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The Rule of 72

The Rule of 72 has been around the investing world since it was invented by Albert Einstein. The rule of 72 is a powerful tool to determine what kind of saving and investment vehicle works for you taking into consideration your budget and your target period to double your money.

Sample Illustrations:

– At 4% rate of interest, money doubles every 18 years (72/4=18)
– At 8% rate of interest, money doubles every 9 years (72/8=9)
– At 12% rate of interest, money doubles every 6 years(72/12=6)

Suppose you start out at age 29 with an initial investment of PhP100,000.00.

At 4% interest money doubling time is 18 years so when you reach 47 (29+18) years old your money becomes PhP200,000. In the next 18 years when you reach retirement at age 65 your money will double to 400,000.

At 12% interest, with your money doubling every six years, you will end up with PhP6.4 million in Year 36 or by the time you reach 65.

In other words, the lower the interest rate, the longer the time you double your money. If you keep your money in a savings account, it will earn less than one percent annually. Applying the rule of 72, it is financially sound to put your money somewhere else such as in stock investment or in mutual funds.

Keeping your money in banks may have very low risk but the rewards are also low. Most banks offer less than one percent per interest for regular savings account and just a little bit higher for time deposits and special accounts; and a 20% tax is deducted from your earned interest. Further, with inflation rate higher than interest rate, you are a sure loser.

Start inventing now. Investments provide a more rewarding avenue for growing your money. Depending on the choice of investments, the risks ranges from low to very high. It is said that one of the greatest investment risk is the risk of doing nothing and missing the opportunity of a superior return.

-Reprinted from DIY Personal Finance

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10 things to look out for when buying property in Malaysia

Everyone keeps saying the time to buy is now but with so many options and different factors in play, how do you make sure that you get the most bang for your buck when shopping for a piece of property?

Malay Mail Online spoke to Knight Frank Malaysia managing director Sarkunan Subramaniam, real estate lawyer Chris Tan and senior real estate negotiator at Property Hub, Roy Teo and found out the top 10 factors to look out for when hunting for the right piece of property.

10. Landscaping. We are not just talking about the landscaping of the landed property or the compound the condominium sits on. It goes without saying that your property must be at least pleasant to look at and well kept.

Sarkunan said the area or neighbourhood where the property is located has to be taken into account as well.

He said if the landscaping of the area is done right, it is a sign the local council is proactive. They will probably be on the ball when it comes to other issues as well.

9. No unplanned vacant land around

He also warned that buyers should be wary of all vacant land in the vicinity of the property, and find out if future construction will affect either road access or the view from your property. If there are no plans for the vacant land yet, he said it is best to stay away.

“Investigate, don’t be caught by surprise after you have moved in,” he said.

8. Gated or guarded community

Both Teo and Tan said gated communities are in demand. Very.

“It ties back to the fact that people have a fortress mentality. These days, people want to keep the riff raff out… Desa Park City is a good example,” Teo said, referring to the much sought-after enclave in Kepong.

According to Iproperty.com, some of its units (Safa) which were previously priced at RM450,000 are now going for RM1.2 million.

He said previous generations used to aspire to owning bungalows, a house in the middle of a big piece of land.

Today though, he said, those properties are much lesser in demand while he sees a rise in either condominiums or gated communities, which mostly have smaller plots of land, but with bigger build-ups.

7. Near international or high-performing Chinese schools

Teo said having a Chinese school in the neighbourhood adds “huge value” to properties nearby. For example, he said a Chinese school that has relocated to a new development that his company has recently launched in Cyberjaya has been its “biggest selling point.”

He said more non-Chinese families are also looking to move closer to these vernacular schools.

Tan, meanwhile, said that people want to be nearer to schools not only because they want to send their children there, but also to have a good support system among parents.

“If you want to do home schooling, you are better off in a neighbourhood where there are people with the same interest, for example.

“Another example, a popular Chinese school — Lai Meng — recently moved to Bukit Jalil from KL. If you want your kid to go to Lai Meng for example, you would move closer because you stand a better chance of getting a place in the school,” he said.

6. Who are your neighbours?

Tan, who is a regular speaker at property forums, said the neighbouring township is an important consideration when buying a home.

“Why Cyberjaya can work, it’s because it is next to Putrajaya. Why PJ can work because the neighbour is KL and why Iskandar Malaysia can work because the neighbour is Singapore.

“In that sense, the neighbour does play a part because you want to have the best of both worlds. Perhaps lower expenses on one side and high income on the other side,” he said.

Just as important, find out the racial composition as well as the job backgrounds of your neighbours, he added.

Whether you prefer a culturally mixed neighbourhood, or one that speaks only a particular language, or what kind of jobs your neighbours do, and if they are mostly tenants or owners… you need to do your homework.

5. Population growth

Tan also said it is important to observe if the population trend in the area is on an upward trend.

“At the end of the day, real estate is meant for human consumption. So the bigger the population, the higher chance of you getting a better return from your property investment,” he said.

He pointed out that with a bigger population, there will also be better supply services such as hypermarkets, clinics, laundry services and restaurants.

4. Central location or conveniently located

You don’t need to be a rocket scientist to figure out that the more centrally located a piece of property is, the higher in demand it is.

Teo also noticed that the trend has shifted and condominium units attached to malls are back in demand again because people want that sort of convenience.

“When you have strata properties on top of shops, those used to be cheap properties, you can see some in Chow Kit, Bukit Bintang… people didn’t want to stay in that kind of environment,” he noted.

He said the trend is back and is especially popular among the younger crowd who are looking for smaller units, about 1,000 square feet or studio sizes.

3. Infrastructure/connectivity

The real estate negotiator said connectivity is extremely important as more people move further away from central locations. People are moving to townships like Cyberjaya and Setia Alam because of the highways that now connect to the city.

Tan noted that most people do not want their homes to be too close to business activities but they do not want it to be too far away either, because they need the supply and services to be close.

People are willing to accept if their workplaces are slightly further away, as long as they are well connected by highways or LRT, MRT stops.

2. Reputable developer

Sarkunan said it is extremely important to buy from developers with a good track record and a practice of delivering on time with quality.

“It also must have a good following and someone who does not price their products to the maximum and allow for reasonable returns,” he said.

1. Location branding

Tan said branding of location can change, driven by “visionary developers” or plans.

“For example Sentul, many years ago, when we talk about Sentul, we have a certain perception about it. YTL changed the perception of that area and for all intents and purposes, Sentul is very arty farty now because of KLPAC, and it’s actually a very nice location because it is very close to the centre of action,” he said, referring to the KL Performing Arts Centre that is along Jalan Ipoh.

The property lawyer said that now would be the best time to buy with the launch of a slew of affordable housing schemes and the fact that home prices will not fall, especially when the country is only five years away from its ambition of becoming a developed nation.

BY MELISSA CHI, Malay Online