Jan 13, 2011
Q&A: Will I have to use years of rental income to cover initial repairs?
Dr Peter Yee started out as an educator. Along the way, he attained a long list of degrees including a Doctorate in Business Administration (DBA) from Golden State University, USA, majoring in Investment Management, a Master in Business Administration (MBA) from the University of Dubuque, USA, a Diploma of Computer Education from Hyogo University, Japan and a Bachelor of Science (Hons) in Chemistry from the National University, Malaysia.
Over the years, he became a management training consultant, stock broker/remisier, restaurant owner, property investor and property investment coach. Today, he is financially free and has “retired” from full-time work. Yee is the author of property investment books titled, You Can Become Rich in Property and The Certain Way to Life’s Riches.
He runs How to Make Money from Residential, Commercial and Auction Property workshops in Malaysia. For more information on upcoming workshops, SMS <Residential or Commercial or Auction> <Your Name> <Email> to 017-2491077 or visit www.balancelifesuccess.com
Dear Dr Yee,
I refer to your question and answer column.
I wish to highlight that those interested in buying houses or apartments must have disposal income of about RM2,500 to RM 3,000 per month. If you buy an apartment that is 20 years old, there is cost of repair between RM 20,000 to RM 30,000. Cost of labour charges has increased.
If you intend to lease out to tenants, the cost for repairs can be high. After deducting assessment and maintenance charges, two years of rental income may not be sufficient to cover your cost of repairs.
Regards,
Lim B.P.
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Dear Lim B.P.,
From the bank’s perspective, the eligibility for a housing loan will depend not only on a person's income statement but also the person's ability to pay. The loan amount is based on the person's monthly loan repayment; should be less than 30% of his/her monthly income. Some banks even allow a person to borrow up to 40 years or stretch their loan up to 70 years old. That means a younger person can stretch their loan longer and thus lowering their monthly repayments.
I have come across a young employee earning less than RM1,500 who could purchase an apartment that costs RM80,000. Therefore, it is not accurate to assume that those interested in buying houses or apartment must have disposal income of about RM2,500 to RM3,000.
For low- to medium-cost apartments, it is not necessary to fully furnish it before renting it out. Thus, one does not require a bigger capital outlay. From my experience of owning several apartments that are more than 20 years old, the repair and renewal costs has been consistently less than RM3,000 for the plumbing, lighting and painting, which is only a few months’ rental income and not years of rental income.
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