Let say the Condo Price is 220k, and monthly return is 1k, is it ok ah ?

220k not include the legal fees thing, and monthly maintainance fees RM220 .

(1000 x 12) / 220000 = 5.45%

8% and above is what we usually expect from "good" return...
Of course its your choice

moreover have to minus 220 maintainance fees

maintainance fees need to count? legal fees 5k plus , loan interest ???

It's not necessary 5.45% only. Property prices could also rise over the time which will increase your return.

Depends on location.. Generally.. condos dont appreciate much.. The amount of interest incurred (if you are taking loan) might even exceed your profit

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Added on October 31, 2009, 8:58 pm

100*((1000X12) - (220X12))/220000 = 4.25%

We havent factor in Assessment fee + Quit rent..

Rule of thumb usually 6% which consider ok... 8% - 10% will be very good..

No fix rules.. if you feel tat 4.25% is just 1 or 2 years and you can foresee return will increase in the future.. why not .. Depends on your own judgement...

This post has been edited by eugene jk: Oct 31 2009, 09:03 PM

don't just consider yield. It's an overrated measure.

consider COCR. Assuming u take 90% financing (198K loan)- your monthly installment to the bank is approx RM 917 per month. Including your maintenance fee of RM 220 - your total monthly outflow = RM 1,137 per month. You're bleeding cash flow every month, as your rental of 1K is insufficient. Your COCR is negative. Bear in mind -

Even if u have a yield > 8%, give it a miss if your Cash flow is negative, or if your COCR is lousy. A good benchmark would be to have a COCR of at least 15%. If you're ambitious like taikor Pai, gun for minimum COCR of 25%. If not, give it a miss.

The easiest rule on investment is A) How much cash out flow you "invested" vs B) How much cash inflow you earned. Than do the maths of whether or not it's worthwhile.

Thus i your case, you need to know how much down payment you're putting in, how much installment you're going to repay etc....

I very concern about the neighbourhood. Is the environment well maintained ? Many residents don't take care of the available facilities, after few years you will see lift broken, pool not working and so on. If this kind of condos you own ? With this yield I would sell it off.

actually looking property in Dutamas area, near by Mont Kiara and Segambut...asking price is 216k....duno want to buy or not.

just want to ask which calculation is correct?
apartment bought 70k+5k lawyer fee
initial money used aquired the house 10k (5k dp+5k lawyer fee)
loan 66k
rental after minus service,quit rent and assesment = 500 a month
for first yr interest is 2.4k
so is the first yr return is (6k-2.4k)/10k*100% =36%
or 6k/75k*100% = 8%
or (6k-2.4k)(nett) /75k*100% = 4.8%

thanks

i believe dutamas area may appreciate, even though COCr is low. but thats just my personal opinion. cheers

which condo in dutamas actually for 216k? the older ones is it,,

anyone can clarify? tyty

To get the exact it varies on how one wants to treat the down payment.
For me, I would take it into my year 1.
i.e.:

(Monthly Rental Received*12) - (Monthly Installment Paid + monthly misc charge)*12 - Cost for acquiring (down payment & legal fees)
That would be your "profit" generated.

If your initial cost is high, you may want to bring it to 2 years instead of 1st year like what id done on the above example.
Like doing business, one has to have a target on when to recoup back the capital. Same concept here.

In my first sentence, I used the word "varies" because some treat the down payment separately. Some has the idea that the initial cost spend there would only be calculated at the end when one wants to sell the property. So it's different for everybody. For me, I would rather take it as my year 1 cost for better management of cash inflow and outflow.

Agree else its hardly worth the effort n risk.....

Gotta salute you, if its only about 20% COCR would you still consider?

Pai Kor,

Very hard to find something that gives a 25% COCR leh...how much is the interest rate u will use for calculation before buying a property? The current interest rate, or you will add in some buffer?
For example, current BLR (5.55%) -1.9% = 3.65%, so u will use 3.65% for calculation, or use a 4%??
if u use the existing BLR for calculation, what if the BLR increases? Wouldn't it affect your COCR?

Thanks.

Interesting point. I always use BLR-x%+0.5%, and calculate COCR from this.

Bro Pai, 25% is superb. I only can do max 20% these days. But I know there are ways to get more than 100% COCR. See how daring one is oni

% wise is about there, but also equally important is to have decent nett cashflow. For every 100k loan I commit, I expect to have minimum RM200 nett postive cashflow every month.

p/s : 20% COCR is nothing when boss Phoeni here get close to 50% COCR and approx RM400-RM500 nett cashflow permonth from a 140k investment..