Let's talk about valuation a little bit. So you need to know how much a property is worse. You just different ways how we can do that. The most reliable but also expensive way is to get an official value to just ask them do a valuation for you. So we're talking about maybe 300 pounds 400 US dollars 500 Singapore dollars at least to do that valuation foil, but then it's pretty accurate because the value is a proper license value will done have done the job properly because he to sign it and if it's not right or at least totally wrong, you can sue him and all that. So, this is going to be pretty accurate what you can get for free and within sometimes minutes but at least maybe a day or two is indication by by banks.

So, you just call the bank and say I got this property what is approximately value so those because they finance property and that he will every day they can give you some indication which might not be as accurate as the official valuation but reasonably okay and if you want to find a system that's anomaly go by, so, that's what a good indication. Like if it's wrong, you can have no regrets. So then you can look at comparables, if you have portals Where can I get numbers from? in UK right move on Singapore here, the Ura. On Australia, they also have some portals that show you the transactions that have happened in the last few months in that facility, same location is comparable properties, then you know what kind of the market is approximately like, which I showed you in that sample for my, one of my sourcing agents early on also where they have done that for you.

Certainly indication but depends, obviously, on different factors, you don't know how the condition of the property was smaller, but it's sort of as an indication It's okay. Previously in the strategy section, we talked about this briefly in terms of how valuations are made someone go into details. But quick recap like for presidentials depends on the factor, obviously, location, size, condition, and also the general market, how it's behaving and outlook that is there for devaluation. And if it's a leasehold, obviously also on the lengths of the lease that's left speech just discussed just now. Yeah. If you're thinking about or if you're looking at the leasehold property, how do you determine the value relationship with the amount of lease let Is it a linear decline of the value of the property to the end?

Or is it like an option in the case of a thing where it's stable indicates quickly? Yeah, that's a good question. I will get back to your net. I have a table that shows basically d dk, but I can't remember when selenia or like an option, kind of profile. Right questions, I'll get back to you on that. I guess that'd be great if you could share with them.

Thank you. And then for commercial properties, it basically depends on your location and the rent that it can fetch. As I mentioned, in that stretchy section might even the same property address shopping center ABC, it will be different whether you're on the ground floor at the entrance or the third floor right behind the corner. Of course, you can fetch less rent there, and therefore the property, even the same size will be worth less than the ground floor. So that's about valuation. So now let's look at the actual deal then, when you have a deal and later we will learn how to calculate these figures.

I just give you the framework right now, I just said when you analyze the deal, then what you want to check is of course, the yield, return investment and cash flow. We will do the extra computation examples later how to calculate these numbers. And just to give you some flavor of examples, what can roughly expect, for example, an HMO in the UK would probably expect around 13 to 19% rental yield one bedroom, eight or 12 in the north in London, it's maybe three or four, two bedroom maybe 611 and three bedroom five to nine so you see what they talked about the other day to pick up the unit is the law Your yields would be because you're giving discount basically for larger size compared to the smallest size seven bedroom apartments or even smaller than that the lettering by room which is HMO or renter and have a look at when you finance a property, what if the interest changes, right?

You do a calculation obviously based on today's interest rate in times of trouble in 2008, or nine 2001 or 1997 Asia, this has called out a lot of investors when the interest rate has gone up by a fair bit, some of them could not pay the mortgages anymore because suddenly, their cash flow was very negative because of the high interest and the high mortgage repayments One thing that you could do in that respect is of course, when you do your financing that instead of a variable interest rate, you will choose for half of the portfolio at least a fixed interest rate. So even if the general market goes up, your interest rates stay fixed for at least that period of time you fixed it to three 510 whatever years you fixed it for, so, that might be ideal for reducing your interest risk. I saw make sure this were important.

Have you done your calculations that your deals as positive cash flow otherwise, if you have negative cash flow, it would be rather hard to get financially free if you have to pay every month rather than getting paid every month. Do not go $200 in slump redevelopment I put it up. Because if I don't get less than 200, Singapore months positive cash flow, it's not worth my time to do the deal. And also if the interest rate goes up, I might get negative. So that's my personal special. But as you saw earlier, the deal for 26,000 pounds would have produced 200 pounds is what 350 or so Singapore dollar positive cash flow.

So that's something you can look at. When you talk about law. You can also see better the loan that you're getting is against the asset or I can see person what does it mean? In Singapore For example, when you take a property, loan or mortgage in seconds of course, that means Firstly, you have certain limitation on how much loan you can get which in Singapore is capped at 60% of your salary if you're an employee or if you're a businessman or self employed they cut your profit by 30% and then 60% of that which you can take a maximum mortgage payments. Secondly, it means that if you don't pay your property, loan and stay foreclose, you can come after you as a person and take everything else you have. If the mortgage so if the house is not enough to pay for the mortgage And there's still some debts left open, they can take your other assets from your car or your gold or whatever you might have.

In some other jurisdictions I think the US is one of them. UK I think also, the loan is against the asset against the house so the house technically owns the mortgage loan, which means that you can have as many as you like, as long as the bank is happy with it. Right. But if the bank is happy with your house, and loans against it, you can have five 10 100 698 mortgage this for 698 success. So there's no restriction and if they don't pay, they don't want to take the asset not the not not necessarily person unless you sign a personal guarantee on top of the mortgage soul so I have to know what you're signing here but anyway, you should not not pay a mortgage right? That's not really feasible.

But just be aware of the law. In many countries, not in many other in a few countries, they have something quite interesting. called interest only loan. interest only loan means exactly what it says. It says you only have to pay the interest on a loan. You don't pay back any capital So what do you think, is advantage and disadvantage of that?

Advantage is that your cash flow can be a lot more that I have to pay in principle, right every month, every month. The disadvantage is that don't build equity over time. You might still build equity if your property price goes up faster than your loans horse. Oh, sure. But you're not saving into your property, I guess. Right.

And you have to make sure that somehow, at the end of the tenure, how you're going to pay back, either you have money elsewhere, or you sell the property and pay it back from there. Yeah. Other two key advantages, as he rightly mentioned, the cash flows hugely higher. Then a don't pay down loan because most of the payment actually goes into a paid on. This could be as I think, 4 million at 2% if you pay interest only pay like 1600 a month if you pay down and pay 5000 a month, so let's see thousand 400 more cash flow issue can be invest or use whatever you want to use it for. Just make sure at the end you can pay back your principal also, if the tenuous long enough, then our friend called inflation will help us because if I get a million now and have to pay back a million in 20 years, it's gonna be worse, a lot less.

It's getting a bit harder to get interested in loans nowadays. The banks are getting more restrictive, but it's still possible. UK does it us does it Australia has it. Singapore Nope. Okay. Yeah, it's quite common in Australia, definitely just any period at the beginning of a.

Okay, for five years. Thanks for sharing because it is really an interesting option to get a lot better cash flow out. And if you don't, maybe 20 years later sell the property for profit, pay off the loan. Still got some equity left and you had a huge the higher cash flow for 20 years. So nice option. Yeah.

So let's look into the calculations, how to do that. And I have also templates available for everybody. were to do that in these Excel sheets, so it's becomes easier for you also my app. If you have the iPhone, remember, you have all these calculations for you as well. So let's go into some numbers. Some people are scared of it, it's very easy.

I mean, as long as you have attended grade one or grade school, primary school, you can do this calculations is really only subtractions, additions, multiplications and divisions and support. We only have to know what to divide by what, right so that's what we're going to learn in this section. So firstly, like I said earlier, which people focus on their net worth or the net wealth, how much it was do simple calculation of that is all your assets including a property values minus all your liabilities, right? So if you have a house was a million and a mortgage 7000 that is was 1000 and then maybe have 100,000 in other investments or go to od or whatever it might have costs all your assets then it was 40,000 basically. Then the cash roll that we said has to be positive is your income is mine cell points.

What might be okay, incomings is obviously the rent does not much other sources really, of incoming outgoings might be referring to mortgage interest rate payments, insurance rates Water electricity if you're paying it if the tenants are paying it, so Okay, so these are the major ones and there might be other things here and there could be management if you won't have it managed by company but these are the major outgoings So you simply subtract these outgoings from your rent and then you see whether it's anything slept or we're going to do some example in a moment. But like that is grade one mathematics, just some additions of the outgoings and subtract them from the incoming from the rent. That's your cash flow, and that's the one you would want to be positive. Okay, so ROI. In the investment world, there is an ROI which is the gross ROI.

In property we have two different our eyes that we need to consider So, the gross ROI is basically your net cash flow is what comes up out in the previous calculation we have done here. Although you're invested capital, invested capital basically at a time of purchase means your purchase price of the property. In any investment you do that see return on investment formula, whether we have stocks or options or bonds or whatever. This is how you compute ROI. In property, we have a second our idle, which is the cash on cash ROI or a C or C to short which is obviously also your cash flow that receiving But not over the total invested capital, the purchase price, but your own invested capital, how much of your own money did you put up? And that's the one that is actually a really interesting one.

Because that's how much return my investment gives me all the money if I put my money, less other people's money, the mortgage for example. They will do an example of it. Yes. So that that's the most analogous to if you put your cash in a template or a bank account that pays you interest, it's like the rate of interest. Right? If I've $30,000 I'm gonna buy 100,000 property, and I get so much cash out.

I still only invested 30,000 right. So do up off the cross ROI is is still meaningful, but it's not the one you can compare to a, like I said, a financial product or a term deposit or whatever was to put it only bought 30,000 of it from your own money. And we will see some numbers there in a moment. And the good thing about it, I mean dead more other people's money, and the less old money you use, the higher this becomes. And that's why you can get really really good numbers and properties for your, for your money. We will do a sample calculation in a moment there to see extra numbers that do yield that's basically went to yield that is your annual rent divided by the value of the property.

So fairly easy calculation. Just make sure Sure, when you calculate it to take the annual and not the monthly rent, you have to multiply by 12. Because that's what you annually get in terms of years like a bond, right? What? on maybe paying 3% annually. So in your property yield is because you get monthly rent, or you return 10 times 50 to monthly times 12.

So to get your annual annual rent another calculation we have is what we call gearing. Here is a ratio is simply how much debts you have compared to the value of your property. How much did you finance with other people's money. In my example, just now, if you have 30,000 cash by 100,000 property, you're gearing up 70% say percent of other people's money. So these are the important calculations in Do you can use my templates to help you do them. So, let's do some examples here.

So, I have a property that I buy for 100,000. I have 35,000 available the monthly rent I get it's 900 and the expenses I have to pay for my mortgage insurance and whatever else utilities together ended up will be 600. So, what is my cash flow? Cash Flow is 300 per month, so 36 3600 so what is my ROI? So the gross ROI Is 3.6% Yep, that's 3600 divided by 100,000 of the purchase price is 3.6%. Correct.

And the cash on cash return is 10.9%, which is 3000 63,003 minutes. So let's see thousand $600 cash flow divided by my own capital 75,000 is just above 10%. And that's what I'm getting all my money, I got a 10% return, right, which you now can compare to a bond term deposit of 3% or 0.8%, or whatever it gives you. And that's precisely why leverage has my best friend. Okay, Andy eventually yelled Oh, sorry. so graceful yield is 900 per month times 12.

So 10,800 per year divided by 100,000 value. So 10.8% Yes 10.8% is my rental yield? It's a gross rental yield on my rent. I'd not my net, obviously, because I still have expenses to pay. But we compare basically on gross rental yield. Okay, fantastic myself for you.

Obviously, as an investor yourself, it's easy to do these calculations but the thing for anybody else there's no complex things involved here is simply knowing with what to divide from what compute your cash flow, ROI CLC yield solace is very, very easy. Simple. First grade math only additions subtractions and divisions. Okay, so that's completed concludes basically our module on sourcing and some important numbers. Any questions left open? Probably the only the main question I had is there were a lot of different sourcing options.

And I I would I'm interested to know what is the most common that you so that you have used your portfolio so say, you know what your portfolio would have thought through, say sourcing agents versus other strategies. Would it be mostly sourcing agents for for most people? I can't really comment on most people. I can't when it comes to myself, it's really varies. I mean, some people prefer to use the portals. Some people who maybe have more time available and want to spend big money on sourcing agents that do themselves.

This proactive spell cheese for me, I'm mostly indeed relying on sourcing agents. Because I'm quite busy. These are things that my time is precious. So Rado, paid him for good deal. Then suddenly a few thousand on their fee. I mean, if you see the deals that you get with idle, huge cash flow on the HMO in Salford, or that's huge In equity in Pattaya, I don't mind paying an agent at all.

But it's my personal preference. It's not because it's the best strategy. It's just my for me, it's the best. But for you, that might be different best. Yeah, so it depends on a lot on the individuals objectives about time and return and capital out. Okay, good.

Make sense? Thank you. All right, so let's do this model here. Thank you everybody for watching, and stay tuned for the next module. Thank you. Thanks very much.