Malaysia’s benchmark index retreated as profit-taking in key heavyweights weighed on sentiment, while overall market activity remained active. Summary FBM KLCI fell 0.83% to 1,684.93 , dragged by losses in banking and selected large-cap names, despite steady trading participation. Market Performance FBM KLCI : 1,684.93 (-0.83%) FBM Mid 70: -0.00% (flat) FBM Small Cap: -0.23% FBM ACE: +0.20% Broad market was mixed , with weakness concentrated in large caps. Market Breadth & Trading Activity Total volume: 3.54 billion shares Total value: RM4.19 billion Gainers: 456 Losers: 678 Unchanged: 550 Market breadth turned negative , reflecting cautious sentiment. Top Movers – KLCI Gainers Axiata (6888.MY) +1.54% Petronas Gas (6033.MY) +1.18% Sunway (5211.MY) +1.15% Losers Hong Leong Bank (5819.MY) -3.29% Maybank (1155.MY) -3.02% CIMB (1023.MY) -2.47% Banking sector weakness was the main ...
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.
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