This is an opportune time for business owners to seriously consider investing in commercial properties, most notably shop houses, office lots and factories, as a means of expanding their operations, utilizing surplus funds or simply to diversify their investment portfolios. Investment in private real estate such as houses for rent may also help positively diversify investment portfolios.

Commercial properties are a good buy at this juncture because business owners can capitalize on the significant drop in mortgage rates which was preceded by some national bank’s cutting of the overnight policy rate to an all-time low of 2% per- annum in February 2009. Borrowers will be able to enjoy the prevailing low rates and save substantially on interest payments by leveraging on the low mortgage rates and lock in at this level for the tenure of their loan.

For risk conscious investors, current alternative investment instruments may prove to be beyond their risk profile in this bearish environment. To mitigate risk, investors should balance their portfolio with a selection of differing investments. As such, some banker and investor believe that commercial properties offer a more stable rental yield. As the latest property induces have shown, demand for commercial spaces has remained relatively constant and unabated compared to other investment vehicles. Properties continue to be excellent assets to hedge against inflation when prices start to rise on the heels of an economic rebound.

While it is ideal for investors to buy at the right time, the right place, and at the right price, most of the time it is all about striking a balance. An estimated 3 million square feet of office space as well as another 3 million square feet of retail space will be added to the Kuala Lumpur landscape this year as a result of launches from the past couple of years. Investors will have ample opportunity to select from diverse locations and types of spaces, and also reap the benefit of numerous freebies offered by developers ranging from free legal costs to discounts in prices. They will also be privy to an array of financing schemes.

Business Mortgage One Account (BMOA) is specifically designed for SMEs and business owners who in the course of their operations will have periods of surplus funds. The BMOA provides a very smart solution for business owners to enjoy savings by using cash in their current account to shorten their loan principal amount, with the added benefit of redrawing with no penalties charges from their surplus payments.

In situations where the SME wishes to ensure his funds are fully optimized for the operating cycle of his business, our SMI One Account is the perfect business mortgage solution because he gets the best of both worlds — funds in his operating account can generate interest credits for the benefit of his business mortgage outstanding.

While we are mindful that property purchases are long-term investments and being fixed assets, are not as liquid as investments in equity; the return on property investment may not be lower than equity investments.

Notwithstanding his modest means, Gwen is a compulsive shopper and spendthrift. Alex has many times tried to advise his daughter-in-law to curb her spending habits but it only ended up in arguments between them. Many times she has told him to mind his own business. This went on until the relationship between them deteriorated so much that both avoided each other in the house.

Alex had savings of his own and he is the sole owner of the house he stayed in and as such, he did not need any monthly allowance from Donvin. As time passed, Alex’s health deteriorated and he began to think of how to pass his assets to Donvin. He wanted a hassle-free transfer of the house to Donvin. He figured that although his relationship with Gwen was not good, she would still take care of him out of her duty as a daughter-in-law and Donvin would be around to ensure that. After considering for some time, Alex decided to transfer the house to Donvin’s name believing that he would be taken care of. He also wanted to take advantage of the 50% reduction of the stamp duty to transfer the property to Donvin.

Unfortunately for him, shortly after the transfer, Donvin passed away in an accident. Though Donvin did not have much, he wrote a Will anyway to give away his assets. In his Will, he gave all his assets to his wife, Gwen. Alex’s name was not mentioned in his Will since the son had felt that he could take care of his father and that he had his savings. The first thing, Gwen did when she obtained the Grant of Probate was to chase Alex out of the house. Since Alex was no longer the owner of the house, he had no choice but to leave. Luckily for Alex, he still had his own savings. He managed to check into a nursing home. Though he had a place to stay in, he was filled with regret over what had occurred.

The above scenario highlights the common mistakes many make by assuming that the older always dies before the younger and transferring of assets is the only way to solve their inheritance problems. What has been described here is similar to many cases previously reported in the papers.

Had he been properly advised, Alex could have written a Will or set up a Declaration of Trust.

For Alex to get his Will done, all he needs to think about is:

A)    Who will he appoint to be his executor to carry out his instructions stated in his Will? He can appoint an individual or a trust company as his executor. Since Donvin would probably be his sole beneficiary, he can appoint him to the executor, failing which a trust company to be the substitute executor. It is important to have a substitute executor in the event Donvin cannot act for whatsoever reason.

B)    What assets will be inherited by Donvin and whether Alex would like to impose any conditions before Donvin inherits?

C)    Who will the beneficiary in the event Donvin predeceases Alex and whether any conditions to be imposed before the substitute beneficiary inherits?

Alternatively, if Alex would like certain assets (not his whole estate) to be received by Alex without having to wait for Probate, a Declaration of Trust can be created. This is where he declares himself as the main trustee of the assets and a trustee company. In this arrangement, he would have control and enjoyment of the assets during his lifetime and upon his demise, the trustee company would then step in and the trust assets to his son Donvin or any other beneficiaries as directed by Alex. The documents needed for setting up a declaration of trust are a trust agreement and an irrevocable power of attorney between him and the trustee company.

The inclusion of a power of attorney would allow the substitute trustee to take over the role as trustee form Alex, without having to wait for Probate.

Alex is able to enjoy the trust assets as he will the substantial beneficiaries and Donvin would be a minority beneficiary. Only upon Alex’s death, would Donvin be the absolute beneficiary. At the same time, as the ownership and control of the trust assets still belongs to Alex, no assets are being transferred away from Alex.

For total peace of mind and ensuring the instructions of the declaration of trust are carried out, rather than relying on an individual to be the substitute trustee, it is better to appoint a trustee company for the simple reason that an individual will die, fall ill or meet with an accident and be incapacitated or become bankrupt. When the individual substitute trustee passes away, his assets including the assets he holds on trust will be frozen until the necessary estate administration processes are completed. There will be a long delay before the trust is able to continue to benefit Donvin and this defeats the purpose of creating the declaration of trust.

What would be the difference if Alex writes a Will and declaration of trust? The Will is subject to Probate and payment of debts and liabilities. There are also hosts of procedures that a prudent executor would need to go through before distribution to Donvin. Donvin would have to wait until the all procedures are completed and this would typically take between 12 months to 18 months.

However, with the declaration of trust, the assets are part of the trust which effectively would mean that these assets no longer form part of the estate of Alex. As a result, Alex’s Will will exclude these assets and the distribution to Donovan need- to go through the complicated and long procedures when one applies for Probate.

I would recommend that if Alex feels he would like certain assets to be received by Donvin without having to go through Probate, then he should create a declaration of trust. The assets he should include as part of the declaration of trust should be moneys in his bank accounts, unit trust and mutual fund investments, shares of listed companies, whereas properties should be handled by his Will. By leaving the properties in his estate to be handled by his Will, the stamp duty involved for the transmission of the properties to Donovan. If these properties are included in the declaration o trust, the stamp duty that Donovan would have to pay will be very high based on the market value of the property i.e. for the first USD100,000, 1% shall be payable; for the next USD 100,000, 2% shall be payable and if it is above USD500,000, 3% shall be payable.

Therefore, if Cheong has a property valued today at USD500,000, the stamp duty payable would be USD9,000 (as USD1,000 is payable for the first USD 100,000 and USD4,000 is payable for the next USD 100,000 to USD500,000).

In addition, with a declaration of trust, Alex will be protected in the event he suffers from a serious illness or disability where he can no longer be mobile, the substitute trustee can use the assets in the trust for his maintenance and to pay for his medical expenses.

Both Will and declaration of trust would give Alex the flexibility to amend the terms during his lifetime and this will accommodate changing circumstances within the family unit.

Should one refinance their home loans, the answer is simple — if there are net savings to lower monthly repayments and save money in the long run as well as flexibility in cash flow management.

Many are still hesitant to do so as they believe their loan is still within the 5-year or above lock-in period, they cannot go about refinancing their loans. However, the reality of the situation is the opposite; homeowners can still refinance their homes even during the lock-in period.

What homeowners need to know is that in view of the low interest rate and competitive home loan products on offer especially with zero moving cost, exploring refinancing is worthwhile even if within lock-in period. In reality, one could also generate savings by refinancing one’s home loan.

Should I Refinance My Housing Loan Now?

The next question is why should homeowners go through the motions of refinancing, which is something they rather not worry about after buying their dream home?

For one thing, they get interest rate reduction. By reducing the interest rates, one benefits from a lower monthly repayment to ease one’s financial burden. Alternatively, the lower monthly commitment enables one to maximize the money set aside for any investment opportunity. In addition to this, if your home market value has increased substantially, you may refinance and cash out to fulfill your current needs or consolidate your higher interest debts to save on interest.

The Best Option Available?

In order to maximize one’s benefit from refinancing a home loan, it is best to fully understand one’s short-term and long-term financial plans and to choose an option that gives maximum value and returns with minimum risks.

Homeowners are advised to always compare home loans on the features offered to have a better idea of what you will be getting. For instance, many banks have zero refinancing costs packages and flexible products, which allow you to deposit your savings to offset on interest with flexibility of withdrawal.

However, homeowners should always review and choose some loan that matches his or her financial plan or economic management of income against expenditures. One has to always bear in mind that a flexible product is beneficial only if one can utilize the facility of deposit to offset on the interest. Otherwise, it would serve as a conventional loan where it defeats the purpose and a person could be paying higher interest rate plus fees and charges.