have been thinking for a while.

after reading across many property forums, blogs and portals, some says not worthy to sell off an apartmen in klang valley due high demand for it and rental wud easily make rm1200~1500 nett return per year. along with, property appreciation for an apartment is about 5%-10% a year..

for an instance, i have a unit of a medium cost apartment, 5-storey walk-up type but my unit is the ground floor, 920sqft + 4 parking lot (free lot actually but since infront of the apartment, the neighbors are just being nice to me ) and current mv is from 120k, last year mv from 110k. thats 9% increase!
with HL at 101k, mthly 475/mth and rental @ rm650/mth..nett is rm175x12=2100/pa nett.

so, if someone offers to buy the apartment, how wud we consider as the selling price? what are the figure that can be considered as "worth-it"? putting it at market price wud be stupid if refer to the figure the apartment would produce in a year ( or as long you could keep it)...

i would rather continue renting out the apartment. my 2 cents anyway

I would sell it at a price that will give the buyers a gross yield of 6%.........

Renting it out since it was giving you a 10 percent return annually (I assume that your deposits plus the lawyer fees is 20k) and buy a new property as the cash flow can help you to reduce your monthly installment.

pai, how is that. i dont much get it...

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Added on June 18, 2010, 12:09 pmdarren, do u mind elaborate a bit further?? even it gives 10% return, but 9% is in the mv, kenot cashout unless u sell it. so, only the cashlow part @ rm2.1k is usable for buying other property.

This post has been edited by yuszairi: Jun 18 2010, 12:15 PM

I meant if you still got a credit limit for another house then you should keep this apartment and buy a new one as the cash flow can help in your new house installment then you got two property...........

if gross rental is 650 per month, annual gross rental is 7800, with 6% yield, it's 7800 / 6% = 130,000. Sell it at 130k so that the new purchaser will secure unit giving him 6% gross yield.

This is assuming you do not a pile of cash at the moment, you can continue renting it out to collect net cash of 2.1k per annum.

When Darren says 10% return, it's a measure based on cash-on-cash basis, where assuming you have spent RM20k for both downpayment and legal fees to get the unit, now with 2.1k net cash return p.a., you are getting 2.1k/20k = 10.5% p.a. C-O-C return.

If you really want to realise the 9% gain in market value, you can either sell it off to take cash gain, or you can even choose to refinance to 90% again of your property market value, so you can cash out the 9% equity built. Bear in mind, your loan early exit penalty, or selling unit cost you agent commissions, legal fees and if any, real property gain tax.

Simple said, if dun need cash urgently, and you believe this unit will always be in hot demand as rental unit in the next near-mid future. Keep it for yourself as cash cow rather than offering it to others for easy milk.

bingo

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Added on June 18, 2010, 3:36 pmAlso Yus, if your property is located in a good, high demand area with good public transportation............ personally I'll keep the property.

Just look at the prices of new launches in the same area and Im pretty sure you'll see a huge gap. Time however will close that gap.......




This post has been edited by Pai: Jun 18 2010, 03:36 PM

If it is a lower cost walk up apartment/flat, I think you will need to give a higher yield because the capital appreciation will be low. If it a decent medium/higher cost apartments, then 6% will be fine. Personally, 6% gross yield is a still a bit low for me, as after net all expenses the returns will be just be slightly higher than long term FD. Can only 'cari makan' with the capital appreciation.

This post has been edited by gark: Jun 18 2010, 05:03 PM

+ 1

wahh. tenkiu sifus for the explainantion!!
will definitely keep the apartment..forever. thou rental yield 2.1k, still is $$$

thanks again. very2 appreciate with this short yet very infomative response!!

If you're selling to an investor, then they will not buy for A mere gross 6% return.

minolta, thanks for the advice. better keep the 6% to myself first lah

u r rite but you are looking from a buyer's perspective ........ Im looking at the sellers side........... no point settling for lower profits when the property is a decent one?

I recenntly put up an adv to flip a property n u'll be surprised at how many "investors" willing to take up the unit even at below 6% yield...... its a sellers market so we shouldnt short sell........

Yeah, now property is having quite high demand no matter in which corner of klang valley and also at very very low yields. Later when they found out that there are not enough tenants available, or the location they buy will not have anymore capital appreaciation then they will be brought back from cloud 9. Wonder how long can this demand last?

This post has been edited by gark: Jun 19 2010, 10:11 AM

agreed with u, pai.

from seller point of view, giving up those 6% yield to investor doesn't sound correct. in any business oso, balik modal condition mostly achieveable within 2-3 years at the best..so if a seller if being offered instead he is willingly to sell, the price to impress is 3-5years property gain as considered as compensation/gratia etc...

take my apartmen as example, with latest mv by banks (verbal), it is 130k (last year 110k), rental yield 650mthly x 12 = 7800pa. total (7800+20k)/110k = 25% increase. wudn't i be very stupid to accept rm140k-160k ( < 2 x 25% gain) and to reject if rm195k (3 x 25% gain)??

these condition currently applied with sime darby props, i&p, whereby 3years ago their launching price were merely 300k, and now mostly burst 550k figure.

just my 2cents

I believe there's strong and real demand for props below 200k......... in good or bad times as the tenants are primarily locals. Its the 500k and above ones that are at risk

Hi all Sifu, will you all consider to buy below property? Is it a good offer?

1) an old 5th floor apartment with RM450 rental, maintenance fee RM30/mth with RM48k?

2) an old 3rd floor apartment, with RM380 rental, 0 maintenance fee, with RM40k?

i'll go for this one:

2) an old 3rd floor apartment, with RM380 rental, 0 maintenance fee, with RM40k --> if walk-up apt

1) an old 5th floor apartment with RM450 rental, maintenance fee RM30/mth with RM48k --> if got elevator

This post has been edited by yuszairi: Jun 21 2010, 01:29 PM