By international standard, all property investors should be looking at minimum 6% yearly return when it comes to property investment. Here's how you calculate the rate of return:

Rate of return = Net Annual Rental / Price

Scenario 1. Double Storey Shop House at Taman Johor Jaya
Monthly Rental: RM2000
Price: RM400,000

Therefore,
Rate of return = (RM2000 x 12) / RM400,000
= 0.06 or 6%p.a.

Remarks: Attractive investment.

Scenario 2. 8th Floor Office Suite at City Plaza
Monthly Rental: RM4400
Price: RM600,000
Maintenance Fees (monthly): RM1900

Therefore,
Rate of return = (RM4400 - RM1900) x 12 / RM600,000
= 0.05 or 5%p.a.

Remarks: Less attractive investment.

Let me share with you a rule of thumb i often use without having the hassle of going through the above calculation.

Whenever you see the price, take off the last two digits, if the monthly net rental is at least half of this new figure, then rest assured, as you are getting minimum 6%.

READ EXAMPLES HERE .

P.S. I really want to know if anyone finds my articles useful, so feel free to leave your comment/questions at my blog

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ABOUT THE AUTHOR: Lim Boon Ping, Registered Estate Agent (E 1690), was elected as the Chairman of Malaysian Institute of Estate Agents Johor Branch since 2004 until now. He is currently employed as General Manager under Tiram Realty, an established real estate agency of over 20 years history in Johor. To get instant access to all his valuable tips and advice on Malaysia's real estate matters, visit: http://www.tiramrealty.com.my and http://www.blog.tiramrealty.com.my

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I find your post very informative, at least to me who are noob in financing, property.

but I am also wondering why you dont even get single reply to your thread?? anything wrong here??

This post has been edited by bobtiang: May 9 2007, 01:21 AM

this one i not so agree, coz there are other fees u r paying oso, like :
quit rent , maintenance fee, insurance , renovation cost , legal fees...

my calculation would be :
[ Annual Rental ( say, 18000) - all fees involved - instalment paid (if any) ] divided by total sum u had put in ( downpayment, legal fees, renovation cost , instalment b4 unit is rented out )

example :
rental income = rm18000/yr

house price = 200,000 , downpayment = 20,000
legal fees paid = 3300
annual maintanance = 2000(166x12months)
fire insurance = 200/yr
quit rent = 1000/yr
renovation = 3000
instalment paid b4 rent out = 10000(say , 9months)
other charges like access card =500
TOTAL COST = 40,000

monthly loan instalment = 1100/m = 13200

return = 18000-13200/ 40000 x 100%=12%/yr

we are looking at money put in real estate vs money put in UT or share, so it is ACtual money in hand ( paid ) tht counts...

just my 2cents...

IF based on the TS's calculation : 18000/200000 x 100% = 9%/yr return, tht is if i paid CASH to buy the house.

This post has been edited by yewkhuay: Jun 4 2007, 01:10 AM

Nothing wrong...

Just blog whore...
sorry no offense.

Sorry if I sound offensive.

TS just spam the sub-forum with many threads with some cut and paste general info.
Could have merged them in one or fewer threads.
Suspect this is free advertisement for real estate agent.

i quite agree with u but not real estate agent but something else...financial planner...

Nice info here

he never reply.......

actually the ts quoted it correctly.. but you folks read it incorrectly.
pay attention to the word 'net' or 'nett'..

but ts uses confusing examples..

a apt/condo net yield can go as high as 11%. so ts' range of 6% is realistic.

however what ts failed to highlight is the advantages of being a landlord as far as how you can optimized the annual yield..

i speak from experience.

pls enlighten me with the Net and Nett words......
so is my calculation correct or wrong?

hi yewkhuay i'm newbie, can u explain wat is installment b4 rent out and how do u get the loan installment figure?

instalment b4 rent out = total money i paid for instalment b4 the unit is rented out n i stop paying from my own pocket.

Loan instalment figure = 1100 permonth x 12 month = 13200.

care to elaborate more?

yea. can elaborate more on that? i don get wht u mean

As a rule of thumb, the monthly installment should not be more than 1/3 of your monthly income, or not more than 40$ of your monthly net disposable income.

how do u calculate 1/3 of a monthly pay of Rm 3000 monthly income?

ot more than 40$ of your monthly net disposable income. can explain this?

hi yewkhuay, I am referring to the bolded sum, do u think we should add in the sum of the interest that we paid monthly to the end financier during the construction period, say 2 to 3 years?

This post has been edited by SowYau: Jul 23 2007, 05:28 PM

yes , u may add in ur total interest paid b4 u get ur property.

here you go...tis is much simple and straight...

https://www.wikihow.com/Work-out-a-Rental-Yield