theSun Property February 2015

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ON FRIDAY FEBRUARY 13, 2015
Land scape
>Feasibility study and important details and characteristics to consider
CONTINUING from last
week’s article on land
investment, we delve
further into the subject
which B.I.G Plots Sdn Bhd director
Tan Hwa Chuan is so passionate
about. We know nowwhy land
investments can make us big
money. We also knowwhat
constitutes good land DNA.
The next step is to determine if
we should or should not buy that
plot of land. Says Tan the expert:
“You must have an entry and exit
plan.” And in order to come up with
these plans, one must first do a
feasibility study.
BASIS AND BASICS
According to online sources, a
feasibility study is recognised as an
evaluation or analysis of the
potential of a proposed project.
Intensive investigation (or study
and research) is required to support
the process of one’s decision. “It
simplymeans that onemust put in
time and effort to study the piece of
land one intends to purchase. List
down all its ‘good landDNA’ points,
scrutinise it thoroughly, do your
math to calculate if you can buy the
land or if you need to “structure a
deal”. Then domoremath and
calculations, as in a feasibility study,
towork out your costs. From these
figures, decide to build and develop
or wait and sell. Also consider
rentals and yields, or if you intend to
sell, whenwould be best, taking into
account howyou canmake themost
from the returns/profits, etc.”
In his book Make BigMoney via
Land, Tan highlights four feasibility
study cases. Each is based on land
designated for different
development types. “One needs to
do a feasibility study before
deciding if one wants in on a
particular project. This is where we
evaluate the land based on its size,
price, location, land type and
various surrounding factors. We
can then determine if the land is
worth exploring as we map out the
many factors that contribute to the
success or failure of a project.” Tan
then divulges his 10 step feasibility
study framework which he
compiled after learning other study
methods used by different people
and having gone through his years
of learning and experiences.
FUNDAMENTAL DETAILS
Tan then gives a brief summary and
runs through his self-conceptualised
feasibility study framework. He
describes the first level, rule
of thumb, as a quickmental
calculation that involves a formula.
This requires one to “quantify the
land”, whichwill require one to
consider the gross development
value (GDV) of the land intended
for purchase, along with total
construction cost (TCC), land cost
and profits. “TCCwill depend on
PART2
the type of property you
intend to build on the land
you are thinking of
purchasing. Youwill
generally need to estimate
the cost per unit … if you
want to build link houses,
semi-D’s, bungalows,
shoplots, a complex, etc.
Times this with the number
of units and roughly
calculate howmuch returns
you can get from the sale of
the land before and after
construction,” says Tan.
Basic data study is
generally an analysis of the
land – its size, tenure (freehold/
leasehold, etc.), location, gradient/
contour, infrastructure and
accessibility, surrounding area, etc.
This is where the “good land DNA”
comes in – the more ticks,
the better. Once the land intended
for purchase passes level one and
two, you can proceed to level three,
then again, Tan says that not all
land deals require site visits at the
early stages. “The purpose of the
visit in the beginning stages is
actually to verify if the information
you got from your basic data
compilation matches with what
you physically see.” A site visit
“One needs to do a feasibility study before
deciding if one wants in on a particular
project. This is where we evaluate the land
based on its size, price, location, land type
and various surrounding factors. We can
then determine if the land is worth
exploring as wemap out themany factors
that contribute to the success or failure
of a project” – Tan Hwa Chuan
checklist is also provided in
Tan’s book, pointing out what
you should look out for and be
wary about.
RESEARCH AND CHECK
Throughmarket study, we should
be able to have an idea of howwe
intend to develop the land … build
and develop or perhaps wait and
sell. Wemove onto government,
land office and JUPEMchecking
which provides much information
onwhat can or cannot bemade of
the land, encumbrances, setbacks,
any regulations and orders the land
is bound by, etc. “Information
retrieved here is crucial as this is
where you can get guidelines for the
potential project you intend for
your land purchase.” Tan urges
those serious about purchasing a
particular plot to get hold of the
“local plan” which can be acquired
through purchase.
DEAL CLINCHER
Last but not least, in the framework
study, is the financial analysis,
which is similar to level one,
requiringmuch calculations.
However, at this stage Tan says we
are working onmore accurate
financial figures. “This is also the
stage where we will be able to see
the viability of the project, in terms
of cashflowposition (after we
service the loan eachmonth). This
is also the stage whichwill
determine if the landwill deliver
profits or losses. With all the
information at hand, youwill be
able tomake a firmdecision by
now,” Tan informs.
Still he says, “Never
underestimate your gut feeling.”
He then shares an instance where,
he shelved a deal after years of
discussions, negotiations and
deliberation. He also adds that in
the early stages, prior to level one
of his 10 step feasibility study
framework, one should not neglect
one’s gut feeling. “If you visit a
place and you get an uneasy feeling,
follow your instinct.”
For detailed information and
step-by-step guidance, join one of
Tan’s workshops and training
seminars or buy his book.
PHOTO: NORMANHIU/THESUN
Tan’s 10-level feasibility study
framework
Level 1 – Rule of thumb
Level 2 – Basic data study
Level 3 – Site visit
Level 4 – Market study
Level 5 – Local government checking
Level 6 – Land office checking
Level 7 – JUPEM(Department of Survey
and Mapping Malaysia)
Level 8 – Frequent site visits
Level 9 – Layout planning
Level 10 – Financial analysis
Good Land DNA (Property Good Points) Checklist
Shopping mall – eg Jusco, Tesco, Giant in Equine Park
International school – eg About 9,000 students across Garden Int’l School,
Mont’ Kiara Int’l School and French Int’l School in Mont’ Kiara
Shops – eg Secret Recipe, Cha Time, Starbucks in Damansara Uptown
School – eg Puay Chai 2 Primary School in Bandar Utama with
1,860 students
Lake Park – eg DesaParkCity’s eight acres lake is frequently visited by
people and also their pets in the evenings from 5pm to 8pm
Accesibility/Highway – eg NKVE and LDP to Kota Damansara
Hospital – eg ParkCity Medical Centre (Ramsay Sime Darby Health Care) in
Desa ParkCity
Banks – eg 17 banks in Dataran Sunway in Kota Damansara
Branded Developers – eg UEM Sunrise Berhad, Ireka Land Berhad, Bukit
Kiara Properties Sdn Berhad
University/College – eg UTAR has 30,000 students
Timing – User Speed – eg Platinum Victory’s 90% occupancy within
6 months
Traffic Jam – eg Bukit Bintang as the nation’s capital shopping belt
Investors – eg Pacific Star led a group of investors to invest USD300 million
into Pavilion in January 20061
Matured Townships (Old Town) – eg Kepong old town with
360,000 population2
TIPS FROM TAN
Characteristics of areas where
property price will rise – areas
where there are more people,
universities, matured towns,
banks, hospitals, fast user
speed areas, new highway
areas, newMRT areas,
Tier 1 outstation
areas, etc.
Where subsale is hot!
* Semenyih:
Link House or Landed
* Equine Park:
Link House or Landed
* Matured town areas:
Kepong
Kajang
Semenyih
* Upcoming/new highways:
Equine Park
Puncak Alam
Meru
* Outstation areas:
Batu Kawan
Courtesy of Tan Hwa Chuan [ref 1 and 2 can be found in Tan’s book Make Big Money via Land]
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