What to invest in if you have not much of money in savings account? Perhaps buying a low cost house to collect rent is not a bad idea. Example: Setia Alam’s low cost apartment is worth your consideration. How good is the return of investment?
Let’s take Semarak Apartment in Setia Alam as case study. It was developed by SP Setia Group, Malaysia’s top property developer for 4 consequent years from 2005 to 2008, ranked by The Edge.
- Project: Semarak Apartment @ Setia Alam, Shah Alam
- Launching Price: RM42,000
- 10% Down Payment: RM4,200
- Built-up: 682 square feet
Fixed Deposit vs. Property Investment
Let’s do a comparison using a simple investment calculation in Microsoft Excel templates to compare how much money you can make from fixed deposit and property investment.
Option 1: Put Money in Fixed Deposit Account for 15 years (assume FD interest rates = 3% p.a)
Option 2: Invest Money in Low Cost Apartment for 15 Years
Analysis
The housing loan calculator on above shows that monthly instalment = RM309.42. Is it difficult to get a tenant who willing to pay their rents higher than RM309? I don’t think so.
Cannot get higher rental rates? No problem, then I assume the rental is only about enough to cover monthly loan instalment and other expenses, which means it is a zero cash flow investment.
If this is the case, can a property investor still be able to make money from the investment?
Refer to above table, the home loan will be fully paid on the 180th month (15 years). Then, you get the full ownership of the property with initial down payment of RM4,200 only.
That means your RM4,200 has appreciated to RM42,000 (but don’t forget, this calculation is made with assumption that the property value to be maintained at the same price after 15 years from now, which is normally less likely to happen)
Conclusion
If you invest your RM4,200 in fixed deposit now, it becomes RM2,343.00 after 15 years. But, by investing in low cost apartment, the future value of investment for the same RM4,200 is worth RM37,800 after 15 years because tenants have been working hard to pay off your house loan every month.
So, interested to invest in low cost housing now?
Related Articles: Buy SP Setia Alam Property for Investment or Own Stay
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{ 13 comments… read them below or add one }
Im interest in low cost apartment, can I have more detail on the low cost apartment.
pls provide me more information on property investment.
i m really interest to buy this house pls know me a contact details
Hi Horlic,
Thanks for your sharing. I wish to ask for your advice here. When we about talking about yearly ROI % ( positive cash flow ( rental – off all related expenses such as loan + insurance + quit rent+ accessment ) x 12 ) / invested capital ( downpayment + renovation + lawyer fees etc )
how many % of roi will consider as good deal?
7% onwards?
Low cost apartment is meant for the needy..low income earner. We should not steal their rights!
I’m intrested in the low cost of Semarak. Please let me have the contact detail.
may i have more detail of semarak and the contact thanks
I would like to buy a low cost flat at Bandar Parklands, Klang. This is my 1st time buying house. I buy it for rent to others. So, I would like to ask your opinion about the low cost flat in Parklands. Worht for money or not. Thx
No, i meant RM 42000 low cost flat in Parklands, Bdr Bukit Tinggi 3. It is ok? If compare the low cost flat between Setia Alam and Parklands, which one u recommend? Thanks for your opinion ^_^
I’m intrested in the low cost of Semarak but in kuala lumpur setapak . Please let me by my email .
l would like to buy a low cost flat at bandar setia alam,klang,
please let me a contact details.
thanks
What kind of details? I assume you are asking on the good location to invest in low cost apartment below RM150K. I suggest you may keep an eye on low cost apartment surrounding Segi College at Kota Damansara, Subang USJ, Pusat Bandar Puchong, Sunway, and etc.