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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