This
tool is used to evaluate the gain/loss from the buy-and-rent of multiple units of the property with the different
unit price by comparing the approach of purchasing the property entirely with
cash or with mortgage by taking into account the adjusted occupancy, rental
rate, miscellaneous expenses to maintain the property and property
appreciation.
To
begin, user is required to specify “Total Amount of Free Cash in Hand” in order
to simulate the potential net gain on the disposal of the property invested.
Total Amount of Free Cash in Hand
|
RM1,500,000
|
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Next,
user is required to specify details of the property and mortgages (e.g. no. of
units purchased, % of loan, interest rate, tenure, etc.):
Property No. 1
|
Property No. 2
|
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Unit Price
|
RM500,000
|
Unit Price
|
RM700,000
|
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No. of Unit Purchased
|
1
|
No. of Unit Purchased
|
1
|
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% Loan
|
90
|
%
|
% Loan
|
90
|
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Loan Amount
|
RM450,000
|
Loan Amount
|
RM630,000
|
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Loan Interest Rate
|
4.5
|
Loan Interest Rate
|
4.5
|
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Loan Period (Maximum 30 years)
|
30
|
Loan Period (Maximum 30 years)
|
30
|
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Monthly Installment
|
RM2,280.08
|
Monthly Installment
|
RM3,192.12
|
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30
|
30
|
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Initial Capital Investment
|
RM50,000
|
Initial Capital Investment
|
RM70,000
|
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Total Initial Investment Capital
|
RM120,000
|
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The
calculator will automatically calculate the loan amount and monthly
installment.
To
proceed, the user is required to assess and specify the expected average
monthly rental, % of occupancy per annum and the miscellaneous expenses to
maintain the property:
Average Monthly Rental
|
RM1,600
|
Average Monthly Rental
|
RM2,400
|
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% of Occupancy Per Annum
|
90
|
%
|
% of Occupancy Per Annum
|
80
|
%
|
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Other Average Monthly Expenses (for single unit)
|
250
|
Other Average Monthly Expenses
|
320
|
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[i.e. maintenance fee, housing tax, etc.]
|
[i.e. maintenance fee, housing tax, etc.]
|
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This
simulator is built to compare the gain of purchasing the property entirely in
cash and if to purchase using bank mortgage (e.g. 80% loan, 90% loan, etc.)
assuming that the purchaser can invest the balance of the free cash in hand
(after deducting the down payment). User is required to specify the % Rate of
Return per Annum in order to compare the gain net gain when disposing the
property in future. For the % rate of return per annum, it can be based on the
scenario if the purchaser placed the free cash in hand to a Fixed Deposit that
offer, said, 3.5% annual interest rate or to invest in equity fund/bond that
offer certain annual rate of return. Throughout this simulator, the figures
indicated in red represent the investment related to this free cash in hand. If
user does not wish to assess this option, just set the % Rate of Return per
Annum to “0” (zero).
Free Cash in Hand
|
RM1,380,000
|
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% Rate of Return per Annum
|
5
|
%
|
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(if invest the free cash in other investment plan)
|
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Net Gain from Free Cash in Hand after Deducting of the
Downpayments
|
RM867,875
|
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for Property 1 & 2, If Invested the All Initial Lump Sum
Cash in Hand
|
RM943,342
|
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Without Purchsing Property 1 & 2
|
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To
account for the potential compounding gains/loss from the net income/expenses
generated by the property over the period of time until the disposal of the
property (mature period), user is required to specify the 'General % Rate of
Return per Annum'. As reference, user can estimate the General % Rate of Return
per Annum based on the general bank fixed deposit rate (refer to Fixed Deposit (FD) Calculator for the information).
For example, if the net income collected from the monthly rental is placed in
the bank fixed deposit and let the interest continue to compound over the
period of time until the property is disposed, this can generate additional
compounding gain to the owner.
In
addition, user is required to specify the estimated '% Unit
Appreciation Per Annum' in order to assess the appreciation of the
property over the period of time until the mature period.
General % Rate of Return per Annum if the Net
|
4
|
%
|
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Monthly Income Collected is invested.
|
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% Unit Appreciation Per Annum
|
3
|
%
|
% Unit Appreciation Per Annum
|
3
|
%
|
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Unit Mature Period
|
10
|
Year
|
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The
'Unit Mature Period' refers to the total duration from the initial ownership of
the property (i.e. upon the first payment of the bank mortgage or collection of
the house key)
When
disposing the property, various costs (e.g. legal fee, stamp duty, renovation
cost, property agent fee, administrative fee, etc.) may be incurred. User is
required to specify the estimated cost. The legal fee, stamp duty and RPGT can
be calculated using the following calculators:
- Sales & Purchase Agreement (SPA) Legal Fees Calculator
- Stamp Duty Calculator
- Real Property Gains Tax (RPGT) Calculator
Miscellaneous unit cost for disposal of the property (single
unit)
|
RM18,000
|
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(i.e. legal fee, RPGT, stamp duty, agent fee, etc.)
|
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User can use this tool to simulate and assess
the potential net gain from the buy-and-rent property investment strategy by
evaluating the rent versus the occupancy rate in order to optimize the net gain
over a period of time. For example, with the tool user can adjust (e.g. reduce)
the rent, said below the market rate, in order to increase the occupancy rate
and check on of this approach is going to affect the overall net gain.
Updated on 24th April 2017
