Bread & Butter Properties

Bread & Butter Properties
Generate passive rental income

Wednesday, August 17, 2011

I Sold!

I finally sold one of my bread and butter properties. And, it was not as difficult as I thought, probably because it was to a friendly party - my uncle and aunt.  Actually my mom sort of arm twisted me to sell this to them as she thought it was a good thing to do. They are both retired and recently sold their shop house near Bahau and are renting a house now. With the money they got from the sale, it would be difficult to generate any kind of decent returns otherwise. Here are some options.

Option 1: put it in FD,
RM100,000 in FD today would probably earn you around 3% p.a. so that would be around RM250 per month. A paltry sum really, not even enough to cover their rent which is around RM350 per mth for a small link house in Bahau.

Option 2: Put in stocks
This would be a risky option since they both have no experience, and would probably end up losing all their money, I wouldn't advise my mom to invest for them either!

Option 3: Buy a Flat with good rental yield
The flat I sold to them is a 2bdrm, 500 odd sq ft which fetches RM600/month rental; this is a unit I rented to a company that houses their workers for their Mamak shop chain. They have rented another 3 from me and are excellent paymasters. So my uncle and aunt can be assured of consistent income, and not have to worry about renting out the unit every few months when tenants move.

After costs (such as maintenance RM20/mth, Indah water, cukai etc) they would probably end up with around RM550/mth. The unit cost them RM95,000 in cash (the price my mom wanted) so that means a 6.9% p.a. yield which is not bad at all. Much better than letting the bank use their money. With this, they will at least end up with an asset, not to mention being able to pay for their monthly house rental. And, have some money left over from this little rental unit.

I am sure they would want to buy another unit soon, when they see the nice cash flow, but I doubt I would part with another right unit now..

As for me: well, at 95k you can say I made a descend profit for my efforts; plus, I can always go buy another one right? also, I am quite happy to cash out on this one, as I had accumulated quite a bit of equity in it. All in all, a win-win I guess.


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