Top Secret of Property Re-Finance by Milan Doshi

Milan Doshi shows you how to recoup your original downpayment within 7 years and use that amount for the downpayment of another property via Refinancing.

In chapter 5 of my best-selling book “How You Can Become a Multi-Millionaire Real Estate Investor!”, I wrote on the five types of returns from property investment. There is a sixth and powerful return which I shall call The Secret and Magic of Refinancing!

Unlike other returns like Rental Yield, Capital Appreciation, etc., it’s not possible to come up with a number or do an “apple-to-apple” comparison against other investments.

One unique feature of property investing is the ability to pull money out every few years via refinancing as the value of property increases due to inflation and the outstanding loans are reduced thanks to the rental income. In this article, I will highlight a simple example where you can take out your original down-payment in 7 years. Thereafter, you own a “zero money down” asset working hard for you that generates infinite returns.

Firstly, Some Assumptions:
Purchase Price = RM100,000 for a low cost apartment which most people can afford
Down-Payment = RM20,000 (20%)
Loan = RM80,000 (80%)
Interest = 5% pa
Tenor = 20 years
(the interest and tenor is on the conservative side as it’s possible today to get loans at BLR – 2.2% pa up to 40 years or age 70)
Yearly Installment = RM6,418 or RM535 per month
Rental = RM600 per month which is enough to pay the monthly installment and service charges.
Hence the Cashflow = Zero every month
Apartment Location: within 15 minutes walking distance to a nearby train station where the occupancy is more than 90%.
For simplicity, other costs such as legal fees, stamp duty, etc are ignored.
Other Assumptions: Interest rate remains unchanged, no rental increase and price appreciation over 20 years.

Take a look at how the loan of RM80,000 reduces over time from the Loan Amortization Table below:

Under the column Total Principal Repaid in blue, take a look at the numbers highlighted in yellow. At the end of year 7, the total principal repaid is around RM20,000 which is the original down-payment amount. It’s possible (subject to the bank’s terms and conditions) to refinance this apartment and increase the loan quantum back to the original amount of RM80,000 and cash-out RM20,000.*

* Note: In reality, as property prices go up over time due to inflation, it’s even possible to refinance to an amount higher than the original loan amount. Alternatively, you can pull-out the RM20,000 in a shorter time, perhaps 5 years instead of 7.

What Happens in this Example is:

1. An investor is able pull out his original down-payment or equity of RM20,000 within 7 years and put it to work somewhere else, preferable on a second property. Thereafter, none of his original money is left in the first property. The first property then becomes a “zero-money down” investment enabling him to enjoy infinite returns.

In fact, he can keep refinancing and pull out RM20,000 every 7 years for the rest of his lifetime. Even after he passes away, the apartment will still be around and his children will be able to withdraw RM20,000 every 7 years for the rest of their lifetime. Human beings will come and go whereas properties will always be around!

2. The investor enjoys a payback period of 7 years on his capital of RM20,000. This is not considered long considering the low risks involved as long as the property is in a good location that has high occupancy. In comparison, the payback period for new restaurants or retail outlets which are considered to be much higher risks is approximately 3 years.

For example, a good friend of mine today owns three franchises of a famous kopi-tiam chain. He told me that his investment in one outlet is approximately RM1 million. Each outlet is able to generate profits of around RM30,000 per month or RM360,000 per year. Within 3 years, he is able to recover his original investment of RM1 million which he then uses to open another outlet. On the surface, the returns and payback period may seem very attractive, but the risks he takes are also very high.

Keep Duplicating

If you are a full time employee, it’s possible for you to replicate my business friend’s success via property investments which entails much lower risk. You can easily recover your down-payment of RM20,000 within 7 years which you can then use for a down-payment on your second property. If you wish, you can then duplicate the formula 7 years later (in year 14) by refinancing the first and second property and pull-out RM40,000 which you then use to purchase two more properties.

An initial down-payment of RM20,000 in one property has enabled you to acquire four properties within 14 years. Another 7 years later or in year 21, you can refinance all four properties, pull out a total of RM80,000 and purchase another four properties! This is the best kept Secret and Magic of Refinancing that no other investments can offer!

Hurry, register now to Milan Doshi 3 hours mini workshop in Penang on 19th March 2011. Milan will share with you more secrets and tips of property investment.


March 8, 2011 at 11:59 PMjeremy tan

what he is encouraging here is for people to leverage on more debt. That will undeniably contribute to the expansion of the current bubble. Inevitably, this method will lead to a housing bubble that will eventually burst

There are many ways of investing and i do believe leveraging on something that you cannot afford is not a wise way to invest

Just my 2 cents : )

March 9, 2011 at 2:32 AMBoneBreak

Low cost housing meant for low income group but not for investment purposes. But somehow some idiots have abused the system to further burden the poor ones.

I would suggest government to re-inforce law to restrict rental for low cost housing and set rules to prohibit those who owns low cost house from buying second property.

March 9, 2011 at 11:05 AMMr.Business

Milan is encourging you to keep on borrowing from bank. There are a lot of hidden stuff he ignored & a lot of doubt in his example, let review the example again:-

1) You buy a property , out of pocket $20k & borrow 80k. then you have $600 installment. ok, sound simple. TOTAL $$ OUT = $20k.

2) best case, rent out $600, you got 0 monthly commitment. worst is $600 monthly commitment.

3) Stamp duty & legel fee are the concern. when you refinance, you get back your $20k, wow sound good because you don;t need to wait till you sell the property, then you can encash out. but the fee charges is $4k. loss $4k or 20% loss. in this case, you better get personal loan or credit card debt which is about 15% to 18% .

4) Refinancing for for 2nd , 3rd ..time. you keep on lossing 4k + 4k + 4k.... end up, you get:-
year 7th = 16k
year 12th = 16k
year 16th = 16k
48k for your re-investment

5) what if i dun refinance till at year 16th, i sell it. I got $60k back for re-investment. of course, through out 16 years, you dun have money to roll more money.

6) Again, keep on refinancing ..this mean, you always owe bank 80k in any of the year. 1st property - 80k, 2nd property-80k...eventually if you own 5 properties, you owe bank 80k*5=400k. what happen if the properties cannot fetch a good rental or even cannot rent out in certain years? who need to maintain it and pay the installment? it is you, $600*5 = $3000 installment every month from you for whole life. the worst if you cannot sell the property and get back the money you paid out. Wholelife will be $3k monthly instalmment. Remember property price will drop as well, market will burst as well, rental market will go down as well.

March 9, 2011 at 11:18 AMVincent

One important point omitted by Milan is Plan B - the ability to service monthly installments should units failed to rent out or tenants moved out without any new replacements. How to mitigate this risks?

March 9, 2011 at 12:16 PMjeremy tan

I am glad you guys understand how it works : ) It might sound simple but it is not.

After all, what is 20K after 5-7 years? what is 20K after 7-14 years? what is 20K after 21 years?

If i buy Gold now, i am pretty sure after 21 years it will outperform his investment methods by at least 100%

If i long commodities with my 20K i am pretty sure my returns will be a lot more

His method is obviously flawed.

He assumes that inflation will always go up in the property sector for the next 21 years. Inflation is sector specific most of the time.

March 9, 2011 at 1:40 PMLim_soong

Strongly disagree with this way of investment.
What happen if the market collapes & no one rent from you & you cannot sell it.

The bank will sue you till bankrupt.

Dont get trouble to yourself. be free & have a good night sleep (most important)

March 9, 2011 at 2:04 PMpockaroo

This whole concept of extracting equity on one property and leverage into a second or third property is extremely dangerous. You are promoting the idea that it is ok to take on more debt in your pursuit for property appreciation and hence wealth. The very idea of using your property as an ATM machine every few years and using this "recovered" capital to re-invest into another property is called leverage. Leverage is the act of increasing your risks (hence anticipated rewards) with small increments of capital outlays. In this example, increasing your risks by revolving capital - turning your initial 20k downpayment

For those who understand clearly how the housing bust in the US came about will agree. When the culture of "it is ok to take on more debts" is main stream, add the banks who are too blinded by profits to make out increasing amount of loans regardless, this is what you get.

Prime or subprime does not matter. When it comes to properties anywhere on the planet, what really matters for owners/investors is the total debt to household income - the debt/income ratio. Housing is the biggest human debt, next car, credit cards, etc. This is about your ability to pay back debts during your productive working lifetime.

His example of using a 80k flat is misleading. Yes 20k by today standards is not that much. The concept of turning the 20k infinitely seem rather innocent. What is not highlighted to the reader is every time the 20k turns, your debt increases exponentially!

We have not gone into the issue of potentially rising interests rates and the effect it has when you compound your debts.

At the end of the day, property investment has risk and may not be for everyone. The readers just needs to be fully aware of the risk and not be deluded into thinking leveraging is the meal ticket to retirement.

March 9, 2011 at 2:36 PMjeremy tan

Well said pockaroo, i bet you have been around long enough to be able to tell how the whole system works : )

You have a good grasp of economics

March 9, 2011 at 4:16 PMLouis

I think this is only the preview. He will urge the audience to enrol his course.
What do u guy think?

March 9, 2011 at 4:16 PMFence

The fact is that the current market is partly being “fueled and fried” by these so-called property gurus. They have created exponential effect to many youngsters and create the waves of property speculations. I guessed that they found that property investment is not as good as their seminar incomes and best of all risk free. After all it is the students who will take the loan and take all the risks. I am surprised as I thought all the while Penangites are smarter and cost-conscious but nowadays many willing to follow these programs. Don’t forget that Penang is not KL and vice versa. Penang is small market and it is not easy to find impatience seller to sell you under market price. Be realistic!

No doubt property investment is still viable but we need to be very selective and cautious. Many are simply jump into and queue up for the new high risk projects. They would feel it is better to let the property developers to get their money than those existing homeowners because they can’t accept the fact the original value increase by for eg. 30%. They feel they look unintelligent to buy the complete house...but they forgot these are lower risk and have more upsides.

Anyhow our market behavior here is certainly different from US. Fundamentally we are much stronger. Personally in general I still have the confidence on property in Penang for increases in 2011 especially in landed properties.

March 9, 2011 at 5:36 PMJeff

I have attended Mr. Milan's 3hrs workshop sometimes back in Penang. I must say that it was really too general even for a introductory course. Perhaps it is only suitable for those 100% newbie and i will definitely not recommend to anybody who has read a few property books before. I was expecting some good interaction among attendees and perhap abit with Mr. Milan himself, unfortunately there was almost none. The only real purpose of this workshop is to attract people to register for the intensive course, which will cost a few thousands and require to travel to KL.

March 13, 2011 at 5:39 PMAlan

All are sound negative comments...Strange.

I personally believe that with Milan Doshi's experience and reputation in the market, it must has some good thing to share. After all he's a millionaire thru property investment.

I am not his student yet, but I read 2 book of him. My comment is Milan is not what you all comments as above. I did read his interview in Personal Money last year and he really go all out to maximize his loan.
So, I strongly believe he has using the method above to double and triple his property portfolio.

To be fair to everybody comment, yes the example showed are too simple and too good to be true. But I believe Milan Doshi just showed the concept of refinance and it sound logic too. Details of the process still have to be experience it individually.

This is how rich people become richer, they just need to understand the concept or "point" of the idea then they will go out to practical it and from there they know how to leverage the bank money to become richer.

It's risk involve for everything we are trying to create the "breakthru". The risk of working or self employed have the risk too, right?

After all, I will say those mortgage reduction company will be out of business if really follow the Milan Doshi idea.

I think I will drive all the way from Kangar to attend what he's going to share...Hopefully he share the above example in more details..

March 13, 2011 at 6:03 PMmax

the truth is that his wealth if not solely generated from property investment... most if his income are coming from the course fees/books that you guys paying him... if his method works, why do he need to conduct the class after class? instead, he can have a better life like just sit at starbuck and enjoying cups of coffee with all his lawyers/bankers friends...

March 13, 2011 at 6:43 PMlee

Not really, max...I attended the 3 hours workshop in KL last year. The different between Milan and other trainer is , Milan Doshi did show you his bank account and loan statement and offer letter involve RM6.5 mil before he start his talk. I found it very convincing listening to him.

I have attended so many wealth creating seminar since last 10 years, stock, forex, options, internet marketing and property seminar name it ...
And I found Milan Doshi is the only 1 willing to show the "real" wealth .....

Just post your question to him when you attend the seminar and see what he's going to say..Interesting...

March 13, 2011 at 11:00 PMjeremy tan

Lee, don't be so naive. Having RM6.5 million in his account does not justify his method on leveraging on debt. If he has to earn your trust by showing you his bank account that is pretty pathetic for starters. If he makes you rich and you start praising him, that's a different story all together

If you understand economics and finance, you would know by now that the method he is using is flawed for many reasons. You have to take into account inflation, plus interest rates and the fact that you won't lose your job or become unemployed for the next 21 years.

If you really want to make RM6.5 million. Work hard and start saving. Invest in agriculture and commodities and perhaps you can start giving out talks like this in the near future.

Milan Doshi is rich not just because of his investments in properties but also his investment in human capital. As long he gets enough human traffic to enroll in his causes he would generate enough profit for himself from all the workshops he is offering.

Time to wake up my friend. We live in a world where capitalism rules

It is not how much you earn but how much you can save and capitalize on it.

March 14, 2011 at 12:24 AMChin

Jeremy...You are too serious.Is Milan Doshi did something bad to you in the past?

I am Milan's student 8 years ago. I have total 15 properties now in Penang , KL and JB. Total worth RM25mil(estimated).

It will not possible for me to retire now if not attended Milan Doshi workshop. I and my spouse keep on buying properties after the workshop and all are using the concept of refinancing to make the downpayment.

I believe you either a unit trust agent or mortgage loan consultant which Milan strongly against these industry.....
All the best man, you are heading to poor man mindset.

March 14, 2011 at 1:50 AMFence

To all ex-student of Doshi, please provide your brief account statement with full details to convince us. Or please share the strategies and the plans how you achieved the incredible number of properties in such period. This would kill off the critism.

March 14, 2011 at 1:58 AMChin

Fence, you think so you will be convinced?

Better do whatever you are doing now and hope to retire at age 55 with financially free.

Also, for your mindset , the best guru won't help you until you have the mindset switch and your life may be transform.

There're 20/80 rule where 20% population control the wealth of 80% in property sector.

Hope to see you in the 20 section 1 day...All the best

March 14, 2011 at 4:31 AMAlvin

To all successful investor either a Milan Doshi follower or not, it's a good discussion. We have been reading all the negativity news everyday from newspaper , so enough is enough....
Nothing can satisfy everybody, there is a said one type of rice feed thousand type of people.. Seminar is just a way to acquire knowledge , you may use your way if you think it's better for you.

Let the positive energy flow and continue to buy more properties...
Sub prime, bubble burst or financial meltdown or whatever you call it, happen once every 130 years, you can ignore it.
Worry of can't rent out your properties?Look for area like Villa Emas, BJ, Parkview, where there're 90% occupany rate , it will reduce your risk.
After all, do whatever you feel comfortable including attending the seminar.

March 14, 2011 at 10:57 AMJason

The US bubble was due to ignorance and the thought that oh it wont happen for hundred years.
Since when had Malaysia property market burst? Not yet.. so the hundred years are drawing close as more people jump into the greed bandwagon and all those $25 million properties could well be $25 million owning to the bank.

One thing for sure, follow the crowd and you are just 1 small fish eaten by the big fish guru. be the fisherman, when all the fish gathers, nab them with a net. The bubble had already grown, all it takes is a small needle and then it will burst, at that time lelong and fire sale would be the best opportunity to invest.

March 15, 2011 at 12:29 AMjeremy tan

It is simple logic. Leveraging on debt is not a wise idea. The sub-prime mortgage crisis didn't just happen out of the blues. Be wise and don't be ignorant.

My net worth is certainly more than the 25 properties you claim that you are holding right now.

My core business is in plantation. I do not need to explain to you how profitable are commodities such as palm oil and latex.

Speaking of mindsets....

March 19, 2011 at 10:26 PMVirtual Real Estate Entrepreneur

Good learning point and discussion point here.Most important is to open mind and analyse it personaly. Is best everyone benefit from the risk mitigation and input

March 20, 2011 at 7:12 PMEdgar "Jobe" Gasper

Currently in Penang especially, it seems there are less and less people buying to stay and more ppl buying to sell, thus I have my reservations for going into even more debt by refinancing just to 'buy-in' this late into the property game.

Bottom line, many ppl have played this game, and as with anything involving RISK, some won and many lost.

Some rags-to-riches winners will then go on to sell tickets to their 'seminars', claiming less luck was involved then really was...

As for the many losers, who are the ones with some real advice for the rest of us... well, who ever heard of seminars on not jumping on the 'get rich quick' bandwagon anyways.


My RM0.02

March 27, 2011 at 9:55 PMA

Very good (and civil) discussions from both camps ... kudos to that. There have been some really good comments and I think Jeremy's stood out among the best. I'm really impressed by the spot-on analysis of Milan's other avenues of wealth generation aside from property investments which I bet he hasn't shared with any of his followers has he ...

"I do it because I like to work ... because that's my interest ... because I wanna help others". These are some typical favorite lines used by these so-called gurus when they are quizzed about why they are still conducting courses after courses and publishing books after books, if they are already supposedly financially free. I'm sure many of us have heard them before. But I think these replies are just becoming too familiar to be credible now. Maybe next time they can say "coz I wanna save the world" or just plainly "I'm too bored" ... at least that will have been something different.