Truely far-sighted. admire....
Thanks for your kind words
Truely far-sighted. admire....
Is the occupancy rate of your units and rack rates transparent to the owner of the unit?
Its Somerset, and we are using standard hotel contract.
By the way, we k sell anytime we like in the ten years. So if we manage to get a return of 8%, then we k sell off the units to would be investors at 5% return at RM1120psf.
I believe the mgmt will take the total occupancy rev minus the cost and divide by each unit (of course by size) and payout on a quarterly basis with a min 5% gaurantee payout ..
Are these information (account book) is opened to all investor? Otherwise, you may not know if they have achieved which occupany rate.
If I am the management company, it is like running a business. Total revenue less all expenses and operation cost including maintenance, upkeep, admin, marketing and profits for myself before sharing with the investors, as long as it is at least 5%. Note that provisions have to be made for low occupancy periods as well.
But how would you know the true expenses unless it is an open book. Maintenance is rather wide as it can also include replacement cost. Hence, you derive at the nett returns. It is rather doggy.
My opinion most probably would be like this ( Of course I am a novice on this subject)
"Business" is the keyword. It comprise of revenue, management, sales, direct, indirect expenses. It is not straightforward accounting. It is not dodgy but rather a way of management. It is just like ultra conservative unit trust but this is even better. No upfront agent fees and guaranteed 5% yield.
Honestly, I think it is a good deal.
That means the lease agreement with its original terms is transferable within the 10 year period. It got nothing to do with the property title.What do you understand by this: By the way, we k sell anytime we like in the ten years. So if we manage to get a return of 8%, then we k sell off the units to would be investors at 5% return at RM1120psf.
That means the lease agreement with its original terms is transferable within the 10 year period. It got nothing to do with the property title.
How our friend got the figures of RM1120, I think it is most probably market driven. No fixed formula as it has nothing to do with the lease agreement.
Maybe Dfiris can shed some light?
Lets say for example
based on RM700psf fully furnished, SPH able to bring in 8% returns, that would be RM56psf.
At point of selling, if surrounding projects k only command yields of 4-5% or lower because of new higher selling prices of surrounding projects, we k market the SPH units at 5% yield to potential buyers.
Then RM56/5% would give RM1120psf selling price.
So message is very clear, SPH woukd be a benchmark ultimately when it is completed, providing a rough reference for prices and rentals in the area.
So I hope you all kinda of get my hint on something...
Kinda slow here....
The benchmark yield for my own standard should always be 200 basis points above that country's risk free rate ( which we k use their Fixed Deposit rate) as reference at 3% average.
Freehold - 3% + 2% = 5%
99 yrs - 3% + 3% = 6%
This for the extra risk we take in property investment as compared to Fixed Deposit. And for covering outgoing costs like maintenance, assessment and other related costs n fees. Its a rough guide and everyone is free to set their own benchmarks so don't pinpoint on the mechanics hor.
Then once you are invested in a freehold property in a good location (meaning marketable at all times, just a matter of price), you can depend on the property to help you beat inflation over time, must keep long enough to ride through all correction cycles (so freehold is important)
So for the recent buys at RM1300psf, based on 5% yield, you need to get RM5.40psf. It is already higher than KL standards.
The benchmark yield for my own standard should always be 200 basis points above that designated country's risk free rate ( which we k use their Fixed Deposit rate) as reference at 3% average.
Freehold - 3% + 2% = 5%
99 yrs - 3% + 3% = 6%
This for the extra risk we take in property investment as compared to Fixed Deposit. And for covering outgoing costs like maintenance, assessment and other related costs n fees. Its a rough guide and everyone is free to set their own benchmarks so don't pinpoint on the mechanics hor.
Then once you are invested in a freehold property in a good location (meaning marketable at all times, just a matter of price), you can depend on the property to help you beat inflation over time, must keep long enough to ride through all correction cycles (so freehold is important)
So for the recent buys at RM1300psf, based on 5% yield, you need to get RM5.40psf. It is already higher than KL standards.
What is KL standard range of rental rates (RMpsf)?