Looks like the market is in down trend. Monthly RSI analysis shows that the BSKL will drop some more.
Monday, March 3, 2008
Malaysia share market review: 2008/03/03
Looks like the market is in down trend. Monthly RSI analysis shows that the BSKL will drop some more.
Friday, January 25, 2008
Excerpts of The Millionaire Next Door
http://www.retireearlyhomepage.com/millbook.html
The authors make the important distinction between the truly wealthy and those that just spend a lot of money to look wealthy (i.e., those who are "all hat and no cattle.") Excerpts from and comments on the best parts follow:
Page 3. "The Seven Factors...Seven common denominators among those who successfully build wealth.
1. They live well below their means.
2. They allocate their time, energy, and money efficently, in ways conducive to building wealth.
3. They believe that financial independence is more important than displaying social status.
4. Their parents did not provide economic outpatient care. [(EOC) (i.e., parents did not provide substantial cash gifts to their children)]
5. Their adult children are economically self-sufficient.
6. They are proficient in targeting market opportunities.
7. They choose the right occupation."
Page 13. "Computing one's expected net worth:
Multiply your age times your realized pretax annual household income from all sources except inheritances. Divide by ten. This, less any inherited wealth, is what your net worth should be. For example, if Mr. Anthony O. Duncan is forty-one years old, makes $143,000 a year, and has investments that return another $12,000, he would multiply $155,000 by forty-one. That equals $6,355,000. Dividing by ten, his net worth should be $635,500.
Given your age and income, how does your net worth match up? Where do you stand along the wealth continuum? If you are in the top quartile for wealth accumulation, you are a PAW,or prodigious accumulator of wealth. If you are in the bottom quartile, you are a UAW, or under accumulator of wealth." Mr. Duncan in the example above is an AAW, or average accumulator of wealth
The authors have developed a simple rule of thumb: if your net worth equals the average calculated by the formula above, you are an AAW, if your net worth is twice the average, you are a PAW, if your net worth is half the average, you are a UAW. Whatever your income, if you want to Retire Early you must be a PAW.
Page 27. What the wealthy eat. The authors tell a hilarious anecdote about a study of high-net worth individuals they did for a large international trust company. To make sure the respondents were comfortable during the interview they rented a penthouse on Manhattan's East side and hired a gourmet chef to put together a menu of four pates and three kinds of caviar. They also served a high quality Bordeaux wine. Nine people attended this two-hour function. They occasionally glanced at the buffet but only ate the gourmet crackers, avoiding the pate and caviar. One respondent, a Mr. Bud, was offered the Bordeaux wine. Mr. Bud looked at the interviewers with a puzzeled expression and said:
"I drink scotch and two kinds of beer - free and Budweiser!"
It turns out that few millionaires are gourmets, but a large number of trust company officers and college professors are. The food was consumed by the latter after the millionaires departed.
Page 32. What the wealthy wear. The authors tell us that half of all millionaires they surveyed spent less than $399 on the last suit they purchased, less than $140 on the last pair of shoes, and less than $235 for their last wristwatch.
Page 55. "To build wealth, minimize your realized (taxable) income and maximize your unrealized income (wealth/capital appreciation without a cash flow)." Sound advice for any season.
Page 68. "It's easier to accumulate wealth if you don't live in a high status neighborhood." Surprisingly, it's easier to be affluent if you don't live in an affluent neighborhood.
Page 100. "Forty-two percent of millionaires the authors interviewed for their latest survey had made no trades whatsoever in their stock portfolios in the year prior to the interview. The so called active investor is one of the more difficult types of millionaires to find for interview purposes." Frequent traders take note: buy and hold seems to create more wealth.
Page 106. The Martin Method for selecting financal advisors. When a stock broker or other financial salesperson telephones Mr. Martin with an investment idea. He tells them to send a copy of their personal income tax return along with a list of what they had in their portfolio for the past three years. If stock broker has made more money from his investments than Mr. Martin, he'll invest with them.
Mr. Martin reports that so far none of the cold calling salespeople have submitted their income and capital appreciation data. Wonder why?
Page 113. How many millionaires indicated that their most recent vehicle purchase was used? Nearly 37 percent.
Page 116. How do millionaires buy their cars? "These people are not into status; they buy automobiles by the pound."
Page 141. Economic Outpatient Care (EOC). How much money should you give your kids and what will it do to them? Lots of examples and anecdotes, both amusing and frightening.
Page 211. Businesses and professions that will prosper as the number of wealthy families increase in the coming years. Estate and tax lawyers along with cosmetic surgeons are prominently mentioned.
Page 229. It's not easy to become wealthy. "That's why [the authors] are offended by people who tell the American public:
Just buy my educational/study-at-home kit and your new business venture will be a success."
Wade Cook. Repent!
Page 243. The six-figure doggie. The best anecdote of the book. The problems a millionaire dog and condo owner had with his neighbors in a luxury high-rise. You'll have to buy the book to read the punch line.
The authors make the important distinction between the truly wealthy and those that just spend a lot of money to look wealthy (i.e., those who are "all hat and no cattle.") Excerpts from and comments on the best parts follow:
Page 3. "The Seven Factors...Seven common denominators among those who successfully build wealth.
1. They live well below their means.
2. They allocate their time, energy, and money efficently, in ways conducive to building wealth.
3. They believe that financial independence is more important than displaying social status.
4. Their parents did not provide economic outpatient care. [(EOC) (i.e., parents did not provide substantial cash gifts to their children)]
5. Their adult children are economically self-sufficient.
6. They are proficient in targeting market opportunities.
7. They choose the right occupation."
Page 13. "Computing one's expected net worth:
Multiply your age times your realized pretax annual household income from all sources except inheritances. Divide by ten. This, less any inherited wealth, is what your net worth should be. For example, if Mr. Anthony O. Duncan is forty-one years old, makes $143,000 a year, and has investments that return another $12,000, he would multiply $155,000 by forty-one. That equals $6,355,000. Dividing by ten, his net worth should be $635,500.
Given your age and income, how does your net worth match up? Where do you stand along the wealth continuum? If you are in the top quartile for wealth accumulation, you are a PAW,or prodigious accumulator of wealth. If you are in the bottom quartile, you are a UAW, or under accumulator of wealth." Mr. Duncan in the example above is an AAW, or average accumulator of wealth
The authors have developed a simple rule of thumb: if your net worth equals the average calculated by the formula above, you are an AAW, if your net worth is twice the average, you are a PAW, if your net worth is half the average, you are a UAW. Whatever your income, if you want to Retire Early you must be a PAW.
Page 27. What the wealthy eat. The authors tell a hilarious anecdote about a study of high-net worth individuals they did for a large international trust company. To make sure the respondents were comfortable during the interview they rented a penthouse on Manhattan's East side and hired a gourmet chef to put together a menu of four pates and three kinds of caviar. They also served a high quality Bordeaux wine. Nine people attended this two-hour function. They occasionally glanced at the buffet but only ate the gourmet crackers, avoiding the pate and caviar. One respondent, a Mr. Bud, was offered the Bordeaux wine. Mr. Bud looked at the interviewers with a puzzeled expression and said:
"I drink scotch and two kinds of beer - free and Budweiser!"
It turns out that few millionaires are gourmets, but a large number of trust company officers and college professors are. The food was consumed by the latter after the millionaires departed.
Page 32. What the wealthy wear. The authors tell us that half of all millionaires they surveyed spent less than $399 on the last suit they purchased, less than $140 on the last pair of shoes, and less than $235 for their last wristwatch.
Page 55. "To build wealth, minimize your realized (taxable) income and maximize your unrealized income (wealth/capital appreciation without a cash flow)." Sound advice for any season.
Page 68. "It's easier to accumulate wealth if you don't live in a high status neighborhood." Surprisingly, it's easier to be affluent if you don't live in an affluent neighborhood.
Page 100. "Forty-two percent of millionaires the authors interviewed for their latest survey had made no trades whatsoever in their stock portfolios in the year prior to the interview. The so called active investor is one of the more difficult types of millionaires to find for interview purposes." Frequent traders take note: buy and hold seems to create more wealth.
Page 106. The Martin Method for selecting financal advisors. When a stock broker or other financial salesperson telephones Mr. Martin with an investment idea. He tells them to send a copy of their personal income tax return along with a list of what they had in their portfolio for the past three years. If stock broker has made more money from his investments than Mr. Martin, he'll invest with them.
Mr. Martin reports that so far none of the cold calling salespeople have submitted their income and capital appreciation data. Wonder why?
Page 113. How many millionaires indicated that their most recent vehicle purchase was used? Nearly 37 percent.
Page 116. How do millionaires buy their cars? "These people are not into status; they buy automobiles by the pound."
Page 141. Economic Outpatient Care (EOC). How much money should you give your kids and what will it do to them? Lots of examples and anecdotes, both amusing and frightening.
Page 211. Businesses and professions that will prosper as the number of wealthy families increase in the coming years. Estate and tax lawyers along with cosmetic surgeons are prominently mentioned.
Page 229. It's not easy to become wealthy. "That's why [the authors] are offended by people who tell the American public:
Just buy my educational/study-at-home kit and your new business venture will be a success."
Wade Cook. Repent!
Page 243. The six-figure doggie. The best anecdote of the book. The problems a millionaire dog and condo owner had with his neighbors in a luxury high-rise. You'll have to buy the book to read the punch line.
The Millionaire Next Door
The information is obtained from various sources online:
http://en.wikipedia.org/wiki/The_Millionaire_Next_Door
The book The Millionaire Next Door: The Surprising Secrets of America's Wealthy (1996, ISBN 0-671-01520-6) is by Thomas J. Stanley and William D. Danko.
This book is a compilation of research done by the two authors in the profiles of 'millionaires'. In this case they used the term 'millionaire' to denote U.S. households with net-worths exceeding one million dollars (USD). The results that they gathered were quite surprising.
Contents
1 UAWs Versus PAWs
2 Main Points
2.1 Spend Less Than You Earn
2.2 Avoid Buying Status Objects or Leading a Status Lifestyle
2.3 PAWs Are Willing to Take Financial Risk if it is Worth the Reward
2.4 Economic Outpatient Care
3 Related Publications
4 Links
UAWs Versus PAWs
The authors suggest that an "Average Accumulator of Wealth (AAW)" should have a net worth equal to one-tenth their age multiplied by their current annual income from all sources. E.g., a 50-year-old person who over the past twelve months earned employment income of $45,000 and investment income of $5,000 should have an expected net worth of $250,000. An "Under Accumulator of Wealth (UAW)" would have half that amount, and a "Prodigious Accumulator of Wealth (PAW)" would have two times.
Most of the millionaire households that they profiled did not have the extravagant lifestyles that most people would assume. This finding is backed up by surveys indicating how little these millionaire households have spent on such things as cars, watches, suits, and other luxury products/services. Most importantly, the book gives a list of reasons for why these people managed to accumulate so much wealth (the top one being that "They live below their means"). The authors make a distinction between the 'Balance Sheet Affluent' (those with actual wealth, or high net-worth) and the 'Income Affluent' (those with a high income, but little actual wealth, or low net-worth).
Main Points
Spend Less Than You Earn
If you are always spending up to or above what you earn, you will never increase your net worth no matter how much you make. The author discusses being prugal: prudent and frugal.
Avoid Buying Status Objects or Leading a Status Lifestyle
Buying expensive imported vehicles is poor value and you will constantly need to buy the newest model. Buying status objects such as branded consumer goods is a never-ending cycle of depreciating assets. Living in a status neighbourhood is not only poor value, but you will feel the need to keep buying status objects to keep up with your neighbours, who are mostly UAWs.
PAWs Are Willing to Take Financial Risk if it is Worth the Reward
PAWs are not misers who put every penny under their mattress. They invest their money for good returns, and will consider riskier investments if they're worth the reward. Many put money not in the stock market, but invest in private businesses and venture capital. They do not gamble or speculate on long-odds stocks.
Economic Outpatient Care
The authors also make the interesting observation that UAWs tend to have children who require an influx of their UAW parents' money in order to afford the lifestyle that they expect for themselves, and that they are less likely to have been taught about money, budgeting and investing by their parents.
Related Publications
This book is also available unabridged on audio tape and CD (4-Disc set) format, read by Cotter Smith and published by Simon & Schuster. In addition, one can also find this audio programme available on the iTunes music store for download. The programme is also unabridged.
Thomas J. Stanley has a second book, The Millionaire Mind, which gives a much more detailed account of the mindset that these people have.
Links
Excerpt of the first chapter (logon required) http://www.nytimes.com/books/first/s/stanley-millionaire.html
First chapter can also be found here: http://www.washingtonpost.com/wp-srv/style/longterm/books/chap1/millionairenextdoor.htm
Review of The Millionaire Next Door: http://www.staywealthy.com/reviews/books/the-millionaire-next-door
UAW/PAW Net Worth Calculator: http://www.retireearlyhomepage.com/millbook.html
Millionaire Next Door Calculator: http://www.banksite.com/calc/wealth
Another UAW/AAW/PAW Calculator: http://www.booleanlabs.com/Pages/SoftwareMillionaireNextDoorCalc.aspx
http://en.wikipedia.org/wiki/The_Millionaire_Next_Door
The book The Millionaire Next Door: The Surprising Secrets of America's Wealthy (1996, ISBN 0-671-01520-6) is by Thomas J. Stanley and William D. Danko.
This book is a compilation of research done by the two authors in the profiles of 'millionaires'. In this case they used the term 'millionaire' to denote U.S. households with net-worths exceeding one million dollars (USD). The results that they gathered were quite surprising.
Contents
1 UAWs Versus PAWs
2 Main Points
2.1 Spend Less Than You Earn
2.2 Avoid Buying Status Objects or Leading a Status Lifestyle
2.3 PAWs Are Willing to Take Financial Risk if it is Worth the Reward
2.4 Economic Outpatient Care
3 Related Publications
4 Links
UAWs Versus PAWs
The authors suggest that an "Average Accumulator of Wealth (AAW)" should have a net worth equal to one-tenth their age multiplied by their current annual income from all sources. E.g., a 50-year-old person who over the past twelve months earned employment income of $45,000 and investment income of $5,000 should have an expected net worth of $250,000. An "Under Accumulator of Wealth (UAW)" would have half that amount, and a "Prodigious Accumulator of Wealth (PAW)" would have two times.
Most of the millionaire households that they profiled did not have the extravagant lifestyles that most people would assume. This finding is backed up by surveys indicating how little these millionaire households have spent on such things as cars, watches, suits, and other luxury products/services. Most importantly, the book gives a list of reasons for why these people managed to accumulate so much wealth (the top one being that "They live below their means"). The authors make a distinction between the 'Balance Sheet Affluent' (those with actual wealth, or high net-worth) and the 'Income Affluent' (those with a high income, but little actual wealth, or low net-worth).
Main Points
Spend Less Than You Earn
If you are always spending up to or above what you earn, you will never increase your net worth no matter how much you make. The author discusses being prugal: prudent and frugal.
Avoid Buying Status Objects or Leading a Status Lifestyle
Buying expensive imported vehicles is poor value and you will constantly need to buy the newest model. Buying status objects such as branded consumer goods is a never-ending cycle of depreciating assets. Living in a status neighbourhood is not only poor value, but you will feel the need to keep buying status objects to keep up with your neighbours, who are mostly UAWs.
PAWs Are Willing to Take Financial Risk if it is Worth the Reward
PAWs are not misers who put every penny under their mattress. They invest their money for good returns, and will consider riskier investments if they're worth the reward. Many put money not in the stock market, but invest in private businesses and venture capital. They do not gamble or speculate on long-odds stocks.
Economic Outpatient Care
The authors also make the interesting observation that UAWs tend to have children who require an influx of their UAW parents' money in order to afford the lifestyle that they expect for themselves, and that they are less likely to have been taught about money, budgeting and investing by their parents.
Related Publications
This book is also available unabridged on audio tape and CD (4-Disc set) format, read by Cotter Smith and published by Simon & Schuster. In addition, one can also find this audio programme available on the iTunes music store for download. The programme is also unabridged.
Thomas J. Stanley has a second book, The Millionaire Mind, which gives a much more detailed account of the mindset that these people have.
Links
Excerpt of the first chapter (logon required) http://www.nytimes.com/books/first/s/stanley-millionaire.html
First chapter can also be found here: http://www.washingtonpost.com/wp-srv/style/longterm/books/chap1/millionairenextdoor.htm
Review of The Millionaire Next Door: http://www.staywealthy.com/reviews/books/the-millionaire-next-door
UAW/PAW Net Worth Calculator: http://www.retireearlyhomepage.com/millbook.html
Millionaire Next Door Calculator: http://www.banksite.com/calc/wealth
Another UAW/AAW/PAW Calculator: http://www.booleanlabs.com/Pages/SoftwareMillionaireNextDoorCalc.aspx
Tuesday, January 22, 2008
Share selection
| http://www.nanyang.com/index.php?ch=9&pg=29&ac=807484 - 财经焦点 - | |
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| 股市无常钱押何方？ 2008/01/20 ●刘慧欣 |
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大马股市近期大起大落，想要在股市赚钱过肥年的市井小民可要注意了。
本期的投资专题，将带领读者赴一场“股宴”，深入浅出，实际受用。
谁适合买股？
市场上的投资工具各有优缺点，投资股票的好处又有哪些？
理财师黄凯顺在接受《南洋商报》的专访时指出，投资股票容易套现，而且投资成本不高，可以根据本身的经济状况进行小笔投资，伸缩性比较大。
然而，股票的风险也较高，因此投资者需对股票有了初步的概念之后，才开始投资。许多散户的通病，就是在不了解股票的情况下，人云亦云的贸然进场，结果蒙受损失。
“以开车来说，如果你不懂得开车，就安分守己的走路，如果随便跳上去驾，那容易发生意外，这样的道理放在投资股票皆准。”
“此外，在探讨‘谁’较适合投资股票之前，需先探讨投资者的投资目标。我认为，股市是一项长期投资，要在短期牟取暴利的投资者，并不适合投资股票。”
黄凯顺以结婚为例，他说，如果一人要筹集结婚所需的资金，并不适合投资股票，因为结婚计划不是十年八年的大计。
再者，不同的投资者也适合不同的股票类型。一般上，蓝筹股的风险不大，基本素质强，但是上涨空间比较小，短期的涨幅不高，适合风险承受度较低的投资者。
反观小资本股的涨幅却很大，可以在短时间内涨几倍，但是下跌幅度也是相对的高，风险承受度较大。
进场费用
股票经纪的佣金
任何股票买卖都需付佣金给股票经纪，但有关数额可由客户及股票经纪自行磋商，最高的费用为0.70％，其他费用如下：
此外，投资者还需支付：
● 结算费用(交易价值的0.04％，每合约的最高数额为200令吉，最低数额为10令吉)
● 印花税（每1千令吉会抽取1令吉或更低的费用，最高数额为200令吉）
● 登记费用（从股票证明书中抽取3令吉，付给有关公司）
数据看透透
投资者在进行股票投资前，需先清楚了解一家公司的业务，并从他的业务状况衡量股票是否值得投资。
专业股市投资者冯时能，在著作《冷眼·30年股票投资心得》中指出，在参股前，必须先了解：一、你所投资的公司是做什么生意；二、探讨生意是否有无前途；三、管理层是否可靠；四、公司的财务状况是否稳固。
这些资料，一般都能在年报、招股书或大马交易所的网站取得。
须了解公司业务
了解公司业务，有助投资者在大环境下评估该股是否值得投资，若发现公司前景有问题，那便应该作出正确的选择。
除了解公司业务之外，投资者也可通过本益比（PER）、每股净值（NTA）、周息率（Dividend Yield）作为评估股票的标准。
本益比（股价÷每股盈利=本益比）
本益比其实就是多少年回本的意思。如果一直股票的本益比为5倍，意即你的投资可在5年内回本。
黄凯顺说，一般上投资者认为17倍以下的本益比便拥有涨幅，其盈利也有空间，是值得投资的股项。
但是，这却非金科玉律，一些很有前景的公司，即使本益比高，投资者也认为值得投资，可以买进。
每股净值（股东基金÷股票数目=每股净值）
除了本益比，每股净值也是评估股票是否值得投资的工具。每股净值，也称每股净有形资产，若一家公司没有无形资产（如商誉、商标、品牌等），有形资产总值就等于股东基金。
黄凯顺说，投资者可将每股净值和当天的股价相比，来评定该股的股价是否处在合理水平。
如果每股净值低于市价，那就是被低估，反之亦然。但这也要视情况而定，一些夕阳行业的前景黯淡，虽然被低估，也不一定值得购买。
周息率（股息额÷股价X100=周息率）
一家公司若派发10％或每股10仙的股息，以目前的市价（2令吉）计算，周息率为5％，也就是说每100令吉的投资，可获得5令吉的股息。
冯时能指出，投资者一般将周息率跟银行的定期存款利率相比，来决定是否值得投资。
公司派发股息，是处理盈利的方式之一。发展中的公司一般将部分盈利以股息方式分给股东，其他则保留在公司内作为拓展用途。
多低才算低？
股票大跌时，很多人都会感到惊惶失措，急急抛售手中的股票；股价大好的时候，投资者又因心理因素趁热进场，往往造成“买高卖低”的情况，这也是一般散户常犯的通病。
静守股市回弹
其实，真正懂得投资股票的投资者，在股市大跌时，反而非常开心，因为他们能以更低的成本买入股票，慢慢守到到股市回弹，获得的报酬也更大，这种方式就是我们常听到的“趁低买入”。
黄凯顺说：“以800点和1500点相比，800点很低，可是上涨空间很大，投资者在这个时候买，长期等待之后，股价攀升的潜能很高，那么投资者就成功以较低的成本买入，往后股价回弹越多，赚的也就越多。”
“反观1500点，相比800点，它的上涨空间小了，投资者反而要小心它回跌。”
先设底限
学习趁低买入固然重要，但多低才算低，投资者要如何拿捏？
黄凯顺指出，有些投资者会在投资一只股之前，先为它设下底限，若股价低过了底限，就“够低”能趁低买入，达到投资目的。
不理外因平均成本
黄凯顺在接受本报专访时，提出了平均成本投资法（Dollar Cost Averaging），此投资法是有计划的进行长期投资，不为其他因素影响投资计划，让投资过程更轻松。
“我们很难判断股市短期的走势，但透过这项长期投资法则，持续性的进行投资，即使股市大跌仍处变不惊，并有耐心的等到股市回弹，获益也将更大。”
他指出，若参考大马股市多年来的走向，会发现我国的股市处于上涨趋势。只要对本国经济有信心，就该相信股票跌了会回弹。
但他也提醒投资者，必须注意一家公司股价的走势。
若一家公司过去的股价记录，并不跟随大市步伐起伏，那便要特别小心，投资者应分析该股究竟是本身实质出现问题，还是反映出大市走势，从中作出明确的选择
Sunday, January 20, 2008
500% return in 6 years in share market
My friend gave me the following tips on shares selection which led to his achievement of 500% return in 6 years:
1) Company management/ head
2) Company position in the field
3) Business position - is the business expanding?
4) Financial status - cash flow, PE, etc
5) Others: liquidity, government link, etc.
1) Company management/ head
2) Company position in the field
3) Business position - is the business expanding?
4) Financial status - cash flow, PE, etc
5) Others: liquidity, government link, etc.
Wednesday, January 2, 2008
Positive Cash Flow in Property Investment
Where can I find cash flow positive properties?
Positive cash flow on 100% financing? Not impossible, but highly unlikely. Unless you can buy at a significant discount, or much higher rents can be supported once you do buy, your chances of positive cash flow are slim and noneExample:
bank installment is 1430,
monthly installment + maintenance = 1430 x 12 = 17160
Monthly rental = 1450+200 =1650 x 12 = 19800
rental is 1450 add 200 maintenance making it 1650
Some rule:
Higher downpayment == Lower monthly loan repayment == higher positive cashflow.
But higher downpayment == higher positive cashflow != higher COC.
Story to learn: (my refer to the story provider)
Here's my 1st property story, and I believe its rather unconventional :
Bought my run-down 3r/2b condo for 140K 2 years ago. Location is superb that it took me less than 1 month to rent it out, and I didnt fork a single cent to rent this out, as I only advertise online. Im renting below market value to my current tenant, and boy he is damn happy to learn that I decided not to jack up the rent. My tenant is a gem, so I'll settle for lower income for better peace of mind. No late payments, and he doesnt bug me at all, what more can i ask? :)
Why I bought the property?
1. Superb location, close to LRT & amenities.
2. Good, positive yield.
2. Other similar condo's in the same area cost minimum 200k, but rental is about the same.
3. I got a good price for it, and I believe even at market rate it was undervalued given all the good fundamentals.
4. I luv the condo and the area, hence I really dont mind staying in it if things go bad.
5. There were at least 3 commercial centers coming up within the area (all within 5 min walking distance), and early this year a developer is building a grade A shopping + office complex RIGHT NEXT to my condo. There plenty room for capital gains over the next few years.
6. Decent management + cheap maintenance fee (RM0.12 for a condo).
d/p = 16K (Market value was 165 back then, now slightly higher if im not mistaken )
All other charges (S&P, Legal fees, quit rent ,TNB deposit , 3month maintanence+service...) = 10k
renovation = 3K
Total capital = 29K
Total cash I use to buy this property = RM 0 (Some hanky-panky ;) which I doubt anyone would want to elaborate further...)
Yearly instalment + maintanence + quit rent + assesment fee's = 1040 x 12 = 12480
Yearly rental = 1120 x 12 = 13440 (Market rental is about 1.2k-1.3k)
Nett cash income per anum = RM960
Nett return or COCR = 13440-12480 = 1200/0 x 100% = ???
Since my COC denominator is RM0, this property has NO COCR. So technically, I didnt pay anything to buy a property that gives me RM1k income per year.
COC = Cash receive / cash invested
If the cash invested = ZERO due to positive cash flow, you get the highest return.
ANY property can produce positive cashflow, as long as you put sufficient downpayment.
Or,
take a longer loan tenure aka 30 years loan. Big down payment is NOT the only way.
Note:
But it doesnt mean that all cashflow positive properties will give you fantastic COC. You should be able to understand this if you use my example to calculate the COC based on 2 scenario's :
a. Scenario 1 - I use 10% down payment to purchase the property.
b. Scenario 2 - I use 50% d/p
Notice the diff between the 2 COCs? ;)
One of the way to achieve break even cash flow is to put a HUGE down payment. Let's take your example and I have break even cash flow by putting down payment of 200K. If I sell the house after 30 years for 100K without putting additional money in, I lose money.
You can make money or lose money with positive or break even cash flow too. It all depends on how big is the down payment.
Additional points for considering to invest:
2 main rule when looking for rental properties for NOW, apart from the location :
1. COC return must be at least 7% p/a.
2. Must be positive cashflow at 90% financing for 25 years.
Break even in cash flow, you still gain
I don't view as don't pay anything to sustain the property as being "break even", ok let say you don't pay anything for and earn nothing extra from the property aka "break even" to sustain the property because the rental is just right to cover everything, 30 years later the property is paid up just by renting alone, and what you get? a FREE HOUSE that worth 100k++ of value!even you sell it under market price you still have hefty amount of money extra! is that a break even?!
Friday, December 21, 2007
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