KUALA LUMPUR, July 30 (Bernama) -- Bursa Malaysia's key index closed at an intraday high today, supported by continued buying interest even as renewed geopolitical tensions and a weaker overnight lead from Wall Street following the US Federal Reserve's (Fed) decision to stand pat on interest rates weighed on broader sentiment. The Fed has decided to hold rates steady for the fifth consecutive meeting, with the Federal Funds Rate unchanged between 3.50 per cent and 3.75 per cent. At 5 pm, the FTSE Bursa Malaysia KLCI (FBM KLCI) rose 4.84 points to 1,720.40 from yesterday’s close of 1,715.56. The benchmark index, which opened 1.14 points lower at 1,714.42, hit its lowest level of 1,710.69 in early trade before gaining momentum for the rest of the day. However, the broader market was negative with losers outpacing gainers 581 to 411, while 612 counters were unchanged, 1,173 untraded, and 87 suspended. Turnover declined to 2.49 billion units valued at RM2.25 billion from ...
One of the asset class that's not mentioned as often in this blog is property. Today, we will try to talk a bit about one of the common metric that's being used to evaluate the value of a piece of investment property.
EFFECTIVE GROSS INCOME is a metric commonly used to evaluate the value of a piece of investment property. It's calculated by adding the amount of income produced by the piece of property and the miscellaneous income, less vacancy costs and collection losses.
Here is an example:
A condominium has an income of $1,000,000 if it is able to rent out all of its units (full occupancy). Historically, the condominium is unable to fill 10% of its units, meaning that it is unable to collect $100,000 ($1,000,000 * 0.1).
The Effective Gross Income for the property is $1,000,000 - $100,000, = $900,000
Some things to ponder when calculating EGI is the factors that can influence the vacancy costs and collection losses for a piece of property. There is a need for investors to estimate the costs of the income lost what can be generated but the market might cause this to fluctuate up or down.
When looking to purchase investment property, potential investors use the Effective Gross Income to gauge the expected amount to be paid for the property and the expected earnings from it. Low Effective Gross Income and high costs are a sign to reconsider about buying the property, vice versa for high Effective Gross Income and low costs.
Comments
Post a Comment