CASH BACK ON HAND VS CASH FLOW POSITIVE ?? | QUESTION OF THE WEEK

After answering questions for 2 weeks straight, there has been a question in my head. Would you prefer to have CASH BACK on your property purchase? Or would you prefer a CASH FLOW positive property? As projects are including all these promotions, perks, packages, campaigns, whatever you want to call it. Those things are inflating the property price to go sky high and the focus of developer is just to close deals. The more I can sell the better. And during the recent years, ease of ownership has been the focus. All promotions are addressing the lack of cash among youths to be used as down payments. Hence, new property often face a problem of having subsale market value way below their SPA price, and the rental are way lower than their monthly installments. On the other hand, if we go conventional by paying upfront on the 10%. This leads us to less loan amount from the bank where there's a higher chance of getting cashflow positive. In other words, the rental is higher than our monthly installments. Which one would you prefer??

[@rafiqmuhamad8251]

I believe one of the most important point in taking cashback is too look at the potential rental value in the area. Do some research for the surrounding properties, if condo or apartment find out what are the rates your neighbors are renting. If the rental can somehow cover 80-100% of your loan including the cashback, you can take the cashback. But if not, better don't. I have experienced some friends trying to sell me property in CJ with about 40% of cashback. The property (condo) is sold at approximately 1 million, so the cashback is almost 400k. Wow, tempting right, but then with 1million of loan, the monthly is at least 5K and guess what, the rental in that area is only 1.5 to 2.5 K. I would be bleeding at the rate of 3k in negative cash flow. His game plan is to use the 400k cashback to cover for the negative cash flow for the next 5 years with the hope that after that 5 years, the price of the property would increase and can be sold at the market rate, which they estimated at 1 million. So, after minus about 150-200k needed to cover the negative cash flow, he said, still untung about 200k. Sounds easy, but then I believe it is a death trap. It comes with the assumption that you can always rent it at 1.5-2.5k and the property will appreciate to 1 million after 5 years and someone is willing to buy from you at that rate. Unless if the property is in Mont Kiara or Bangsar South, may be, but then in CJ? So, be careful about this cashback thing. No right or wrong, but need proper research.

[@yoshiYoishIRL]

Had this thought at the back of my head, your experience confirms it!

[@Ciankemu91]

Yeah, you right

[@wadzeee]

you should always go for the cashback option for safer bets. cash is king and having the option to receive a large sum amount of cash upon purchasing a property is always a nice thing to have. but like sean say, you need to have a very strong mindset when receiving large amount of money. I see a lot of my friends splurge when they receive large amount of money from property cashback. suddenly you have this big purchasing power and your mindset change to 'i can finally buy this and that, etc.' as for cash positive property, its obviously the most ideal thing to have when you're investing in property. but you should always aim for the long run. we need to address the fact that you should not rent your property according to your monthly installment but should rather follow market rate la. having to fork out the difference between rental rate and installment is OK as long its within your calculated risk. property in the end is always about the long term investment. another great video as always sean, stay safe. cheers!

[@sanjieev]

If you do proper homework and go looking around and negotiate well, you can get both.. i got a 4story walkup at usj for 170k on January 2020 with downpayment of 4k. Market value 250. My loan is 200k. Cashback about 18k because the seller settle all fees and documents. Rental is 1.1k repayment is rm970. My plan is to spend like 15k in 2 years and sell it off when the market recovers.

[@JeffErin]

Hais, I am one of the victim la bro. haha! Now I am immune to all this gimmicks after watching your video.

[@GengarShadowBall]

I prefer cash flow over cashback anytime not because I am cash king but rather to reduce the monthly installment and the interest amount.

[@jjandrooney]

If they're not investment savvy/discipline they can consider - Putting it back against your loan to lower your monthly installment. This can be done using a Flexi-Loan, they can also withdraw the amount out if they need it. (It'll be better than any FD rates anyways)

[@KhyeTheGuy]

Valid argument. Great stuff !

[@weiminwong4507]

Hi Iherng, can you talk more about services apartment condo, which wall is hackable and the law regulations and etc more on this part?

[@iherng]

Thanks for reaching out Wei Min=)

[@oceanblue1211]

Cash back for sure, can lower down the interest with flexi loan, and it also can lower down the RPGT in the future because of the dilution of not making money or less money when selling off!

[@shinrei19]

Good podcast as usual. Me cashback because own stayed 😄

[@iherng]

Love that! Haha. Thanks for sharing Terry=)

[@kohlee888]

👍🏻

[@chrisch5015]

I don’t think there is much options for youngsters nowadays especially to fork out a huge amount for deposit (10%). That alone is already the determining factor. Hence, we need to ask for greater discount or cashback. Can later use this money to contra with the flexiloans once you can financially breath!

[@JSJE1990]

There is always an option. Can always rent first, especially renting in Malaysia is cheap when you are still young and save up more cash. Or u can start with a small apartment and then upgrade in the future but keeping in mind don’t spend too much on furnitures and renovation on your first house. People always have the misconception that your first house is your last house so I want my dream home as my first house.