Is it possible to have an infinite return on investment (or free money)?

one infinite pretzel
Creative Commons License photo credit: oskay

If you have read Robert Kiyosaki’s books about financial education, you must be familiar with the term “infinite return on investment” mentioned in many of his books (sometime referred to as “free money”). If you have not heard about him, an investment with “infinite return” actually means an investment that requires no money from you but you receive return in term of money from the investment.

“Is it really true in real life?” Many people may ask as it sounds too good to be true.

In this article, we will discuss a real case of such investment in real estate shared by tan81, a blogger who shares his investment experience at tan81 investment and rich secret. tan81 has shared the latest progress of the acquisition in his blog.

A real case
tan81 found a furnished rental property last month, which was valued at RM280,000 by Hong Leong bank. He managed to negotiate the purchase price to RM230,000.

The property is currently rented to a tenant for RM1450 every month. Monthly maintenance fee is RM200. Total monthly maintenance cost is around RM250 including other expenses like quit rent.

In one of his articles, he estimated the transfer fee for a property worth RM260,000 should be around RM7470, which includes:

Stamp Duty 1st RM100,000 X 1% = RM 1,000
RM160,000 X 2% = RM 3, 200

Legal Fees 1st RM 150,000 X 1% = RM 1,500
RM 110,000 X 0.7% = RM 770

Other costs = RM1,000
Total = RM7470

Here we assume RM7500 is required for the transfer of the property.

Housing loan package offered by Hong Leong bank to him is Mortgage Plus with floating interest rate BLR-2.2% (up-to-date BLR is 5.55%), tenure 30 years, zero entry cost and 5 years lock-in period.

If he loan 90% of the purchase price, the projected cash flow and return are shown in the following table.

From the above table, we can see tan81 has found a property worth borrowing with monthly cash flow of RM287.72 and a cash-on cash return (cashflow yield) 11.32% if he loans 90% of the purchase price. An upfront cash of RM30,500 is required in this case.

However, as mentioned in his blog, tan81 decided to borrow RM250,000 from bank, which is about 89% of the bank’s valuation (RM280,000). With the approval of this loan amount, which is enough to cover all expenses, he effectively doesn’t need to fork out any money for this acquisition!

Look at what happens to the projection of cash flow and return now.

From the above table, tan81 will still get a cash flow of nearly RM100 every month even though he doesn’t need to pay anything to buy this rental property. This is a typical example of “infinite return on investment”!

How can it be true?
Though this is a real example of “infinite return on investment”, it is a bit different from those cases described by Robert Kiyosaki. In most of his cases, Robert would still need to pay a certain amount of down payment in cash.

The only thing that made Robert’s cases “infinite return” was that he borrowed this cash from somewhere else. For example, friends, overdraft (OD) or term loans with – most of the time – much higher interest rates.

In the case of tan81, which solely depends on a housing loan to cover all expenses of an acquisition, is something that can be happened quite uniquely in Malaysia. We normally call it 100% (sometime can be more than 100%) loan or sometime “loan with mark-up”.

In Malaysia, banks will normally offer a mortgage loan amount based on the purchase price stated in sell and purchase agreement (SPA). For example, up to maximum 95% of the purchase price is quite common for new development projects.

So how can a borrower borrows up to or more than 100% of the purchase price?

As far as we know, the trick is in the purchase price stated in SPA.

For example, in tan81’s case, since bank’s valuation of the property is RM280,000, that means bank is willing to lend up to 90% of this valuation amount (RM252,000), provided financial strength and credit record of the borrower meet the requirements of bank.

Once you know the bank is willing to lend up to RM252,000 for the property you want to buy, all you need to do is to use the valuation amount (RM280,000) as your purchase price in your SPA and submit this SPA for loan application. If your financial strength is strong enough and your credit record is clean, you might just be offered with the maximum loan amount of RM252,000.

Simple right? But wait… is there any risk?

In our next article, we will discuss the risk that you may face and how you can manage it.


About The Author


Coming from a humble little town named Tangkak in north Johor state of Malaysia, I am so lucky to have chances to learn and work both in Johor Bahru and Singapore - a conurbation with 6.49 million still fast growing population - since year 1996. Hope now I can have a chance to contribute back to the community by sharing what I see, what I know and what I learn in this wonderful place.


  • jasonhanjk

    Reply Reply May 15, 2009

    In Robert’s book, Guide to investing.
    He introduces the 90 / 10 rule of money.

    Where 10% of the population, control 90% of the world money.
    To be that 10%, investor must know how to buy asset as well as create asset.
    Most investor only know how to buy asset, that alone will not put them in the 10%.

    • ongkl

      Reply Reply May 18, 2009

      Yes, creating asset is always the most wonderful and exciting process, be it being a developer to build real estates, setting up a business to provide better goods and services to people, launching a company for public to invest through IPO and stock market, and many other ways…


  • JYeo

    Reply Reply May 26, 2009

    Hi OngKL, where can I download the wonderful real estate investment appraisal spreadsheet? (I’ve already signed up for newsletter :-)….)

    • ongkl

      Reply Reply May 26, 2009

      Hi JYeo,

      An email has been sent to you with the spreadsheet and its explanation note.


  • GiapSeng

    Reply Reply June 3, 2009

    1. There are more updates on the tan81 blog, on people’s opinion that the purchase does not really yield a very attractive return. In his blog, it pointed out that the purchase does not have enough margin of safety. Any comment?

    2. Can you send me the spread sheet also? I had signed up, but yet to get the spread sheet.

    Giap Seng

    • ongkl

      Reply Reply June 3, 2009

      Hi Giap Seng,

      Thanks for your update.

      1. You may want to read our follow-up article of the case study “What risk you may face if you borrow too much and how to manage it?”. In order to secure enough margin of safety, we suggest to keep monthly installment below 60% of rental income, so as to provide room to maintain a positive cash flow should interest rate be revised to double of the existing rate.

      2. You can download the spreadsheet free after subscribing to our newsletter. Anyway, a copy has been sent to you.


  • ccy

    Reply Reply July 26, 2009

    may i have a copy of it too ?

    • ongkl

      Reply Reply July 30, 2009

      An email with the file has been sent to you, CCY.


      • Raymond

        Reply Reply January 21, 2010

        Can I have a copy too? I subscribed to the newsletter but didn’t receive the file or the link to the file. Thanks.

        • michelle looi

          Reply Reply August 8, 2011

          i just signed up. Can i have a copy of the spreadsheet?

  • Michael

    Reply Reply September 22, 2009

    Hi OngKL,

    Your website is truly inspiring!! And it gives me lots of courage to start my asset building path.

    Can you explain a little bit more on the process of acquiring 100% loan?
    How are we going to know how much is the bank willing to loan for a specific property before applying for a loan with a ready S&P? I think this is the key procedure in getting a infinite return property.

    Please enlighten me.


    • ongkl

      Reply Reply October 8, 2009

      Dear Michael,

      To acquire 100% loan normally you may need more than one loan package, i.e. one for mortgage loan and another one for your down payment which is of higher interest rate.

      You can check with your banker or loan officer to find out the value of your property based on bank’s valuation. Just give them the address and they can tell you within a day how much loan amount you can get.


  • john

    Reply Reply December 20, 2009

    Where to download the spreadsheet? I need a copy of it, thks!:)

    • ongkl

      Reply Reply December 28, 2009

      Hi John,

      Once you subscribe to our newsletter you will receive a link to download it.


      • LienOoi

        Reply Reply December 6, 2011

        Can you pls send me a copy of the spreadsheet.


        • ongkl

          Reply Reply December 8, 2011

          Hi LienOoi, the spreadsheet has been sent to you.

  • Dave

    Reply Reply June 22, 2010


    i am recently arranging finance for a property i just bought… my situation is quite opposite, the market value is about 30K lower than the purchase price.

    i’ve checked with citibank and public bank… and both of the loan officers stated they can only offer up to 80-90% respectively based on their valuers stated open market value. as opposed to following the SPA price…

    does anyone know about this? or does anyone know any other banks who are able to follow the SPA price instead…


  • rachel yee

    Reply Reply January 12, 2011

    may i have a copy of it too ?

  • SY

    Reply Reply May 31, 2012

    Can I have a copy too ?

  • Ethan

    Reply Reply June 25, 2012

    Thanks for the tips. Btw, can you send me the a copy of the spreadsheet. Many thanks.

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