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4 reasons that below-market-value (BMV) property is not for you

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Do you love below-market-value (BMV) properties? I do. Especially in the vibrant property market of those few hotspots in both Selangor and Kuala Lumpur. However, every time I see this below-market-value word, it’s usually a property at some location where every other property is already at RM800 per sq ft and this particular one is 20% lower at just RM640 per sq ft. Something along this line, “Market value is XXXX, now this property is only at XXXX. You must not miss this!” Should it be a wow? Should it be a must-buy? Let’s come back to the basics. Here are 4 reasons why that below-marke-value (BMV) property may not be for you.

#1 – WHY do you want that property? If your intention is simply to get a property which is easy to rent out, preferably a small unit of below 800 sq ft and your target are students, please evaluate the property based on all these requirements. Please do not throw away all the WHY just because you know of a property which is BMV but happened to be nowhere near tertiary institutions and is a landed property of 3-storeys… Even assuming it’s 30% BMV, what will you do with it?

#2 – WHERE is this property? Everyone has their own favourite area / neighbourhood. This neighbourhood may have your in-laws’ home, your favourite friendly barista which you frequent every morning, your favourite curry mee, that hair stylist whose cut made you great looking every time and it’s also one straight road to your office. Now, there is a BMV property at an area you have no idea about and your lifestyle of waking up at 8am everyday will have to change to 7am. Please remember, once you bought it, you will have to live in it for 365 days every year…

#3 – WHAT do you want / need in a property? If you are looking for a place to stay because you really want to stop paying rental today, then please look for a place you love to stay! Look for a place which meets your needs. Assuming you are single and you intend to remain single for many more years (unless unforeseen circumstances happen), if the BMV property is 3-storey terrace home, why would you want to buy it?! Oh… because it’s a BMV?

#4 -WHO was the one who said you must / should buy? Frankly, STOP buying any property because someone told you so and you stop researching or do due diligence. I tell you this. IF I (that property expert) found a very good deal, I will ONLY tell myself, tell my siblings, tell my best friend and maybe, just maybe tell my boss. (so that he will treat me better). I will NOT tell the whole world that this property is a must-buy because it’s BMV. Of course, if we have done our own due-diligence and found out that what that person said is true, then sure, go ahead…

That BMV property may be a perfect property for somebody. Maybe it is you, maybe it’s not for you. If it’s for you, then please do not miss this opportunity. Now is really a buyers’ market. COVID-19 has helped push the advantage to the buyers too. If it’s not for you, after you have read all the 4 reasons above, you should already know that it is not for you.

Oh yeah, at the end of 2019 when I could still conduct public auctions, one property was at it’s 4th auction. Briefly, first auction is usually at market price, second auction will be 10% down and so on and it was the 4th auction. So, this is a BMV property, right? A few bidders came because the price was just too attractive. When the bidding was over, the price sold was back to the second auction’s price. Thus it was just 10% BMV. Remember yeah, auction property meant that you may not have seen the interior. Thus, 10% is really a borderline number if we look at it as a margin of safety… Well, happy buying and just remember that not all BMV properties are really BMV for us.

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