirable neighborhood or move out further away from city centre; those are the only way you can enjoy fruits of your home price appreciation.

Do you really make profit from your home when you move out?

Without most of us realizing, it cost more to buy, renovate and maintain a home than you think. Biggest home ownership costs are renovation and bank interest. Hence, it is important not to buy a home that is too big for your need or overly renovate and furnishing it. The profit that you make selling your home may just sufficient to cover your interest, renovation and furnishing cost. In fact, I personally have a friend that stretch his budget to buy a home in upscale neighborhood, over spent to renovate and furnish his home under the name of convenient, investment and “enjoy life”. In our previous gathering, he lamented cash flow problem he encountered in serving bank loan (for car and home) as well as credit card debt for his renovation and furnishing. He is obviously regretted; this is a good lesson not to over spend in home ownership. 

Besides straining your cash flow, you almost certainly lost some investment opportunity (i.e. opportunity cost) along the way while you were spending your money buying the home.

No matter what, I would like to stress that buying a home is still better than renting home. For me, it’s even better if you can spend less on current home and invest in few investment properties (i.e. rental properties) that able to generate positive cash flow to fund your dream home; of course not immediately, but say 10 years down the road. I personally prefer to treat my current home as a saving instrument rather than investment instrument. 10 years down the road, I’ll sell my current home (and probably 1 or 2 investment properties) to fulfill down payment of my dream home in upscale neighborhood. Monthly installment of my dream home will then by funded by positive cash flow from remaining investment properties.

What Robert Kiyosaki didn’t tell you

Money & You by Yap Ming Hui | August 4, 2012

http://biz.thestar.com.my/news/story.asp?file=/2012/8/4/business/11785165&sec=business

A FEW months ago, I was having breakfast with a friend when he told me about the seminar he was going to attend in May to hear Robert Kiyosaki speak.

In the past year, he had read all the author's books and had already taken out two maximum loans to buy properties to rent out. I was curious to know more. We barely finished drinking our coffee when he insisted he had to leave. He was going to the bank to apply for another loan to invest in more properties. There was little I could say or do to stop him from leaving.

As the day progressed, I could not shake off an uneasy feeling that something was not right. I worried that my friend might be setting himself up for financial ruin. As I edited the opening pages of my new book, I recalled my introduction to Kiyosaki's work and understanding of his principles.

More than 10 years ago, at about the same time when I made the decision to pursue a career as an independent financial advisor, Kiyosaki published his seminal work, Rich Dad, Poor Dad. In it, Kiyosaki challenged the preconceived notions the middle class had about their inability to achieve financial freedom.

In highlighting the need for financial literacy, the advantages of becoming a business owner and investor, and overcoming obstacles with a positive attitude, he underlined two fundamental concepts of financial freedom: a “can-do” attitude and fearless entrepreneurship. I have no doubt that Rich Dad, Poor Dad had a positive impact on millions of people all over the world. Indeed, reading it certainly inspired me to work towards becoming rich and doing this fast.

However, as time passed, I observed that many Malaysians who adopted Kiyosaki's approach became trapped in the “rat race” with no way out. This outcome was the exact opposite of what Kiyosaki envisaged in Rich Dad, Poor Dad. I wondered why this was so and decided to read Kiyosaki's books again.

It was clear that Kiyosaki's other books built on Rich Dad, Poor Dad and helped to crystallise some important theories about personal finance. For instance, you should not spend more money than you earn. It is important to invest in assets rather than liabilities to build a passive income from your investments. This is how to make your money work for you so that you become rich and wealthy.

Nevertheless, with the benefit of experience and knowledge as an independent financial advisor, it was not long before I became uncomfortable with what Kiyosaki was saying. In the book he co-authored with Donald Trump, Why We Want You to Be Rich: Two Men, One Message, he made statements which implied that the only way out of the “rat race” for the middle class was to become rich.

Also, all the suggestions Kiyosaki made were about “what to do”; he never gave concrete advice on “how to do it.” For example, you must take on “good debt” to become wealthy. This meant taking on more risk by acquiring loans to invest in properties. However, he didn't show you how to manage this risk or the investments you made.

I feel that the approach Kiyosaki advocated is muddled and has the potential to be both dangerous and misleading. The closest analogy I can give to illustrate my point is this: you're put in a Formula 1 race car and told not to be scared as there's nothing to stop you from driving at the same speed as other Formula 1 drivers. Only, you have never learned the special skills needed to control a race car.

The fact of the matter is that taking on more risks does not guarantee financial success. Fraught with uncertainties, it might get you rich quick, but it can also ruin you. For instance, I know a 45-year-old bank manager who, inspired by Kiyosaki's work, quit his well-paying job to start a business.

Two years later, his business is heading nowhere, he is on the verge of eviction, his wife has taken the children to live with her parents and the hire-purchase company repossessed his car.

Then, like my friend with whom I had breakfast, many have taken out maximum loans with a view to getting rental income and capital gain. However, they cannot find tenants or buyers and struggle to make the instalment payments to the bank.

To be fair, let me state that I am in favour of what Kiyosaki proposes; in fact, we share a common purpose: both of us want to help people to get out of the “rat race.” However, I feel that, on the whole, Rich Dad, Poor Dad and other books by Kiyosaki are no more than successful tools to motivate people to think about how to manage their personal finances. It is unwise for Malaysians to use Kiyosaki's work as the only guide to acquiring wealth. In other words, getting rich is not the only way to get out of the “rat race.”

I am confident enough to say this because I have discovered a more plausible and less risky solution to becoming wealthy. Instead of jumping straight into taking on more risks and acquiring debt, take a metaphorical step back and start by optimising your existing financial resources.

The aim of doing this is to help you work towards becoming financially free. The by-product of this exercise is that you will acquire knowledge and experience about how to manage financial risks and investments. When you have become financially free, your position is secure.

Only at this point is it wise to start applying Kiyosaki's concepts and ideas to increase your financial risks and acquire more wealth.

When you adopt this approach, rest assured you will enjoy peace of mind and have the ability to focus wholeheartedly on creating more wealth regardless of the outcome. This is because you will know that you are financially secure. By far, this is a more certain, safer and better approach to becoming wealthy.