KCLau's Money Tips Forum

[leon]

Hihi... i am considering how much ratio to commit in future for home loan repayment VS. investment.

is there any tools can use to estimate necessary investment return which could higher than the loan interest (taking into account the compunding interest over time). or any guideline? (ie. XX% returns required to cover ZZ% interest)

thanks..

[KCLau]

Hi Leon,

It is really not a simple calculation you are looking at. Because many things change over time - the interest, the BLR, the refinance package, the real estate market movement etc.

However, the rule of thumbs is to be able to invest for positive cash flow. Say your property is providing rental income of RM1000/month. Deduct all the necessary expenses (vacancy period, quit rent, repair etc), you shall get a positive return. If the total expenses is <RM1,000/month, it is a great buy.

If we invest in real estate property to make our cash flow even tighter, it will be very risky. We can't afford the further interest raise. We can't afford to let the house vacant. And we can't buy too many properties because our cash flow is limited.