Finding the right property can be quite a challenge in this day and age, with prices going through the roof and our currently bad economy. It will take quite a bit of time and effort, but when you finally pin point one, all the blood and sweat put into it will feel worth it. However, that’s not the end of it, you’re most likely going to have to take a loan from a bank.

If you’re an investor, leveraging on such funds can help you quickly multiply and increase your investment returns to steadily build long term wealth.

So, how do you calculate your return of investment (ROI)?

1. Rental yield per annum
Percentage return of rental income from the property excluding the expenses incurred from property maintenance against the total purchase price of the property.

Here is an example on how to calculate this; let us assume you purchased a property for RM400,000 inclusive of all related costs. You receive rental income of RM1, 800 per month and incur total expenses of RM1,500 per year to maintain your property. Thus, the Gross Rental yield is calculated as;

RM1,800 x 12 = RM21,600 per annum rental income

(RM21,600 / RM400,000) x 100 = 5.4% per annum

The Net Rental Yield is calculated as;

(RM21,600 – RM1,500)/RM400,000 x 100 = 5.02% per annum

If you take an interest-only loan of RM300,000 to finance your property and the financier levies an interest of 6% per annum fixed for the entire financing tenor, then the loan will be repaid on its financing maturity or when the property is sold if that occurs earlier.

Annual interest rate is RM18,000.

2. Net Leveraged Rental Yield
This takes your property financing in account when calculating the rental yield.

Your capital cost is the difference between your purchase price and your borrowing, for example, RM400,000 – RM300,000 = RM100,000.

This is calculated as (RM21,600 – RM1,500 – RM18,000)/RM100,000 x 100 = 2.1% per annum.


(中文版请看这里:http://www.durianproperty.com.my/blog/article/1142/)