Hi Forumers,

Now I've manage to rent my apartment which I bought at 142k (still under bank loan of coz).I've rented the apartment at RM 800 (which I still get a small profit after pay my loan to the bank).Now with this RM 800 cash in my hand...I quite confuse on what should I do with it. Here are the option that I've manage to come out :

1 - Pay double the amount to the bank ( e.g tenant = rm 800 + my money = rm 800 = RM 1600 monthly to the bank ) so that I can cut the interest that has set by the bank. ( my loan is in 30 years so total amount after 30 years is more than RM250K!)

2 - Invest it to another investment scheme ( e.g Mutual Funds, Gold, Stock..etc)

3 - Save it as my extra buying power.

Those who has experienced like this do share some of their knowledge. Its good for the newbies too. . Thanks!

if u dont have a plan yet, i suggest pay the housing loan additional....its will be helpful in future. if u have plans for other investment than it could be an option as well.

@watekungsik,
As a small-fry property investor myself I only care about money in (rent) vs money out (mortgage/cukai tanah/cukai pintu/maintenance/insurance). If money in > money out, I have a positive cashflow. With that, it doesnt matter how much interest to bank will cost in the long run because technically I'm not paying a single sen on it as long as the property is tenanted.

With that extra cash, I save some in my emergency fund - not stocks/bond etc cause I may need cash access to pay for mortgage in case my property ended up without any tenant; and save the rest as bullets to buy more property

I'm a cashflow person. So I pick 3

I'll personally pick 3 then repeat the whole process another 9 times.

make sure u do the right calculation by adding in the expenses for maintenence fees, quit rent , fire insurance etc to see if ur rent really cover all of them n still have extra.

I will save my own $$ and repeat another purchase in 1-2yrs time.

TS.
You still don't have a right plan when to attain financial freedom.
At the rate you are going, my guess would very likely during your retirement age.

Go through the following steps.
1. If your historical rate of return of your investment is higher than your mortgage interest rate, then invest. Because you'd be earning more than the interest you're paying. If your rate of return is lower, then goto (2).
2. If your mortgage allows you to park extra money into the mortgage account to reduce the mortgage balance, AND if there are no hidden charges for doing this, AND if the bank allows you to redraw this extra payment in the future if you need the money, AND also no hidden charges for redrawing the extra payment, THEN park your extra money into the mortgage account. I doubt there's any FD in the whole country that can give you a rate of return higher than your mortgage interest rate.
3. If (1) and (2) don't work out. Then put your money into FD, if and only if you want to hold the cashflow in your hand (eg as deposit for another property). Otherwise, just prepay the loan.

This post has been edited by simplesmile: Sep 13 2009, 12:14 PM

I will choose No. 1...Is not just reduce the interest but reduce your financial burden. Pay it all before you committed for next properties investment. Ask yourself, if your tenant cant rent out for 6months or more and you are tight with other properties investment burden(if you invest 2nd apartment), or worst your 2nd tenant purchase cant rent it out, what will be the consequences? Will it be your emergency can sustain or cater for that? How if more than 6 months?

I would go with option 1 to reduce interest but with a flexi loan. With a flexi loan, you can always opt for option 3 when you have save enough money or when there is a good buy.

Yes,you can use flexi loan to do the 1st and 3rd option together in the same time. Which is the best option before you have better investment plan.

Pai y do it 9 times only?

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Added on September 13, 2009, 3:42 pmJason.. any suggestion to increase the financial freedom rate rather than to wait until retirement age.

This post has been edited by ehl: Sep 13 2009, 03:42 PM

hmm..interesting opinions by you all.Here are two scenario that I can see :

Option 1 - within 5 years of additional payment, my loan would definitely reduce 50% from the total loan which means (hopefully..) I can settle the rest of the amount without any penalty charged by the banks and I can get a nett income with no strings attached. . But of coz there's a risk (e.g mortgage/cukai tanah/cukai pintu/maintenance/insurance ) that I need to well prepare with my own money.

Option 3 - Within 2-3 years of the amount that I saved, I could make another downpayment for a new apartment and again make a new rental.But the risk is that I've double up my loan to the bank and the risk of getting a good tenant / how good is the location of the new apartment.

Option 2 - No idea..I'm still doing a research on how it could gain higher profit.(i'm not from biz background thou)

coz 9 times is enuff to give you these in 30 years time :

1. At least RM2mil networth from properties alone.
2. At least 15k monthly income p/m.

Which is more than enuff for most ppl. Also, banks see you as a diff animal once you have double digit properties in your portfollio, so property investment might not be as easy or fun anymore.

True but 30 yrs down the line, 2 mil & 15k per month are not a lot of money due to inflation . I guess we have to do it more than 9 times to beat inflation.

Most wealthy people own at least 4 property. Try to hit that target first.

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Added on September 13, 2009, 4:45 pmMake a choice everyday. Ask yourself this when you wake up in the morning:
Why I need to get up, go to work every weekday and not retiring today?
How do I get out of the rat race?

This is the most important step, not many willing to do it.
As being rich and enjoying retirement is a hassle to many.

This post has been edited by jasonhanjk: Sep 13 2009, 04:47 PM

Joink.. I think Pai suggestion is present value.

Pai,
regarding the different animal and double digit..is it a good sign or a bad one?
I mean the bank stop giving loan or they start to give much much favourable loan rate?

Jason,
After geting 4 units with net positive cashflow the amount would be too small to enjoy anything.
Plus, if what Pai said is true.. its a bit slow 30 years to get 9 units.

Anyway, how could increase the speed to 10 years or atleast 15 years?

I won't give you a direct answer but rather, a question.
Attach a picture of a financial statement.

The question to you is:
How do you create an asset in the asset column without having the money?


[color=fofoff]

This post has been edited by jasonhanjk: Sep 13 2009, 07:52 PM

Jason, I borrow from bank with little money I have to create a larger asset..but also come with liability..
and the repayment of liability is done by my tenant. ie. net positive cashflow.

If you said without money then I dont really know, unless bank loan me without me having to pay downpayment, stamp duties and lawyer fee.

This post has been edited by ehl: Sep 13 2009, 08:09 PM