Lately, I received a message from my reader as stated below:


‘Hi, I’m a fresh graduate. I’d just secured my job which pays a monthly salary of RM 3,400. I would like to start investing in a property with the purpose of receiving rental income. Ideally, the rent should cover the monthly mortgage payments. How can I make this work?’


Here, I’ll quickly list down 5 key things that you need to work on first to buy yourself your first investment property.


#1: Debt-Service Ratio (DSR)

First, you can estimate the maximum amount of property loan which you are eligible to obtain by using the free calculator at According to the message above, I assume that my reader is below 35 years old and now receives a gross monthly salary of RM 3,400. Thus,


  1. He can qualify for a maximum loan tenure of 35 years.
  2. His net monthly salary is estimated to be RM 3,000 after income tax, EPF, and SOCSO deductions.


From the calculator, he may obtain:


  1. Maximum Property Loan: RM 443,734
  2. Maximum Monthly Installment: RM 2,100


This is applicable only if he is completely debt-free. The maximum loan that he could obtain would be much lower if he has a car loan, outstanding credit card debt, personal loan and PTPTN.


#2: Choice of Properties

Second, you may narrow down your property search after you had estimated the maximum loan as stated earlier in Point #1. From the message above, my reader intends to earn rental income from his investment property. Hence, I believe, he may choose to invest in a sub sale property where its price is now below RM 400,000. The choice of properties are:


  1. Low-Cost Flat
  2. Walk-Up Apartments.
  3. Medium-Cost Condominiums.


What about new projects which are under construction? In his case, the new projects do not qualify as he could not earn rental income immediately upon purchasing his property.


#3: Down Payment

Obviously, my reader qualifies for a 90% financing from local banks as he is purchasing his first property. From above, his selection of property would be narrowed down further by his available capital. As a rule of thumb, I believe, he should prepare capital as much as 15% of the total property value as down payment, stamp duties, legal fees and minor renovation on his property.

I was not informed about how much he has set aside to buy his first property for investment. Thus, if he intends to buy:


  1. Low-Cost Flat worth RM 100,000, he needs RM 15,000.
  2. Walk-Up Apartments worth RM 200,000, he needs RM 30,000.
  3. Medium-Cost Apartments worth RM 300,000, he needs RM 45,000.


#4: My RONW

RONW stands for Return on Net Worth.

It is a measure of efficiency of the usage of my capital to generate wealth. It’s a useful formula to ascertain whether an investment made would bring more wealth to me or otherwise. Thus, it encourages me to allocate my capital in a more efficient manner to maximize wealth. I have produced a webinar about it. Here’s the link – Return on Net Worth Analysis.

Let me use the following assumptions as an example to calculate his RONW:


  1. He buys a Low-Cost Flat worth RM 100,000.
  2. His initial capital works out to be RM 15,000.
  3. The interest rate of his loan is 4.5%.
  4. His loan tenure is 35 years.
  5. His property is tenanted where the rent is RM 500 a month.
  6. The rent is able to offset both his installments and maintenance fees.
  7. He assumes that property prices would appreciate by 2% per year.


Thus, his RONW on this property investment is:





Total Return

  Low-Cost Flat

RM 100,000


RM 8,000

– CG = Capital Gains
– CR = Cash Returns (Annual Rent / Property Price) x 100%
– TR = Total Returns (Capital Gains + Cash Returns)


= (RM 500 x 12 months) x 100% / RM 100,000
= 6% per year. 






Total Interest


RM 90,000


RM 4,050

– IP = Interest Payments

Thus, his net returns from this property investment is RM 3,950 where it can be calculated:

Net Returns
= Total Returns – Total Interest Payments
= RM 8,000 – RM 4,050
= RM 3,950


Finally, his returns on net worth from this property investment is 26.3%. It is calculated:

= (Net Returns / Initial Capital) x 100%
= (RM 3,950 / RM 15,000) x 100%
= 26.3%

You may check the webinar recording on RONW for a detailed presentation of this formula and its various applications by this link – RONW

#5: Risks

Is 26.3% returns from a Low-Cost Flat sounds enticing?

Before you get into it, let me share its potential downsides:


  1. The conditions for Low-Cost Flat or any properties priced under RM 300,000 are often less ‘Posh’ or ‘Classy’ than nice condominiums that are well-maintained.
  2. Are you comfortable with letting your property to tenants who, most likely, are low-to-middle income earners?
  3. In Malaysia, you can obtain a 90% loan to finance your purchases of  two properties. Some may plan to invest in higher priced properties in order to maximize the amount of mortgages obtained. Hence, you may be ‘stuck’ with this mortgage if you could not sell your property to a new buyer. This can be a problem if you intend to buy yourself a higher priced property in the near future, especially if you have used the 90% loan for two Low-Cost Flats.

What should I do?

It depends. Here is a question: ‘How fast are you able to grow your monthly income?’ Mark Chua, author, banker and a seasoned property investor that owns a property portfolio of RM 11 million commented: ‘The more you earn, the more you can leverage to invest.’ You can check out his webinar where he shared 6 simple ways to boost your income & property portfolio.


So, this is my verdict.

If you foresee yourself doubling or even tripling your monthly income from RM 3,400 to RM 7,000 or RM 10,000 in one or two years time, then, I think, you may reconsider your investment options carefully.

However, if you foresee yourself making close to RM 3,400 a month over the next 3 years, it’s okay. I’m not writing this to condemn you. Rather, I’ll like to share two options that you may consider.


  1. You may consider investing your salary back into yourself to improve your employability. This involves acquiring new set of skills or even a professional qualification which are recognized in your workplace.
  2. You may settle with the property which is priced under RM 300,000. This is because, I believe, it is difficult for anyone to afford the down payment and as well as mortgage repayments for a property which is priced any higher. For the sake of education, let us put aside parental support for the time being.




Personal finance author and trainer

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