What is the main concern of buying a property? Location? Type? Rental Returns?
Thinking of this question, we must first ask ourselves what are the investment objectives, namely, target of return, investment time horizon and etc.
Amongst the main determinants of property value include : -
1. Location – This is to determine there is a demand by the target market for this location. Research on the historical rate of property value appreciation in that particular location for similar property is essential.
2. Property type and size – residential or commercial each have different target market, dependent on location, attracts different tenant profiles.
3. Rental returns – Find out how much rent can fetch by researching the rental values of similar properties in the area and determine the cost of owning and maintaining.
4. Cash flow – evaluate the property’s potential to generate income as against cash outflows. Earliest positive cash flow is excellent.
Property value is the main consideration when investing property Malaysia
Friday, November 20, 2009
Return on Investment
How to calculate return on investment?
Investment in property may take much time and effort than you may expect. When you find a great deal, you might need to leverage on other people’s money to increase your return of investment.
How to calculate the return of investment?
Generally, there are 2 components of returns, rental yield per annum and capital gain or so-called capital appreciation.
What is rental yield?
Rental yield is the return based on rental income from the property less maintenance expenses incurred versus the total purchase price of the property. There are gross and net rental yield. Gross Rental Yield is rental versus the purchase price before the expenses incurred and so on and so forth. In rules of thumb, the Net Rental Yield is approximately 85% of the Gross Rental Yield.
There is another rental yield called Net Leverage Rental Yield. This means, the financing cost is taken into calculation when rental yield calcualted. The expenses incurred inclusive of finance cost versus the net gain is defined as Leverage Rental Yield
What is capital gain or so-called capital appreciation?
This is an one time gain when you sell off your property. It is calculated by subtracting your original purchase price from the selling price. The gain versus the amount of capital gain is called capital appreciation.
As Leverage Rental Yield, the Leverage Capital Gain is also taking into consideration of the gain after subtracting the finance cost incurred.
What is total return yield?
The total is the rental yield plus the capital gain over the investment tenor. The return is usually calculated on the internal rate of return formula.
Check the return on investment before invest property in Malaysia.
Investment in property may take much time and effort than you may expect. When you find a great deal, you might need to leverage on other people’s money to increase your return of investment.
How to calculate the return of investment?
Generally, there are 2 components of returns, rental yield per annum and capital gain or so-called capital appreciation.
What is rental yield?
Rental yield is the return based on rental income from the property less maintenance expenses incurred versus the total purchase price of the property. There are gross and net rental yield. Gross Rental Yield is rental versus the purchase price before the expenses incurred and so on and so forth. In rules of thumb, the Net Rental Yield is approximately 85% of the Gross Rental Yield.
There is another rental yield called Net Leverage Rental Yield. This means, the financing cost is taken into calculation when rental yield calcualted. The expenses incurred inclusive of finance cost versus the net gain is defined as Leverage Rental Yield
What is capital gain or so-called capital appreciation?
This is an one time gain when you sell off your property. It is calculated by subtracting your original purchase price from the selling price. The gain versus the amount of capital gain is called capital appreciation.
As Leverage Rental Yield, the Leverage Capital Gain is also taking into consideration of the gain after subtracting the finance cost incurred.
What is total return yield?
The total is the rental yield plus the capital gain over the investment tenor. The return is usually calculated on the internal rate of return formula.
Check the return on investment before invest property in Malaysia.
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