QUOTE(lowprice @ Apr 10 2014, 01:43 PM)
Hi chris,
For your last paragraph, I'm still doubt for those who borrow bank loan and looking for ROI. First, the entry cost is at least half mil let say for size - 20x70. Even if its appreciation value goes up fast(but I foreseen it will take longer than setia alam. Worst case - high price low demand), how many are affordable to buy its subsale which possible goes near to 700-800k after vp or longer appreciation? For 2 cents view for this project or ecohill is that this is not for investment if applied bank loan but good for own stay.
Pls share your thoughts.
Bro,
It depends on how you calculate the return on investment, which for me, can be in certain several formula.
I prefer to use COCR ( Cash on Capital Return ) on buy / sell purpose as my ROI. Btw, how you use ur ROI? By using the profit / Purchase Price as the flow?
Say, if I buy a RM 500k house and appreciated to RM 750k in 5 years time.
Scenario 1
If I buy cash, my initial capital is RM 500k and upon selling, my cost is 2% agent fee @ RM 15k + miscel cost like S&P at RM 15k.
Net profit after 5 years is RM 250k - RM 30k = RM 220k
Average ROI, 220k / 5 years = RM 44k per year
Scenario 2
If I pay RM 50k downpayment ( my capital ) and get RM 450k loan, my cost is bank interest for 5 years, say estimated RM 50k, and upon selling, my cost is 2% agent fee @ RM 15k + miscel cost like S&P at RM 15k.
Net profit after 5 years is RM 250k - RM 80k = RM 170k
Average ROI, 170k / 5 years = RM 34k per year
If you see the above situation, RM 220k profit is surely more handsome than the RM 170k profit, both is manner of 5 years. But let's see another assumption below based on Cash on Cash Return ;
Scenario 1 : 220k / 500k capital = 44% COCR or 8.88% per annum
Scenario 2 : 220k / 50k ( capital ) + RM 50k ( interest in 60 months ) = 169% COCR or 33.80% per annum
I prefer to to take out RM 50k downpayment and ready another RM 50k which is going to pay slowly over the 5 years course to gain more pretty profit at 169%, rather than not only put in the RM 500k but locked it for 5 years before I get back with just 44% return.
Btw, we shouldn't include a matured township at different location with different demand like Setia Alam as the comparison with under construction likle SEH and EM.
Setia Alam - Entry is high compare to SEH and EM due to matured township and matured price, but steady and less risk due to ready market.
SEH / EM - Entry is lower than Setia Alam and based on pricing, it has the potential to go up further.
If Setia Alam's 20x70 has the buyers of RM 780k - 800k now, I see no reason why SEH and EM can't repeat the same thing of RM 780k - RM 800k in few years later on.
My advise, the risk is there, to buy into very huge township like SEH, EM or Bdr Rimbayu, the potential is surely there but timing and holding is the key. Don't expect 169% COCR upon completion especially for Phase 1.
This is not The Zest, The Treez or KR1.