Think this is an interesting discussion but I'll stick with COCR as the main indicator for evaluating a property investment. Couple a healthy COCR with a minimum nett cashflow target of RM200 per month would do the trick.

To all gurus,

If i find a property with good capital appreciation potential and the rental yield is 8% but the COCR is only 12%, will u consider?

Yes would be the answer.

Ape,

I'm not guru, but would like to give my opinion on your question.

COCR is positive = Positive Cash Flow
Yield is 8% = Much better than current FD rate
High potential for capital gain...

WHY NOT??

whats the expected nett cashflow?

can also define what do you mean by "good capital appreciation potential"?

Around RM7k to RM8k yearly.

Good transportation network (highway and lrt), nearby shopping complex, low density, 10mins drive to the heart of city, klcc view etc.

@ape,

Im guessing that this is a 600k-700k property? Personally think its too much risk IMO for small rewards.... especially when capital gains is not guaranteed n rental returns could potentially be lower as there are over supply for these high end properties.............


my 2 sen........

haha..the price is slightly lower. that's y i need to think twice before vested in this one. Just cant predict the current buying mode can maintain for how long? If can hold on till 2012, I think this is a good buy...

if a prop's fundamental's r solid, then timing will not matter. After all properties r medium to long term investment.

I own a property, and think of purchasing a RM200K or less apartment which can collect rental at least RM900 per month.
After my current house and car installment, I have around 2K left in my pocket.

Add: Monthly installment will be around 600-700, with online calculator. Will it do ?

This post has been edited by dvinez: Nov 13 2009, 12:59 PM

dvinez,

You may want to aim at properties with higher than RM900 monthly rental, if your intention is to enjoy rental yield for longer term rather than flipping the property for capital gain.

A good rental yield, your collected rental should at least be enough to pay for installment to bank, maintenance fees, assessment fees, insurance, etc... and at least still give you RM100/RM200 pocket money, then it's worth considering.

Online calculator may be using your current BLR - x.x rate to calculate the expected installment, no guarantee that the BLR will not move upwards, and you will be dipping into more negative monthly cashflows.

just a certain note here to everyone, I have actually thought of buying a unit of condo for rental purpose, one unit in kelana jaya easily brings in about 200-300 extra cash every month after deducting everything.

the market value for a condo there is about 250k max, and rental up to 1.5k, whereas the repayment for 90% loan is probably 1.1k or so.

but someone once told me this, its all about the risk we may encounter, like some said, blr may rise, bear in mind that condo price do not appreciate much, so there isn't much gain.

on top of that, it also depends on whether you will be able to get a tenant to stay in, for long term, lets call it a bare minimum of 5 years, thats when your loan lock in period expires. If unable, we are risking of paying the repayment ourselves, which will further burden you if you're not earning sufficient enough to cover that cost

so, you got your tenant, what if he is those donkeys that don't pay, or don't pay on time, it further frustrates you. and here comes the worst part, being the owner of the unit, you are liable to most major repairs, leakage of ceiling and bathroom areas are very common in condos, I've stayed in 3 different condo, 2 of which have leakage problems. either mine or neighbours leaking to ours, which we share the cost of repairing at the end.

and bear in mind, tenants don't give a damn on your house condition, to them, its just a place to sleep in, therefore they will not take care of your property like you do for your house, when they move out, you might have to repaint the house, patch up certain holes, a lot of rusty areas to cover before u can even dare to show it to your next possible tenant.

these are all the hidden cost behind the rental yield you may get. not always so negative but, chances are, u may get people like this, and this is true especially in our beloved country where no one actually cares.

sorry for being lengthy, just want to voice out my opinion, thanks

if the property price too high i afraid i cannot afford the downpayment, cos for me higher rental yield = higher property price.
or i should look at a cheaper property. but then the rental will become less too.

everything has risks? So, what's your stand? More importantly, what's your point?

My point would be, to go for it if your financial is stable and strong, which is, in worst case scenario, you will still have your minimum savings or at least it doesnt burn into your savings.

If you already have a house and servicing a loan for it, I recommend that you pay up your current house loan before purchasing another unit. afterall, you only gain after you take away all the negatives (interest)


as for me, I have an outstanding loan of about 400k still, long way to go, I will stay on the safe side, to reduce the interest first, incase gov decide to increase our blr.. cause to me, its no point risking so much for a mere gain of probably rm300 a month. it takes just one bad situation to burn at least 1 yr of your gain, thats what i think..

Hmnnnn

My own housing loan is 350K. I have other loans from other properties much greater than that. Using your theory - i'm headed for the path of financial destruction. Sheesh

My point is this - educate yourself first before taking the so-called "safe road" all the time. Your financial standing does not have to be "strong" -as long as your financial education and gumption is credible.

If that's the case, you should not have take a mortgage! You bad boy you! Save up cash first -then buy a house CASH. That way u don't need to owe the bank any interest at all. Sheesh.

Enuf said.

All these talks are valid for "high rental" properties only. COCR vs yield rate....well, both got their uses. Just which are we more familiar with. I personally use only yield rates.

Up till a year ago, any net yield of >8%/year is good enough. Coz the interest rate is average 6.5%/annum. So sure got positive cashflow! How much exactly is the 1.5% depends on your initial cost lah.

Then for about a year or more, the interest rates have dropped drastically! Average now 4%/annum. So if you still have rentals giving >8%/annum returns, then ur laughing loudest. But with this downturn also, I see the rental yields(especially for higher end places) tended to fall 1-2%. Also, for new properties, the property prices have risen, so much so that for current investors, a yield of >6.5% is considered good now. But thats fines, coz its offsetted by the lower cost of borrowing.

This post has been edited by Minolta: Nov 14 2009, 10:14 AM

What I meant was stick to the RM200k price tag for your condo/house, but try till you get a unit that can give you at least the rental sufficiently high to cover all costs and still give you positive cashflows, ie. one rent for RM900, another rent for RM1.5k, both cost price RM200k. If you get something that is just ngam ngam or giving negative cashflows, you will think you can afford since your monthly salary can tahan, but what if you lose your job or the BLR move against you, you will see yourself bleeding too fast to hang on the the property. A note, most likely condo will give you higher chance of positive cashflows.

If you cannot afford the downpayment, suggest you keep saving up and keep your eyes open and slowly search for the golden opportunity. Plenty of house/condo for sale all the time, not all worth buying, and those worth buying will be gone within days.

Read more, do more research, educate yourself before jumping into big debts. make sure you know the rules of the game before even beginning with it.

I understand what you meant now, as long the cash flow is positive.
Btw, the RM200K condo that give around RM900 rental is located at Setapak.
Location around TARC already have good rental. Where can i get a condo worth RM200k with RM1.5k rental ?

If 20% downpayment still not enough, how much you suggest ?
I paid 30% for my first house, i rented a room and it already generate me income more than 1/2 of my installment.
If i dump in too much of downpayment with extra positive RM300 per month, i rather keep it in my bank. Or i'll just renovate it with one extra room for rental ? (Average RM300/room)

Where can i get a condo worth RM200k with RM1.5k rental
if u bought the earlier phases of platinum victory sure can.