Can you profit from a negative cashflow property? Absolutely yes! I will prove it! Keep Watching! Today’s video, I will show you step-by-step
how to calculate your return for a negative cashflow property. First of all, make realistic assumptions. Without assumptions, nobody can project anything, nobody. Let’s say over the last 5 years, property
in a certain location has appreciated, say 20%. Then you can use that as a benchmark because it has happened before. Next, assuming your purchase price is $1.76m. Downpayment 25% is $440K.
Loan 75% is $1.32m. Let’s say it is your first purchase. Buyer’s stamp duty is about 3 to 4%, which is $55K. Legal fee is about $3K. Assuming loan interest rate is 2.2% over 25 years. Monthly instalment computed is $5724. Now we can start calculating! Assuming your rental return is $3200 per month. That is a yield of about 2% for $1.76m property, which is very normal, especially for high end property. If you agree, comment below, say “Agree!”. Make sure you scroll down, log into your youtube using your Gmail Account. OK, so your annual rental is $3200 x 12, which is about $38,400. But wait, you need to cater for Vacancy, due to marketing of your unit before your tenant moves in. Let’s say minus 3 months. So your actual rental is $3200 x 9, which
is about $28,800. And you need to pay annual Property Tax 10% for non-owner occupied property. This figure is assessed by IRAS using their data. My estimation is about $2,840 per year. You also need to pay monthly Maintenance Fee. Let’s say it is about $324 per month, ie.
about $3,888 per year. And lastly, you need to pay Agent Comm, which is about half a month per year, which is $1600 per year. So your net rent after all these deductions
is about $20,472. But instalment you pay is $5724 per month,
ie. about $68,688 per year. So you see, you have a negative cashflow
of $48,217 per year. But remember, your property is not $$1.76m anymore. It has appreciated 20% to about $2.112m. Also, your outstanding loan has reduced from
$1.32m to $1.11m. For your convenience, I have already calculated
for you. Your net proceeds is $262,290 after deduct
everything, including your outstanding loan, downpayment, buyer’s stamp duty, legal fee
and lastly, negative cashflow. Guess what? Your return is 52%! Sounds good? If you put your money in fixed deposit, it
will earn you about 2% per year? That is about 10% overall for 5 years? You do your maths. Of course, everyone’s situation will be different. So your return will be different too. If you want to know more in details, check
out the video description below. And check out these 2 videos too. Bye!