Category Archives: case study

More guaranteed rental return schemes in the market?

Investors are always being reminded to be wary about “guaranteed rental return” (GRR) schemes in Malaysia property market. It will not be surprising to see more and more guaranteed rental return (GRR) schemes in the next few years. As developers seek creative ways to increase the appeal of their property in a more challenging market to come, more hybrid variations will eventually surface.

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How to Be Sure if a Property is Worth Investing and Worth Financing?

Many individual investors let good opportunities slip through their fingers without knowing it mainly because they fail to identify if an investment is generating enough cash flow or not. This happens commonly in real estate investments as most of them involve finance. Moreover, calculation of cash flow becomes more sophisticated when there is a loan involved in an investment.

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Bad experience with a mortgage broker

Last year, we came to know a mortgage broker who helps property buyers to apply for mortgage loans from several banks. When we first met, we didn’t pay much attention about his side business in insurance. After a few months, things started to show that we have made a mistake. Our bad experience with this mortgage broker does not affect our view about the insurance itself. It taught us a lesson about working with people with different expertise and interests. We do believe there are people who can master and do well in more than one job. But we never believe one can do well in jobs that have conflict of interests.

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Why do you need to pay so much interest to bank?

In real estate investment, or maybe all other kinds of investment, what we emphasise most is the maximum return – how can we get the highest return from the minimum amount of money invested? Stay focused on the maximum return that you can get from real estate investment instead of the interest that you pay to bank. Interest is only part of your costs of investment. Just take all the costs into account before you calculate your return, and then choose the right strategy to go for maximum return.

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What risk you may face if you borrow too much and how to manage it?

The power of leverage can help you to magnify your return on real estate investment through financing. However, it can also magnify your repayment cost even with a slight increase in interest rate, if you borrow too much for your investment property. In order to have a “robust” cash flow from your investment regardless of economy condition, we encourage for each investment property, monthly installment should not exceed 60% of the income generated from the property. This is to provide some room to maintain a positive cash flow should your bank revises interest rate to even double of the existing rate.

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