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> Top 5 Tips for Newbie in Property Business, Sharing is Caring (Investment)

cliffekent
post Feb 8 2019, 02:53 PM, updated 2w ago

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Top 5 Tips for Newbie in Property Business

1. How much you can borrow from bank?
So you can start searching the property based on your loan ability. No need waste time over your budget.
Formula: Gross Salary (not yet minus epf or tax) x 0.8 x 0.7 - (your commitment like house loan, pptn, car loan, credit card total amount owe x 5%) x 200


2. Reduce Unnecessary Expense
Spend what u NEED. Not WANTS, like expensive bag, gadget, cloth, branded thing. So you can do Negative Gearing for the property u buy. Give worst case scenario. Lowest rental there, then how much you need gear. Then u can afford to gear or not. All based on your active income to gear, if your head no so big, then DO NOT over gear.

Eg: Bank Loan: 500k, Terms: 35 years, Interest: 4.55%, Instalment: 2400, Rental: 1200
Every month you need to negative gear RM1200. But your salary only RM4500, minus epf all thing. Nett salary only RM3600 – RM1200= Left RM2400. Not yet include your car loan, other living cost, and maintenances of the house. So DO NOT over gear.


3. The rental minimum must cover the bank interest (using amortization table: google EZ Financial Calculators)

Eg: Bank Loan: 500k, Terms: 35 years, Interest: 4.55%, Instalment: 2400 (1900 is interest, 500 principal)
In this example, 1900 is the interest you need pay to the bank when you borrow 500k loan from bank. So your rental minimum also need cover 1900 in order to no lose interest to the bank. Another 500 principle treat it as a saving (better feeling). Because when you sell your property you can get back. Let say after 10 year your property provided in good location appreciate to 650k. You earn around 150k+-.

4. No Cash or No Capital, die die must invest property.
Buy Low cost apartment, usually give you positive cash flow mean Rental can cover Instalment. Low Risk, Slow gain. Or find property below market value.

Strategy:
Each year buy 1 low cost apartment (below 150k) until 4th low cost apartment. After 5-8 year, sell out one by one. Get the capital gain buy residential or commercial. You get the skill n knowledge to buy residential n commercial after u buy 4th low cost apartment.

Pros
a) Low entry cost (zero down)
b) High return (usually rental cover instalment n positive cash flow)
c) Easy rent out

Cons
a) Low Tenant quality
b) High Maintenance
c) Hard collect rental
d) Cannot sell within 5yrs
e) Hard to sell

How to choose good low cost
a) Location (btw tier 1 - tier 2) like ard KLCC area.
b) Mrt/lrt
c) Old but gd maintainence
d) Rental must cover installment
e) Research online below 200k
f) Can Mark up
g) Use IHC or 3rd quota


5. Use market rate and rental to evaluate New Project Price

You can research online to find this rate. If surrounding same type condo psf is around RM500psf. Then new project selling RM700psf. So is a no go for this project. Below is some grading system use by some guru

CA - Capital appreciation
CF - Cash flow

GRADE A
- CA : 20% upon completion (minimum 3 boosters needed)
- CF : positive. More than RM300.

GRADE B
- CA : min 10% upon completion
- CF : positive

GRADE C
- CA : not much upon completion
- CF : breakeven

GRADE D
- CA : no profit even if sold
- CF : negative up to RM500

GRADE E
- CA : loss of more than RM100k upon selling
- CF : negative more than RM1000

In Conclusion

Property is NOT a Investment. Property is a BUSINESS.
Business require capital to manage it. If you have this mindset, you will treat maintenance, tax and other miscellaneous cost as a business cost.

You should not have a “plant vegetables” mindset
You should have a “plant a tree” mindset

References
AW
Tony Yap
FR
Dr Victor Gan

This post has been edited by cliffekent: Feb 8 2019, 04:07 PM
Sand Dust
post Feb 8 2019, 03:21 PM

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How does current assets (shares, cash, unit trusts, houses etc) will help to get more loans? Any formula to calculate?
cliffekent
post Feb 8 2019, 03:30 PM

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QUOTE(Sand Dust @ Feb 8 2019, 03:21 PM)
How does current assets (shares, cash, unit trusts, houses etc) will help to get more loans? Any formula to calculate?
*
If your this asset worth 1 million and above. You will become high net worth group in terms of bank. Bank usually borrow 70% DSR.
If you declare as high net worth group, DSR can be 80%-150%. Each bank have different assessment. Please consult bank.

This post has been edited by cliffekent: Feb 8 2019, 03:35 PM
icemanfx
post Feb 8 2019, 04:33 PM

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20% or more DSR is considered stretched, risk become mortgage prisoner. Capable to borrow doesn't equal to capable to repay.

Over leverage is not a path to wealth accumulation but recipe for financial ruin.

property investment is not newly invented or discovered. if property investment is as easy as claimed, every da ma and kopitiam unkers are property tycoons, and there should be a lot more than about 3% of adults in this country have over us$100k net worth.

Property bull run 2011-2014 fuelled by cheap and easy credit was a fallout of u.s qe and unlikely to reoccur in the foreseeable future.

In the long term, residential property price rise at about inflation rate. As most buy with bank loan, after deducting loan interest, net gain is less than most expected.

Until current property overhang is reduced substantially, property price is unlikely to rise. By about 2030, Malaysia will become a ageing nation. If Japan is any precedence, property demand and price is expected to be on a long downtrend.

Property investment is a zero sum game; developer/vendor and buyer are on different sides of the same coin; one's gain is another loss.

Those blinded by greed are like those blinded by love, see different in opinion as noise.

Sharing is caring.

This post has been edited by icemanfx: Feb 8 2019, 05:40 PM
cliffekent
post Feb 8 2019, 08:30 PM

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20% or more DSR is considered stretched, risk become mortgage prisoner. Capable to borrow doesn't equal to capable to repay.

Over leverage is not a path to wealth accumulation but recipe for financial ruin.

Yes. Do not over leverage, as I mention in the article also.


property investment is not newly invented or discovered. if property investment is as easy as claimed, every da ma and kopitiam unkers are property tycoons, and there should be a lot more than about 3% of adults in this country have over us$100k net worth.

Property bull run 2011-2014 fuelled by cheap and easy credit was a fallout of u.s qe and unlikely to reoccur in the foreseeable future.

In the long term, residential property price rise at about inflation rate. As most buy with bank loan, after deducting loan interest, net gain is less than most expected.

Ya. That y I say rental must cover bank interest.

Until current property overhang is reduced substantially, property price is unlikely to rise. By about 2030, Malaysia will become a ageing nation. If Japan is any precedence, property demand and price is expected to be on a long downtrend.

What I see is current property is in stagnant stage, due to previous year growth too rapid. Then government in order to prevent property bubble. So government impose cooling measure in. How long it will stagnant, I think nobody can ans it.

Property investment is a zero sum game; developer/vendor and buyer are on different sides of the same coin; one's gain is another loss.

Those blinded by greed are like those blinded by love, see different in opinion as noise.

Sharing is caring.
LoTek
post Feb 9 2019, 03:01 PM

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Note 1 : current govt "cooling measure" is more like fanning the overheating flames. Beware.

Noe 2 : can't overemphasise the difficulty of collecting rental from low cost properties. Yield might look good on paper but in actual fact collection is nightmare of nightmares. Friend actually got threatened back by his tenant when he went (for the 3rd attempt) to collect. In the end not only he could not collect rental, he paid for locksmith to cut tenant's lock and lorry to carry the tenants furniture away.
langstrasse
post Feb 9 2019, 03:06 PM

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QUOTE(LoTek @ Feb 9 2019, 03:01 PM)
Note 1 : current govt "cooling measure" is more like fanning the overheating flames. Beware.

Noe 2 : can't overemphasise the difficulty of collecting rental from low cost properties. Yield might look good on paper but in actual fact collection is nightmare of nightmares. Friend actually got threatened back by his tenant when he went (for the 3rd attempt) to collect. In the end not only he could not collect rental, he paid for locksmith to cut tenant's lock and lorry to carry the tenants furniture away.
*
Agreed on Note 2 - low cost properties bring their unique set of tenant characters.
AskarPerang
post Feb 9 2019, 03:53 PM

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Plus low capital appreciation for low cost units. Very hard to dispose off coz the next buyer must fulfill the requirement set such as must be 1st home buyer and income cannot be more than 5k.

It is better to just buy medium cost apartment at non prime area at the same pricing with those prime area low cost flat (around 200k). Probably can fetch the same rental too if you know the area demand.

Good luck.
leodinouknow
post Feb 9 2019, 04:12 PM

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low cost apartment, need scan and chose the tenant. cannot simply ask agent help rent it out for you.
LoTek
post Feb 9 2019, 04:20 PM

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alot of work managing those low end props, not everybody can do. that friend laughed at me, said his 10 units of 100k units yielding double of my 1 unit of 800k.

but i pointed out, i get to keep working at my job, or taking weeks off when i want to, whereas he spends the whole life running them 😂
leodinouknow
post Feb 9 2019, 05:08 PM

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QUOTE(LoTek @ Feb 9 2019, 05:20 PM)
alot of work managing those low end props, not everybody can do. that friend laughed at me, said his 10 units of 100k units yielding double of my 1 unit of 800k.

but i pointed out, i get to keep working at my job, or taking weeks off when i want to, whereas he spends the whole life running them 😂
*
you & your friend cash rich
icemanfx
post Feb 9 2019, 05:18 PM

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QUOTE(LoTek @ Feb 9 2019, 04:20 PM)
alot of work managing those low end props, not everybody can do. that friend laughed at me, said his 10 units of 100k units yielding double of my 1 unit of 800k.

but i pointed out, i get to keep working at my job, or taking weeks off when i want to, whereas he spends the whole life running them 😂
*
QUOTE(leodinouknow @ Feb 9 2019, 05:08 PM)
you & your friend cash rich
*
Property game is not newly invented or discovered. If low cost rental is a worthwhile proposition, many da ma especially those cash rich would be at it. Gen y or z won't stand a chance to queue.
Bjorn1688
post Feb 9 2019, 05:35 PM

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QUOTE(LoTek @ Feb 9 2019, 03:01 PM)
Noe 2 : can't overemphasise the difficulty of collecting rental from low cost properties. Yield might look good on paper but in actual fact collection is nightmare of nightmares. Friend actually got threatened back by his tenant when he went (for the 3rd attempt) to collect. In the end not only he could not collect rental, he paid for locksmith to cut tenant's lock and lorry to carry the tenants furniture away.
*
Haha yeah there are gains in theory and actual reality.

Never underestimate the difficulty in collecting rental from people who in reality have little to nothing to lose in life.

Used to know this bloke who had several of these low cost properties. His actual "profession" was a loan shark. He tried collecting rent from a "difficult" tenant, ended up he was slashed twice with a parang by the daughter of his tenant while trying to collect rental. Later she turned the story that he was trying to rape her.

This isn't a market that is worth the time and effort and that will eventually apply to all those first home program homes too which eventually will become cestpool of social problems.
LoTek
post Feb 9 2019, 05:37 PM

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QUOTE(leodinouknow @ Feb 9 2019, 05:08 PM)
you & your friend cash rich
*
i dont know him but in certainly up to my nose in debt bruh haha
LoTek
post Feb 9 2019, 05:38 PM

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QUOTE(Bjorn1688 @ Feb 9 2019, 05:35 PM)
Haha yeah there are gains in theory and actual reality.

Never underestimate the difficulty in collecting rental from people who in reality have little to nothing to lose in life.

Used to know this bloke who had several of these low cost properties. His actual "profession" was a loan shark. He tried collecting rent from a "difficult" tenant, ended up he was slashed twice with a parang by the daughter of his tenant while trying to collect rental. Later she turned the story that he was trying to rape her.

This isn't a market that is worth the time and effort and that will eventually apply to all those first home program homes too which eventually will become cestpool of social problems.
*
hahaha lesson is there is always a bigger shark in the ocean. wah this story can be an idea for a jack neo film already
BEANCOUNTER
post Feb 9 2019, 07:37 PM

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I seriously dont know what is this thread all about
leodinouknow
post Feb 9 2019, 08:38 PM

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QUOTE(LoTek @ Feb 9 2019, 06:37 PM)
i dont know him but in certainly up to my nose in debt bruh haha
*
debt is good


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leodinouknow
post Feb 9 2019, 08:39 PM

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QUOTE(Bjorn1688 @ Feb 9 2019, 06:35 PM)
Haha yeah there are gains in theory and actual reality.

Never underestimate the difficulty in collecting rental from people who in reality have little to nothing to lose in life.

Used to know this bloke who had several of these low cost properties. His actual "profession" was a loan shark. He tried collecting rent from a "difficult" tenant, ended up he was slashed twice with a parang by the daughter of his tenant while trying to collect rental. Later she turned the story that he was trying to rape her.

This isn't a market that is worth the time and effort and that will eventually apply to all those first home program homes too which eventually will become cestpool of social problems.
*
shark getting bite by small fish
icemanfx
post Feb 9 2019, 08:50 PM

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QUOTE(leodinouknow @ Feb 9 2019, 08:38 PM)
debt is good
*
Provided you could pay back on time.
leodinouknow
post Feb 9 2019, 09:35 PM

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QUOTE(icemanfx @ Feb 9 2019, 09:50 PM)
Provided you could pay back on time.
*
we want the benefit of owning the house only, but we dont want the house itself. let the bank have it.

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