TITLES
There are two categories of titles
Freehold – which gives the owner perpetual ownership;
Leasehold – which allows the owner to stay in possession only for a specified period. When the specified period ends, ownership reverts back to the authority which issued the title.
Generally, a house is issued a title for the piece of land on which the house is erected; and an apartment is issued a strata title for the specific area on the specific floor of the building in which the apartment or condominium is located. A search can be done at the relevant land offices or registries to determine whether the title is encumbered. If the title has not been issued, a search can be done on the master title on which the whole or part of the housing project is erected.
DOCUMENTATION AND PROCEDURES
All purchases direct from housing developers must use the Schedule G (for purchases of houses) or the Schedule H (for purchases of apartment respectively of the Housing Developers (Control and Licensing) Act 1996 as the sale and purchase agreements. Payment of the purchase price the said Schedules G and H is by progressive payment based on completion of work as certified by the architects. Payment of the last 5% of the purchase price will be held by a firm of solicitors as stakeholders for the defect liability period, which is currently 18 months from the delivery of vacant possession.
There are no fixed rules on the form of agreement for purchases from existing house owners (more commonly called sub-sale). However, it is common practice that upon signing of the sale and purchase agreement 10% of the purchase price be paid to the seller, and the purchaser be given 3 months to pay the balance of purchase price with an extension of 1 month if he fails to do so within the first 3 months’ period. Interest at the rate of 10% per annum calculated on a daily basis is normally charged for the extension period. Payment of the balance of purchase price is usually made to the solicitors acting for the seller as stakeholders to ensure redemption of the house (if the same is still charged or assigned to a bank or financial institution at the time of sale) and payment of real property gains tax by the seller.
Other than the sale and purchase agreement, a memorandum of transfer, which is Form 14A of the National Land Code 1965, must be completed to transfer the title from the seller to the purchase. In instances where the title has not been issued, then if the purchase is from a developer, the developer will undertake in the sale and purchase agreement to transfer the title when the same is issued; and if the purchase is through a sub-sale, the transfer will be through an assignment of the sale and purchase agreement between the developer and the seller (Principal SPA) to enable the buyer to take benefit of the developer’s undertaking to transfer the title contained in Principal SPA.
STAMP DUTY
Stamp duty is levied on the document of transfer (i.e. the memorandum of transfer if the title has been issued, or the deed of assignment of Principal SPA if the title has not been issued) based on the purchase price as follows:
a. 1% on the first RM100,000.00
b. 2% on the next RM400,000.00
c. 3% on the next RM1,500,000.00 and
d. 4% on the remainder
(item 32 [a] of the Stamp Act 1949)
LEGAL FEES
The first Schedule of the Solicitors Remuneration Order 1991 sets out the fees to be collected by lawyers for work done in handling the sale or purchase of house based on the purchase price as follows:
1% on the first RM150,000.00
0.7% on the next RM850,000
0.6% on the next RM2,000,000
0.5% on the next RM2,000,000
0.4% on the next RM2,000,000
OTHER FEES
Stamping fee( per document) RM10
Adjudication fee RM10
Search fee RM60
Registration fee RM100
For each sale and purchase of a house, the solicitors concerned can only collect fees based on the above scale from either the seller or the purchaser and not from both of them.
FINANCING
Mortgages : Loans of 90% of the purchase price are usually available. Current Base Lending Rate 6.3% per annum; loans are available up to a period of 30 years
RETURN ON INVESTMENT: CALCULATING GROSS YIELD
How do property investors know which property to purchase? One of the assessment methods used regularly is termed as Return on Investment (ROI). It is not the only method that investors use to calculate returns; however, it is the most widely used.
ROI, also known as Yield, is calculated to determine the feasibility of a property investment. It is designed to assist the investor to answer, ‘Is this investment worth it?’, ‘What will I get back in return?’ and ‘Which investment options are more attractive?’
It indicates cash flow of an investment over a specific period of time, usually a year. Therefore, the higher the percentage of ROI/Yield, the better rated the property investment opportunity is. As with any investment, before you put your time, energy, effort and money into it, you must have an indication of the kind of returns, including an indication of when it is expected. In this article, “Yield” indicates an annual rate of return, unless otherwise noted.
Note: Investment property refers to a property purchased for the sole purpose of earning a return on the investment, either in the form of rent or capital gain. The owner does not live in the property.
How to calculate yield?
In its simplest form, the profit of an investment is divided by the cost of the investment (Yield is usually shown in percentage). Often, it is best to determine each investment over the course of a year to find out the yearly Yield.
Gross yield
For example:
Investment property RM500,000
Renovations RM80,000
Rental RM3,000 per month / RM36,000 per year
Gross Yield = Annual Rent / Total Cost of Investment
RM36,000 / RM580,000 = 0.062 = 6.2%
ok, gross yield explanation.
ReplyDeletegross yield = the return on a security or other investment before deducting costs or losses incurred in procuring and managing the investment.
ReplyDelete