From George, a viewer who wrote in by email
George's example: a RM480,000 Klang Valley condo bought with a full loan and nothing down, an instalment of about RM2,100, rent of RM2,000 fully furnished and maintenance of RM300. That leaves a shortfall of about RM400 a month, nearly RM10,000 a year for two such units, before wear and tear. Fixed deposits pay about 3.5% and EPF about 5.5%, and Klang Valley condo prices have been flat for a decade.
Why is property still a good investment against fixed deposits or EPF, is the shortfall just forced saving, and who can manage repairs and tenants for an investor with several units?
“if it's without leverage it wouldn't be interesting at all”
Compared without a loan, fixed deposits and EPF would win. But property is bought with the bank's money: with nothing or little down, the tenant pays RM24,000 a year into your loan while you cover a few thousand, and that rent also counts as income for the next loan. Just don't buy a unit whose known rent can't cover the instalment.
Why
Measure return on your own cash
A RM500,000 subsale needs about RM100,000 in cash. At a 5% yield it earns about RM25,000 a year, a 25% return on that cash, against about RM3,500 if the same RM100,000 sat in a fixed deposit.
Look at what the tenant pays
In George's example, two units collect about RM48,000 a year in rent that pays down the loans, against a shortfall of about RM10,000. Over a 35-year loan, a RM500,000 unit costs about RM945,000 in total, most of it paid by tenants.
Rents are easy to check before buying
Portals show what neighbours rent for, so in an established area there is little excuse for buying where rent falls short. Rent of 5.4% or more covers a 4% loan; for an own-stay home, Sean's 85% rule is the minimum.
Prices are moving where you look
Sean sees strong launches in Johor and rising demand in Desa ParkCity, Mont Kiara and Cheras, even if some areas stay flat. Median prices have risen about 4% a year, and building costs jumped 28% to 32% in a year.
What to do
- Check the rents of neighbouring units on property portals before you buy.
- Compare your yield with your own cash invested, not the full price.
- Park spare cash in a flexi loan account rather than a fixed deposit when the loan rate is higher.
- Declare rental income so it supports your next loan application.
- Use a pay-per-job property manager rather than one taking 10% of rent on a new unit.
Editorial Note: Summarised from Sean Tan's full episode. The quoted answer is in his own words; the rest is our paraphrase. Figures reflect the recording date, so check current rates and rules before acting on them.
ASKING SEAN #265 | FIXED DEPOSIT VERSUS PROPERTY INVESTMENT
Sources & Verification Data
Summarised from Sean's full English captions for Asking Sean #265. The quoted line is verbatim; everything else is paraphrased. Figures are as stated in November 2024. Sean recommends The Makeover Guys and its management arm Cozy Homes, whose product he helped develop, and says he had just applied for a loan on a purchase through FAR Capital, a bulk-purchase club he is a member of.
