guys,
there's one question from me here...

lets say if we buy a landed house....and we get a loan...

and lets say if we sell the house before 5yrs...how much do we actually profit?

lets take an example

House cost = RM300k

Selling price after 2years is RM380k

do we earn RM80k? no right? what are the hidden charges not listed here? bank and lawyer fees? penalty loan fees? anyone can help shed some light here?

a lot of factors, including but not limited to:
lawyer fees (for S&P and loan docs)
bank penalty (depending on loan type, e.g tie-in or non tie-in)
stamp duty
interest paid

Costs when you buy:
Developer : Stamp Duty on S&P, Disbursement, Legal etc
Loan : Stamp Duty on Loan Doc, Legal fees, etc
Agent's fees (if applicable)

Costs when you hold:
Cukai Tanah, Cukai Pintu, Monthly mortgage, Repairs, Renovation, Upkeep, Tenancy agreement (Stamp duty and agent's fees), Utilities, Maintenance/Sinking fund etc.

Costs when you sell:
Legal fees, agent's fees, repairs before VP, bank's penalty

There are a lot of ways to save costs, but that's for another thread, another day...

meejawa,
got rough estimate for the cost listed above?

so out of the RM80k profit, how much is actually the nett profit?

i think u need to pay installment for 5 years before you can fully settle your loan.

There's no actual calculation.
I've put some comments in red on meejawa's comment.
Anyway a simple method:
Your Cost:
Total cash money "paid" for the property
i.e. your RM300k is not RM300k. It's basically Down payment + all the legal fees paid for acquiring the property + your monthly loan repayment + taxes + renovation + maintenance + repair +etc.....money that you actually forked out

Your Profit:
Total cash money "received" for the property.
Money received from sales + monthly rental (if applicable) - your cost

ahh..sorry..maybe i ask my question wrongly...

ok...lets asssume the property selling price is RM300k...
what is the additional cost I should expect to pay...when buying the property and at selling that time...

Means:
Property Cost: 300k
Buying Cost: xxK
Selling Cost: xxK
Total Cost = ???

The reason i ask is because i am considering if it's worth the time and risk to invest in property...

Thanks...

if you buy at 300K and sell at 380K after 2 years.
let say you borrow 300K, BLR = 6%
total interest a year is 18K, so 2 years already 36K ... add in the other fees inside, you will get your total cost

This post has been edited by n73me: Jan 29 2008, 01:35 PM

Housing loan interest calculation is not like car loan...

A simple calculation:
Price = RM300k

Cost
Down Payment: 10% (if lucky) - 30k
Legal fee: -nil- zero entry cost loan and free SPA from developer
Loan: BLR - 1.5% fr 30 years = Monthly repayment: 1490.95
-5 years = 89,457

(Let's not get into the details of paying taxes and maintenance)
Total money forked out - i.e. investment capital after 5 years - RM119,457 (total principal paid back to the bank is only RM21,196.38)
Principal left to settle after 5 years = 248,803.62

Sell at RM380k

Profit
380k - 119,457 - 248,803.62 = RM11,739.38

See how much the difference from your initial thought of RM80k profit.
This is only simple calculation which doesn't include legal fees transpired between buy and sell of property. Say it's RM10k.....than there goes your profit.


Thus I never encourage ppl to buy just to sell later for profit.
A wise investment would be it'll start earn you money before the need of disposing/liquidating it.
So usually ppl tend to buy for rental income instead of this "flipping method".
That also doesn't equates to "flipping method" doesn't work. It's all down to hard work, strategies, research and a little bit of luck.

This post has been edited by b00n: Jan 29 2008, 02:10 PM

boon provided some details, and they varied as mentioned. Usually for my estimate I'm using the following rule of thumb (property average RM250k):

1. When buy, the total costs usually is around 4-6% of SnP price.
Assumption: You use the developer lawyer for the stamp duty on SnP, but your own for the loan docs (which usually is the case. If not, you need to add abt 2% more)

2. When sell, the total costs usually is around 6-8% of SnP price.
Assumption: You engage a real estate agent with 2% fees, and you use your own lawyer (no lawyer sharing), and the penalty for early redemption from bank is 3.5%. No RPGT now so it's good.

These are reasonable estimate, and most of the time actually I can manage to get lower than these percentage, but it's good for mind calculation. When you see a deal and you run through these numbers and they come back favorable, then you have a good margin to play with.

To be more precise, on top of that you need to calculate how much you have paid on the INTEREST portion of the monthly mortgage(add to the purchase price), and on the principal side(considered downpayment for easy calculation).

For your case (take WORST CASE) RM300k *6% = RM18k, RM380k*8%=RM26.6k plus another 15k-18k on 1 year interest depending on your rate (yes it's that high), add all up together you will see your profit.

Remember profit is NOT against the purchase price, rather it's against how much cash you've put out. So in your case the total cost is at around RM67k, and your gross profit is RM80k. Your nett becomes RM13k. But let's say you only put in RM30k as downpayment initially, your profit is actually close to 43% in just one year's time!

For exact calculation it will take much more time, but once you are familiar with all the processes and costs involved, you'll be able to judge faster.


This post has been edited by meejawa: Jan 29 2008, 02:20 PM

Opps, calculated at 5 years....
okie say 2 years:

Price = RM300k

Cost
Down Payment: 10% (if lucky) - 30k
Legal fee: -nil- zero entry cost loan and free SPA from developer
Loan: BLR - 1.5% fr 30 years = Monthly repayment: 1490.95
-2 years = 35,782.80(total principal paid back to the bank is only RM7,819.04)

(Let's not get into the details of paying taxes and maintenance)
Total money forked out - i.e. investment capital after 5 years - RM65,782.80
Principal left to settle after 2 years = 262,180.96
Bank penalty....if not wrong is 5% from total remaining interest = 11,938.91

Sell at RM380k

Profit
380k - 65,782.80 - 262,180.96 - 11,938.91 = RM40,097.33

ROI = 40,097.33/(30,000+35,782.80+11,938.91) = 51% = 26% per annum (than it's not bad)
But bear in mind other "chapalang" cost wasn't included in this simple calculation.

That is close to my average return from property investment

---

Added on January 29, 2008, 2:26 pmCurrently I could not find any banks that offer penalty on the balance; some are charging full percentage, some are on a lowering steps interest, but they are all against the ORIGINAL loan. This was about 2 months ago when I talked to the bankers.

This post has been edited by meejawa: Jan 29 2008, 02:26 PM

That I'm not sure.....just an example.
If it's based on the loan.......hhmmm....have to redo the calculation. But that's the method to calculate just to let TS know how.
Anyway, an amortising table if one wants to know how I come out with the figure which I posted in this thread:
http://forum.lowyat.net/index.php?showtopi...&#entry14239555
some simple explanation on how to use:
http://forum.lowyat.net/index.php?showtopi...&#entry14932884

This post has been edited by b00n: Jan 29 2008, 02:37 PM

wow...then it seems like it's quite a good way to invest money...
of course we cannot buy sell a lot of times because we (or me only) not rich...

but really have to identify one good landed property and should be able to get good return for that after that....

quite risky but one unit is all i can afford for now...so i only have one chance!!!

That is the right thinking; the key word is "identify good property". You only need a few of these in your lifetime to earn good money. You start with say RM50k, then you make another RM50k from your first property, then with the RM100k you can start to look for property twice the price. Keep doubling that and when you reach a property at RM1.5M, and then you can sell for RM2M, how much would you have pocketed?

*caveat: always have TWO safety net: one for 6 months of the property's mortgage, another one for 6 months of YOUR expenses. You DON'T need a lot of money, but do your homework and learn as much as you can, as fast as you can.

not as easy tho....especially if u dun get a buyer within the estimated money making time frame.

The last time i tried to sell my house....i terkena a foreigner. If u get a foreigner buyer, u will have to transfer the title of the house 1st to your name, which can be quite costly. They used to be able to go around this, but latest rule is u must transfer to your name 1st. I didnt know this until later after so much trouble, and i gotto pay RM8k for the transfer. (but this applies if the title is out)

But sometimes u can also get lucky....Like if the buyer backs out and the s&p signed, u get the 10% of the full selling price + the house (oh minus 2% -3% agent fees)

This post has been edited by mIssfROGY: Jan 29 2008, 08:49 PM

meejawa, I like your theory, and I personally think its rather accurate


Just to add up to your point, I think one would get at least a decent gain (typically about 100%-120% ROI if use 10% d/payment) when they sell the property at 20% above their purchase price.

If the title is out, normally ppl will sell it off to avoid paying for the transfer (Investment property). But if the buyer knows this, he/she will insist on you paying first before signing the SnP (or caveat in SnP that the title is fully paid off).

It's interesting the example you provided. I have a condo in KLCC area, which a foreigner (Iranian) was interested in. The strata is not out yet (condo takes many years for this as you know), so there's no issue of title transfer. But at the last minute he backed off, so he forfeited the 2% booking fees (the SnP wasn't signed yet, too bad ).

it should be 5% based on the remaining loan. but, overall, ur estimation is close to reality. 1 more thing, the penalty from the bank can actually be waived if the new buyer get the loan from the same bank and also same branch. check it out, it will save you few thousands.