i. the net income receive
ii. the period of an annual stream of income will be received – refer to the term of lease/ tenancy
iii. the required yield – the annual percentage expected from the investment that can be obtained from analysis of sales of comparable investments
Here is the formula
Net Income x Year's Purchase = Capital Value
[Rental Received - Outgoing] x Year's Purchase = Capital Value
what is net income?
rent receivables less any outgoings borne by the landlord, other than income tax
what is outgoings?( 20% on market rental )
- insurance ( Fire insurance / household insurance )
- repairs ( internal & external )
- property taxes ( quit rent, cukai pintu, premium )
- maintenance fee
- management fees - ( 10% on rental paid )
Rental : RM 10,000 per annum
Out going RM 10,000 x 20% = RM 2,000
RM 10,000 - RM 2,000 = RM 8,000
what is Years' Purchase?
is the multiplier element applied to a net income
example : What is the Years' Puchase? If
Net Rental / Net Income : RM 8,000
Years' Purchase = 3.99
RM 8,000 x 3.99 = RM 31,941
what is the formula for net income?
what is the formula for the years' purchase?
Services of income
Rental
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Gross or Net
⇊
Depends on the tenancy agreement
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Who paid what?
Tenant :
Landlord :
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Lease Term
Full Responsibility & Insurance ( FRI ) => Net Income
⇊
Internal Repairs Only ( IRO ) => Tenant pay internal repair & other expenses by landlord
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Internal Repairs & Insurance ( IRI ) => Tenn pay internal repair & insurance, others expenses by landlord
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All exclusive => Landlord pay all cost
