Property investment Malaysia | WHY you lose money 😨❗️

hi CF Lieu here from CFLieu channel now
in this video I want to show you how not to lose money in real estate property
investing in Malaysia and to do that I want to actually show you two scenarios
whereby first scenario you buy a property for investment from a property
developer let’s say at 600,000 okay 600,000 that’s it right no discount no
cash rebate just fair price 600,000 the market price around the aviation so
600,000 and then the other scenario would be where you buy the same very
same property but then on the Sales and Purchase Agreement price it was actually
1 million but then the property developer actually give you of 40
percent of 400 thousand cash rebate and I’m going to give you these two scenarios
and compare the difference right which one is slightly to make you money in the
next 10 20 30 years which one is slightly don’t so to start off with this
let’s just imagine scenario one writes another one I say just imagine you know
we have to make some assumption to make this calculation easier simpler is that
I’m going to ignore all renovation costs and all other sunk costs are the cost of
real property getting taxed when you actually sell your property real estate
agencies in a renovation cost and all these up back end or front end all the
cost involved I’m gonna just join just ignore that right just ignore that but
you know that that is not practical but then for the sake of the point I want to
make this other sunk cost or renovation cost and what other cost other causes
involve it’s not significant compared to the point or the load amount or the
property value that you are buying so in this scenario one could imagine you go
to a property developer you buy a six hundred thousand property which is again
today’s internal model it should be considered as a mass-market property so
imagine you’re not even taking a my division loan it second hundred percent
loan just to simplify the operation okay now just imagine you
probably like that at least a 10,000 income per month before when you buy a
six hundred thousand property you get hundred percent alone and then the
interest is about 4.5 percent in 4.5 so what you have is two new is also equal
to ten years right ten years then you think why 10 years just stay maybe why I
choose ten years because Pena’s Pena’s is almost unheard of right even though
if you are you you always want to stretch your your your monetary duration
the duration of the loan to as long as possible so you lower your money
iteration but as you know that caused you to pay more interest but just
imagine stay with me second 1000 you just say that all right
I’m going to just pay that for 10 years right and money instruments about 6,000
– which is okay manageable no problem okay no problem
okay two one nine ten thousand or more per month even on 8,000 more per month
so what happened is that in this scenario one you end up paying about one
hundred forty six thousand for the next ten years from today to the bank so just
make a note on that in Scenario one you would be paying 141 for 6k of interest
it’s going to fund and make it maybe a bit smaller okay but in total you will
have taped 746 in total 746 K cotton you pay to the bank in seminar 1
now how about another – if you just imagine if you were to have like the
selling price was a 1 million again just a hundred percent right a marginal
financing but I’m not going to take 10 yrs anymore because if you say 1 million
then the bank is you want to approve you based on 1 million of selling price even
though you have cash rebate but but the bank when you’re selling application
depends on what you value based on your debt service ratio based on your
your purchase price now to actually talk about this to me let me explain more
about debt service ratio and to a certain extent about loan compression
just click on click on what is popping up on the upper right-hand corner should
be over here so you actually later can actually go to that at the lesson of
mind to understand you know what loan compression and and that’s the ratio but
I don’t want to wreck it country you just jump right back into here now it
doesn’t make sense if you have a one you buy it a 1 million valuation and you get
100 percent money on financing which means a 1 million loan it becomes 10
years become like 10,000 per per month and make sense so normally what people
will do and this is where you get a 400,000 cash rebate right so actually
the property could be just like two hundred thousand but because you get you
ask for 1 million kind of a purchase price and you take loan out of that look
at four thousand woohoo free money and then what happens is you are going for
let’s say that the years and then we are going to calculate that again now this
very manageable because every menu is given only need to pay like five
thousand okay so five thousand and here and scenario one is about six thousand
something again doesn’t make a lot of difference but when it comes to total
payment over here it makes a lot of difference because in this arrangement
you are actually paying 824 K interest to the bank and in total you have you
will have paid 1.8 million in total of a loan to settle the loan plus the
interest even though your loan actually is 1 million in the beginning but you’re
actually playing like paying like 800,000 interest over a period of 30
years to the bank okay now here’s the here’s the killer killer part right now
just imagine this imagine the valuation the fair value of that property the fair
value of that property at the point when your purchase is a second about them so
in Scenario one you we are actually buying that
imagine you’re buying debt at a fair value per market price or a reflector
market I know discounts and detain no no excessive or
Nicholas fancy marketing tactic of Cash Rebate and all that so just it is what
it is however in the second arrangement they property developer can actually
give you four hundred thousand cash rebate so 1 million in grade four
thousand cash rate because the actual value profits only probably like six
hundred thousand but you are taking another four hundred thousand of extra
loan now it is not really because ultimately you need to pay like four
point something interest per year out of that loan so it’s not free money
although it sitting in your account and you are the one they actually need to
bear this now jumping back right into here if you have a fair value property
price at a point of you buying it now is six hundred thousand let me answer in
ten years in ten years you’ll have thought you would have paid the bank set
on your loan to settle the interest of 746,000 so if in 10 yrs Integra is
another one if you were to even sell it at eight hundred K or even more
realistic maybe at 1 million actually if you compare what you have paid for the
past ten years German of 5060 thousand you sell eight hundred thousand 1
million already again making money make your money out of that
okay make sense right make sense so even like for example you could actually sell
it as soon as fifty you know so much so let’s say minimally you can actually
only able to search under fifty thousand this is just break even with the total
loan pay right auto loan debts pay for the past ten years now what you need to
do is that at the point of entry second a thousand you just need this 100k to
actually appreciate to 750 K in ten years in order for you not to lose money
as simple as that so let me ask you a cop a property appreciation price of one
of the PK okay in ten years that is equivalent to around
115 10 years so that you couldn’t to around to 150 K over your original price
600 K which is around 25% of appreciation in 10 years we despite
really – if you think about it right 25% so one year you need to appreciate the
Ottoman like to two point something percent it is very doable and that’s how
not you you don’t lose money now have a scenario – now scenario – sonata – is
that you have to look at the fact that in the next 30 years you will have paid
close to this 1.8 million total and I have not really included in all the
renovation costs or indirect incidental because this easily can add up all the
legal fees and all that easily add up equally two million but just low-balling
it here or 1.8 million so and you know that in either of this arrangement
whether there are four hundred thousand cash rebate or not the property doesn’t
change the fact that the property values at least six hundred thousand right six
hundred thousand so when you have like six hundred thousand okay at the kind of
project now in the next 30 years you will have paid 1.8 million so I would
say that now your hurdle is bigger because 600,000 you would have need the
property to go to one point three one four eight million in 30 years for you
to actually just pretty even this regarding or other incidental costs
which actually practically you can’t because there’s always this sunk cost
right so six hundred thousand one point eight million property value that is
like three hundred percent of appreciation or three times although is
in the years so every single year every single year can I say approximately just
simple do a simple average about compounding three hundred percent in the
years we divide by 30 every year probably you need like ten percent
appreciation for the property actually a lot
the public actually appreciate 10% per year now there is a lot and there is not
really not easy to do but that is the fact that you need in order for you to
only break-even okay and then the other other things come
the other problem comes because for a property in ten years time a property of
some under fifty thousand is not a one it’s probably still very affordable or a
hundred thousand but in 30 years time again I don’t know what’s going to
happen in 30 years but as what we can see you today just you know just a
property maybe an apartment or condo that cost 1.8 million is unthinkable
maybe that is very common at the point of time but here’s the fact right who
wants to pay actually 1.8 million for a property that is already 30 years old
think about that property at that point of time might cost one for 8 million yes
that’s fine inflation yes I understand but can you imagine if you people have 1
by 8 million they would rather buy a newer property at that point of time 30
years which has I don’t know how the world actually change whether you’re you
and I are or is still here or not whether there’s any world wars even like
world war two or three right so and I don’t I don’t want to even talk about
like weather in the next 10 20 30 years whether your rental cash flow will be
positive or negative is negative then it will be a double whammy to this
this calculation okay and of course when you say that you had like four four
hundred thousand K of cash back you can say oh I can use that money to roll fair
enough if you really know how to let’s say this one a thousand is a cash right
but the interest I mean if you’re just going to put back that that in your loan
account that reduces the outstanding principal a hundred thousand which the
4.8% is charged on your six hundred thousand loan and reducing rather than 1
million on which it’s fair okay which is fair but then again you are not really
again that doesn’t make any difference if you were to actually buy this
property following scenario one despite their property 600,000 no fancy
technology cash rent no fancy discount just just go there right but for most
people actually actually want to we found a thousand k of cash back
they’re going to use that for something else right now unless you could actually
generally turn out there for a thousand which is that lift double okay I get
double higher or even blue or a two three percent higher then what the the
interest are there for the patent is a four point five percent then you would
that would be there will be a lost opportunity cost over there now for very
easy way to a gigantic six seven percent per annum very consistently this is how
actually people playing this game that you putting that Cash Rebate in a very
stable instrument which is called real estate investment trust REIT instrument
as a class if you six seven percent very consistent every eligible put it there
liquid enough anytime they spot an opportunity or situation need to use the
money they can actively draw the front a thousand or partial of the upon a
thousand I just do whatever they want to do so to really understand how people
actually play this you see like real estate investment trusts or REITs as a
temporary parking place for your cash back amount from buying a
brick-and-mortar property just head on to click on this description below or
what is shown below go on to reach method and then you can join join a
webinar and then our actually totally free give you insights of how you can do
that how very in front of the investor actually doing that so it’s about
shifting your money around right to something that is still property that
property co related but it’s liquid enough so that you can sit there before you
actually use that or part of that money for a thousand a to make a big project
so the check on on that links description below or just go see below
this video on this line right so I’m just coming back to here I’m just to
tell you now it has to make sense right so another one for me
it really doesn’t make a lot of sense because again I say property needs to
appreciate by that much about 1.8 million into the just so that you can
actually break even because a lot of people forget for go
in the in the 30 years how much they would have paid and how much your
property would need to actually appreciate in order for you just to pay
even which is why people say that why I can’t feel my property is making money
but then they fail to at least see this angle of things they said okay
ultimately if I will make big money I will make the grundy I will only cover
the other positive equity right at the end of it I can sell it but it’s
very hard edges sell this property may be in the US and one is because it’s all
second is because for that value they can valuable property and the fact is
forgot over over the the past the past 30 years they have paid more than double
almost double of what is the original loan amount that they have now this
image just compared to against a hundred thousand if I go to put like 10 years
you know that the interest is just probably a fraction of the total pay but
if you were going to do this a cash rebate or cash rebate a know and maybe
couple with loan compressions is where really doesn’t really make sense what do
you think now I want you to poke holes into my into my desire this peace this
insider perspective maybe you have other opinions which I welcome you to actually
you know as disagree with me so that’s what I want you to actually post your
comments in the comment section below and see whether I miss anything with any
insights that you would like to share with me and I’ll be happy to actually as
you look at what you have to say what you think what is your perspective or
even a similar situation right or has this perspective ever surfaced in your
mind at all so just go to comment section below just type in your comments
and if no other than that if you think this lesson has been useful click on the
like button just like button I really appreciate that if you really helped
that you have more people to get smarter in your property investing sure they
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like this now that thing same time Cefalu and I will see you in another
lesson okay you take it

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