ok.
i've been reading Rich Dad Poor Dad Series.
The basic idea is, buy a house, pay bank less than your rent revenue, get passive income.
Do it under a company, because you minimize your tax payment.
ok.
sounds simple enough.

As an indivual, i can apply for a loan. I can show my payslip and bank statement.
No problems. (well, as long as he loan is approved)

ok
As a company, how do i apply for a loan?

i mean.
if its a 2 ringgit company, can the company apply for a loan?

typically a RM2 can still apply for loan, but you need to be a guarantor and your payslip and bank statement will be used.

Im actually exploring this option now.

i see,
so basically
the owner of the company becomes the guarantor of the loan.
the owner has limited liability to the company,
but since the owner is a guarantor , the owner's liability is extended to the loan,
ok
how do i calculate the company's income for a house?
for a person, it's
rent - interest paid to the bank

but for company, is it the same formula
for first month on a 72k loan @ 4.65% p.a (CIMB NZEC)

rent = 550
pay bank = 370
interest = 276
maintenance = 20
cash after pay bank and maintenance = 550 - 370 - 20 = 160

taxable income = 28% of (160 - 276) = 28% of negative = 0?
or
taxable income = 28% of (550 - 20 - 276) = 28% of 254 = 71.12

if its 71.12 then 44.45% of 160, which is a lot.

Edited

This post has been edited by Putraskyline: Nov 24 2008, 09:39 AM

Im still learning, so not 100% sure on this, perhaps someone familiar with company taxes would be able to help us out here

Any tax expert here?

Put the rental house under a company if you're paying >20% of income tax.
The company will re-imburse the money back as dividend to share holder at a tax rate of 20%.

Your loan interest can be deduct from your rental income (even when you are employee), so pay less tax also.
I heard setting up company have to pay some accountant fees every year maybe RM1k? If that is more than your tax what for?

From wikipedia:
The subprime mortgage crisis is an ongoing financial crisis triggered by a significant decline in housing prices and related mortgage payment delinquencies and foreclosures in the United States.

Did RDPD assume house price will only go up? coz they don't make more land?

Moral of the story: don't borrow too much and don't expect your house value (including rental) will only go up.

Alternative view about RDPD: http://www.johntreed.com/Kiyosaki.html

This post has been edited by getsmart: Nov 25 2008, 03:51 PM

well..
reading RDPD, he said
"make profit when you buy, not when you sell"
so never assume the price of the rent or the price of the house will go up.
if they do, its a bonus.

i think you just contradicted yourself
how to make profit when you buy if the price not go up after you buy?
you see the reverse psychology or subliminal message at work here?

Motivational books you can use those feel-good catchy phrase lar, but this about investment mah.

cashflow.
based on rent.
example.
d/p: 8k
lawyers fees:5k
rent: 500
paybank: 400
profit: 100
profit per year = 1200
1200/13k around 9%
so it doesn't matter if you sell or not
it doesn't matter if the house price increase or not
it doesn't matter if the rent price go up, well if it goes up, you get more profit.

make profit when you buy
not when you sell

when you buy, straight away make money
like asw

Its quite simple actually. Buy a property that is currently undervalued. That way, you still make $$$$ even if u opt to sell it off tomorow (Hipothetically speaking)

While I agree that motivational authors often use feel-good catchy phrase, it takes REAL intelligence to fully understand the so called "catchy-phrase", then apply it in the real world.

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Added on November 25, 2008, 6:32 pmAgreed.

One should always buy a property based on fact, and sell it based on own anticipation.

This post has been edited by Pai: Nov 25 2008, 06:32 PM

I see your point.
Always calculate your profit as rent/house value.
Assume house value = 120,000 that will give you 6000/120,000 = 5% profit.

Don't forget bank charge you interest. If profit is 5% and bank interest 5% your nett profit is zero but you still have to pay the lawyer fees . Don't forget about inflation too.

As a landlord, consider the risk of tenant not paying, house maintenance, etc, etc.

Think about this: You may get positive cashflow of RM100 every month but you can only buy your second rental property after 30 years?

I think u r not getting it. Suggest u do some research 1st to really getsmart

i have done research and this just my opinion . you are free to share yours, this is a forum mah

many people just look at the instant gratification and not think of worst case scenario.
this make them easy target for creative marketing, con artists and get rick quick schemes.
imagine even got people give 10K and more to strangers who contact them via sms and emails.

And here comes another RK basher whom have no experience in RE dealings. Oh well.

@getsmart
You do not really understand property investment yet.
There's typically 2 type. One is to buy to sell or which is commonly known as property flipping; and the other one is to buy to rent out.

Buying undervalued property and selling it off is one of the options in property flipping as explained by Pai.

Another more common one is rental. If after research, your rental income is able to cover your monthly expenses...than you're on the right track. Even better if within one year it can cover your so called initial starting capital of buying the property. It's not dividing rental against value of the house. It's easier to put it this way - "how much coming into your pocket vs going out".

This post has been edited by b00n: Nov 25 2008, 08:44 PM

@b00n
Flipping i can agree.

I like to agree with the rental income but:
- if house value drop 20% you borrow 85%, will bank ask you to top up 5% more?
- if rental is same as your monthly expense, how long the loan period is acceptable?

Longer loan period, more money go in. Shorter period, more money go out. So what's your yield actually??? This is why i think dividing rental with house value gives more realistic picture. You can then compare it with other investments year on year.

For the first case, it's possible. But the truth is, hardly any banks do an annual valuation unless there's a big news on certain area.

2ndly, not exactly true with your calculation. As like I mentioned, money coming in as opposed to money going out. Until you're due to pay the next installment, the money is still in your pocket. Thus you can never calculate rental yield based on the valuation of the property.

Buying property under co..will get more benefit only if the co is designated as 'property investment ' co..Otherwise, lots of expenses can't be offset for tax purpose. Like someone rightly said, got to think of audit , a/c ting fees and secretarial fees...

Benefit is if u have more than 1 property, then any losses can be offset from other that is showing profit.

In M'sia, we dont have tax credit where losses can be carried forward .

So, what does your research tells you?

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Added on November 25, 2008, 11:35 pmmy exact thoughts

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Added on November 25, 2008, 11:54 pmbut all this audit, a/c and secterial fees are all tax deducteable expenses, right? Can anyone confirms if the following expenses are tax deductable under company expenses :

1. Water + elec tariffs
2. Quit rent
3. Asessment fees.
4. Monthly Maintenance fees + sinking fund
5. INterest on monthly installments
6. Audit, accounting and secreterial charges.
7. Cleaning bills.
8. Repairs bill.

This post has been edited by Pai: Nov 25 2008, 11:54 PM