Session 2: Is It Really Worth to Borrow More Money from Bank via Money Down Deal (NMD)?

But bear in mind, there are pros and cons of doing NMD.

Pros: Able to cash out the money

Cons: Higher loan amount -> higher installment

If owner agreed to mark up the SNP price at Bank value vs market value
We also have to make sure the monthly rental able to cover our monthly installment, or at least break even (This is the important criteria that we have take into consideration
Otherwise, if we still have to fork up more than few hundred to cover the installment, then it is not worth it.

no-money-down-pro-con

For axample

MF condo, Sungai Besi.
Centre of Gravity: Strategic location next to the Besraya Highway makes a breeze of getting to any destination in Kuala Lumpur. Accessibility is enhanced via the MEX KL-Putrajaya Highway, Metramac East-West Highway, Federal Highway, KL-Seremban Highway and SMART Tunnel.
Travelling time

  • 10 minutes to Jalan Bukit Bintang and Mid Valley
  • 15 minutes to KLCC

In 2013
Project: MF Condo, Sungai Besi, kuala Lumpur
Purchase price: RM380k
Bank value: RM450k

Monthly Instalment: RM1917
Rental: RM2000

Month cashflow = rental – month instalment
= RM2000 – RM1917
= RM83

For Midfields condo, after mark up to bank value, the rental still able to cover the installment

The amount of money that we cashed out is actually the money that being charged on bank interest of 4% – 6% or even higher. Compared to if  we are using that cash money money for Fixed Deposit purpose, which give 3.5% interest per annum, which one will be better choice?

In our opinion, It is only wise and worth if we can invest the cash out money for another properties or other investment vehicles that give us return more than 10% per annum.

Besides, we also have to be skillful enough to handle this case

After we found that MF condo is below market value and can generate good rental yields,
We have to evaluate the occupancy rate also, preferably more than 70%

What is occupancy rate? find out more here How to determine Vacancy Rate?

By doing NMD deal, this also means we have two set of booking forms:
1. The 450, that is to pass to bank for loan application
2. The 380, that is to pass to seller.

Have to deal with seller, agreed to mark up the price.
Why owner allow us to mark up? Will share more in coming session…

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