How to calculate your ROI for rental income. an example if you're to purchase a house:
purchase price: RM235K
downpayment: usually 10% of purchase price, so RM23K
what's left will be the loan amount: RM210K
for a 20-year loan, to keep it simple we'll we'll just divide it by 240 months to get the amount of you'll be repaying the loan in a month:
RM210K/240 = around RM1K.
with people living in KL earning around RM4K, RM1K a month to pay the loan might be too steep, so you can rent it out. But before purchasing the house or renting it out, you need to figure out if the rental will bring you in more cash than you out out, i.e the rental should be more than your monthly loan repayments, _plus_ any other expenses to maintain the house.
in horlic lim's post, he estimated that it takes around RM800 for monthly expenses. expenses here include:
1. service charges
2. fire insurance
3. property agent fees
4. quit rent
5. no rent income due to no tenant for 2 months
SO, if you set your rental to RM2.2K, your gross will be:
RM2.2K - RM800 (expenses) = RM1400
and your nett will be
RM1400 - RM1000 (loan repayment) = RM400
RM400 here is your monthly cash flow.
To calculate rental yield (ROI), you do:
(RM2.2 (rental price) x 12 / RM235K) * 100 = 11.2% p.a (per annnum, or yearly)
Horlic lim says that your p.a for the property must at least double the amount a fixed deposit at a bank can give you, as a good benchmark. so if a fixed deposit at a bank is giving your 3% p.a, then this property with a ROI of 11.2% is definately a good buy.
So, kalau nak beli rumah patut consider perkara ini terlebih dahulu, hmm 11.2% ROI, masih boleh dapat dengan senang ker sekarang??
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