Borrow Bank's Money Intelligently

Borrow Bank’s Money Intelligently to Make Money in Property Investment

Buy cash or get a home loan to purchase your favorite property? How to be a smart and intelligent property investor by using bank’s money to make more money in property investment? Below are some of the interesting points of views referring to an article, titled ‘Borrow intelligently as Much as You can’. 

BE AN INTELLIGENT BORROWER PROPERTY INVESTOR

§  Use Bank’s money to leverage and make more money; keep your own money in pocket

In property investment, you can easily borrow up to 90 per cent for a home loan based on purchase price. Pay only RM 20,000, you can purchase a property worth RM 200,000.

Just imagine if prices have been increased by 10 per cent, your property is now worth RM 220,000. This is a 100 per cent gross rate of return based on your original cash outlay of RM 20,000. Of course, when the property price drops 10%, your loss on the property will be 100 per cent as well. Therefore, do bear in mind that LEVERAGE IS A DOUBLE EDGED SWORD.

§  Borrow money even if you afford to purchase the property without any home loan

Let bank to keep and take the full responsible on all important documents such as the title, etc

§  You pay only 10%, transfers the balance 90% of the risks to Bank

§  Depreciation value of Money due to inflation, what you pay 25 years later is not the same as what you borrow now

Example: If RM 1,000 today can purchase 1,000 roti canai, 25 years later the same RM 1,000 can probably purchase 300 roti canai less.

§  Net Worth = Assets – Liabilities

The wonderful part of property investment is you get to enjoy both of the benefits. Over the time, your asset value increases, meantime your tenants are paying your home loan!