Thank you for the clarification. You have made things clearer by elaborating with further explanation.

Thank you very much for sharing with all of us.

If you look at our apartment in Tampoi (“How to increase the return of an investment property to more than 20%?”), we did follow the guideline of monthly installment being less than 60% of rental income.

However, if you look at the latest case study from our reader in Penang (“How to turn a property to become worth borrowing/leveraging?”), the main objective was to turn the property to become worth borrowing. There is always a trade-off. Sometime we just can’t have the best of both worlds unless we do it right in the beginning. In this case, because the rent was low (RM600), if the reader loaned 90% she couldn’t keep the monthly installment below 60% of the rental income.

That’s why we suggested the reader in the article to loan just RM40k (or 38%) only in order keep her monthly installment at RM184 only.

Cheers

Thanks for the clarification and comment. However, I’m interested to know how does the 90% financing which you have mentioned in your previous articles incorporate to what have been mentioned here about monthly installment should not exceed 60% of the rental income? I find both ideas are a bit contradictory. Hope you could clarify further on that.

Once again, thank you in advance for your guidance.

As discssed in our previous article “Inflation may come back soon (or it has never left?)”, if the inflation is comng back which causes interest rate to go up, your cash flow from rental property should increase also.

However, in order to have a healthy cash flow from your investment regardless of economy condition, we encourage for each investment property, monthly installment should not exceed 60% of the income (rental) generated. For example, if you collect RM1000 every month from a rental apartment, keep your monthly installment below RM600, which should be equivalent to a loan amount of RM130k with interest rate 3.75% and tenure 30 years.

This is to give some room to maintain a positive cash flow should the bank revise interest rate to even double of the existing rate.

Cheers

Just would like your opinion regarding interest rate. Currently, bank interest rate for housing loan at its’ lowest and should not be a problem if we could take a loan of 90% to 95% of the purchase price. What happens when the interest rate rise and cause our property investment to become negative in cashflow whereas the current rental are on the high side and might be difficult to increase the rental further? I would like to know what is your comment or action to be taken when such situation arises? Please comment.

Thank you.

You can loan up to the limit that the monthly installment shall not exceed 30% of your monthly income. With a monthly income of RM6000, you can afford loan(s) with monthly installment of RM1800. This amount is the alloweable total monthly installment of all loans if you are applying for more than one loans.

For a 95% loan of RM288k property, tenure 30 years, interest 3.5%, montly installment is RM1228.59.

We need more details about these two properties like purchase prices, intention of investment (for rent or for own staying), expected rental income (if any) and other costs such as budget for renovation and furnishing work (if any), in order to evaluate which one is better. Location wise both are located in good areas.

Cheers