Month: August 2018

Save in ASB or Settle Property Loan

This week I use my EPF to have monthly withdrawal to reduce my loan principal.

I have a question whether to use the extra fund to save in ASB or reduce my loan principal.

So which one will give me higher return?

To do the analysis I need to know what will be:

1) Effective return of saving in ASB vs reduce principal loan.
2) How long it takes to settle the loan

What I meant by Effective Return?

For me it is the amount of dividend / saving from interest that I get by year end.

Example: ASB dividend rate is 7.42% and I make a monthly saving of RM1,074 per month.

So usually, we calculate the dividend by end year we get is:

RM1,074 x 7.42% x 12 months = RM956.

But ASB will calculate based on monthly minimum amount. Based on that calculation the dividend we will get is RM519.

So effective return is RM519 / (RM1,074 x 12) = 4.03%

Background

1) Property Loan

  • Outstanding amount as of 1st August 2018: RM48,152
  • Monthly installment: RM630.96
  • Interest rate: 4% fixed

2) ASB Dividend Calculations

  • I take only last 3 years ASB dividends from 2015 to 2017.
  • So average dividend within those 3 years: 7.42%

Analysis Results

Results

invest in asb vs reduce housing loan principal
invest in asb vs reduce housing loan principal

Comparing the Results

  • In 1 year, ASB gives better return vs settle off my loan principal.
  • In 1 year, ASB effective return is 1.42% extra vs settle loan principal
  • 2nd year,  settle loan principal effective return is 13.34% extra vs ASB.
  • By 3rd year, settle loan principal effective return is 14.30% extra vs ASB and it gives available fund of RM25,560 as the loan is fully settled off.

Why settle off property loan gives higher effective return in the long run?

  • Interest amount over monthly installment getting less and less when the principal is reduced. This helps accelerate the principal reduction.
  • Hence, better effective return from the interest saving.

Conclusion

At first thought without deep analysis, I thought I want to put the money in ASB as ASB gives 7.42% dividend vs loan interest rate of 4%.

However, based on the analysis, I will pay off my loan principal instead of putting the money in. ASB.

Furthermore, by 33rd month, I have fund from monthly EPF withdrawal of RM1,074 + loan monthly installment of RM630 which I don’t need to pay anymore.

So total extra cash flow is RM1,704.

 

Reference:

Excel analysis file Invest in ASB vs Settle of property loan

Genting Rooms Occupancy Rate Estimation

Background

I invested one unit in a condominium at Genting which is Windmills Upon Hill.

I would like to estimate what would be the occupancy rate in Genting knowing that there are lots of hotels room available and few condominiums under construction such as Vista Residences, Midhills and Geo 38.

To estimate I need 2 major information
1) Number of visitors who going to stay at Genting
2) Number of rooms available either from hotels and short rental rooms like AirBnb or homestay.

From those 2 information, I calculated the occupancy rate for all rooms available at Genting.

1) Number of visitors who going to stay at Genting

To estimate number of staying visitors, few assumptions need to be made

1.1) Percentage of visitors who going to stay
1.2) How many visitors will stay together. Example family of 4 will stay in one room. They won’t stay in 4 rooms.
1.3) How many nights they going to stay

Then from there, I calculated the numbers of rooms required in a year.

To ensure that I have a baseline for the expected number of staying visitors, I took Year 2013 figure as I assume it is the actual visitors for the year but I use number of rooms as if all condominiums are all available to be rented out. While Year 2017, 2018, 2019 and Year 2020 are based on forecast number of visitors.

 

I calculated numbers of staying visitors based on the forecast figures to estimate whether the forecast staying figures can increase or not occupancy rate.

2) Number of Rooms Available

For number of rooms available I made few assumptions
2.1) All rooms or units will have capacity as same number of visitors stay together (refer to 1.2)
2.2) Only 60% of condominium units available will be rented out
2.3) Some missing number of rooms considered negligible.

total number of rooms at genting
total number of rooms at genting

So total of numbers of rooms available for short term renting are: 11,419.

Occupancy Rate

I calculated occupancy rate by dividing number of staying visitors by total rooms available. I distributed it equally through out the year. I don’t consider the peak and non peak seasons as it is hard to come out the estimation.

Based on 40% visitors will stay on average one night and with 3 visitors staying together, the occupancy rate produced as below.

occupancy rooms rate at genting
occupancy rooms rate at genting

If based on actual figures in Year 2013 and assuming all condominiums are all ready the occupancy rate is 61%.

If Genting able to attract 30M visitors by 2020, the occupancy rate would reach 96%.

Of course this assume that all units/rooms are equal in features. We all know that most visitors prefer going to First World hotel, hence high occupancy of the said hotel.

Control Figures

TODO section, to check occupany rate from AirBnB of Midhills and other completed condo

Reference:

Excel file to do the estimation