The fictional property has 4.8% gross yield but loses MYR4,300 cash annually under one month of vacancy and the stated costs. Gross rent is not spendable surplus.
List the purchase cash and annual commitments
Assume a MYR500,000 property, MYR100,000 down payment and MYR20,000 other upfront cash. Initial cash invested is MYR120,000. Advertised monthly rent is a fictional MYR2,000, with one month vacant each year. The full mortgage cash payment is MYR1,800 monthly; annual fixed operating costs are MYR3,600. Management costs 5% of rent actually collected.
These inputs are original teaching assumptions, not a listing, lender offer or estimate of typical local expenses. The upfront amount is already treated as cash paid at purchase. Do not charge that same MYR20,000 again as an annual operating cost unless you are modelling a separate future expense.
Move from twelve months of rent to operating income
Potential rent is MYR2,000 times twelve, or MYR24,000. With eleven occupied months, collected rent is MYR22,000. Management is MYR1,100 and fixed operating costs MYR3,600. Net operating income, abbreviated NOI, is MYR22,000 minus MYR1,100 minus MYR3,600: MYR17,300.
The management percentage follows collected rent, while the fixed amount remains payable through vacancy in this model. That distinction matters for the vacancy lesson. If your actual agreement charges a minimum management fee, or some supposedly fixed costs disappear during vacancy, change the assumptions rather than expecting this simple percentage formula to reproduce the contract.
Separate property operations from financing
Annual debt service is MYR1,800 times twelve, or MYR21,600. Subtracting it from MYR17,300 NOI gives negative MYR4,300 pre-tax annual cashflow. Averaged over twelve months that is a MYR358.33 monthly shortfall after cent rounding, although actual payment dates can make the cash need uneven.
The entire mortgage payment belongs in this cash budget, including principal. It is kept separate from ordinary operating costs. This article does not calculate taxable rental income or determine deductible expenses. Use the separate existing rental-tax guide for legal background and confirm current treatment for your own circumstances; the cashflow result is not a tax return.
| Measure | Arithmetic | Original result |
|---|---|---|
| Gross yield | 24,000 / 500,000 | 4.8% |
| Net operating yield | 17,300 / 500,000 | 3.46% |
| Annual cashflow | 17,300 - 21,600 | -MYR4,300 |
| Cash-on-cash | -4,300 / 120,000 | -3.5833% |
| Break-even occupied-month rent | 25,200 / (11 × 0.95) | MYR2,411.48 |
Use three ratios for three different questions
Gross yield is MYR24,000 divided by MYR500,000, or 4.8%. Net operating yield is MYR17,300 divided by the same price, or 3.46%. Cash-on-cash is negative MYR4,300 divided by MYR120,000 cash invested, approximately negative 3.5833%. The first ignores vacancy and costs; the second excludes financing; the third uses financed cashflow.
None is a complete total return. This example includes no resale proceeds, price appreciation or selling costs. Mortgage principal reduction can affect wealth while still using cash today. It cannot be added back to this cashflow merely to make the property appear to fund its bills.
Solve the break-even rent without forecasting demand
With one vacant month and management at 5%, each ringgit of occupied-month rent contributes eleven times 95% toward annual fixed costs and debt service. Break-even occupied-month rent is MYR25,200 divided by 10.45, approximately MYR2,411.48. That is the model’s rounded threshold, not evidence a tenant will pay it.
Changing rent alone may also change vacancy, which this algebra holds constant. Test both together in a separate scenario. A major repair, replacement furniture or unpaid rent is not automatically included in the MYR3,600 assumption. Write what that amount covers and increase it explicitly when testing an additional recurring burden.
Reproduce the waterfall in the rental tool
Load the one-month-vacancy example and inspect price, down payment, upfront cash, rent, loan payment, fixed costs and management percentage. Recalculate and reconcile collected rent to NOI, then NOI to cashflow. Compare the annual figures before interpreting the displayed monthly average.
Save a second scenario with your own documented costs and read the vacancy sensitivity rows. Write down who supplies a cash shortfall and when funds must be available. A purchase decision needs a funding plan as well as a yield, particularly when the model begins with negative cashflow.
The JSON download is a fictional example book for this tool only. Before importing, export a backup of your existing local book. Read the import preview, check the tool and entries, and confirm only if you intend to replace the current book; importing is not a merge. Keep your backup separately. The companion CSV is a manual comparison worksheet, not an import file. Downloads do not connect to your accounts or sync devices.
Download the example book and manual comparison
Put it into practice
Check operating income and financing separately before trying vacancy changes.
Open the decision tool