Real estate is one of the most attractive investment tools today. As the demand for land, homes and business places continues to increase with the increase in human activity on the planet. While the land on this planet is limited. In addition, due to the outbreak of COVID-19 The government has also cut the benchmark interest rate to encourage buying and selling activities. This includes buying and selling real estate.

however, real estate investment It’s not easy. Especially if you want to invest in housing. Whether it’s a house, dormitory, hotel or other commercial real estate. Because there will be a lot of expenses that you have to spend.

Therefore, several key rules in real estate investing have emerged to help people set the highest price for real estate they can afford. One of these general rules is the following 4 Rule by Michael Sloan, author of the financial book:

Understanding Rule 4

Rule 4 is a method for calculating the amount of property you can buy. This includes the price of the property and some additional costs, such as monthly mortgage installments. lawyer fee and other legal requirements

The goal is for people to understand how much they can afford to buy a house for. in order not to buy a house that cost much more than their ability And will create trouble for myself in the future

How does the 4th law work?

The way Rule 4 works is quite simple, that is, by multiplying the sum of available capital or total deposit amount by number 4 (if DP 20%), number 5 (DP 15%), and number 6.6 (DP 10. ) %)

Total Equity is obtained by the formula:

Total available deposit or capital = Current asset price x 80% – Mortgage – Emergency fund


  • A mortgage is the value of a fund or asset that you use as collateral for a loan.
  • An emergency fund is the amount of money you have prepared for sudden needs. related to buying a home, such as legal paperwork, lifting goods, etc.
  • The 80% percentage will apply if you pay 20% DP. If your DP is 15%, that number will be replaced by 85% over and over.

Example rule of 4

1. DP 20%

information score
house price 500,000.00
Mortgage (80% x price) 400,000,000
mortgage 150,000,000
emergency fund 20,000,000
All available equity 255,000,000
Rule 4 (Total x 4) 920,000,000
Example rule 4 with 20% dp

which means You can buy real estate for up to INR 920.

2. DP 15%

information score
house price 500,000,000
Mortgage (85% x price) 425,000,000
mortgage 150,000,000
emergency fund 20,000,000
All available equity 255,000,000
Rule 5 (Total Capital x 5) 1,275,000,000
Example rule 4 with 15% dp

which means You can buy real estate for up to Rp 1.275 billion.

3. DP 10%

information score
house price 500,000,000
Mortgage (90% x price) 450,000,000
mortgage 150,000,000
emergency fund 20,000,000
All available equity 280,000,000
Rule 6.6 (Total Equity x 6.6) 1,864,800,000
Example rule 4 with 10% dp

which means You can buy real estate for up to Rp 1.86 billion.

4 Restriction Rules

1. Double meaning

In the example above It can be seen that the lower the DP value (assuming other variables remain), the greater the value of the asset that can be bought. This has two meanings:

  1. Due to the increase in loan installments The total amount that the borrower has to pay is therefore greater.
  2. But indirectly, this could only be interpreted if people with low down payment capabilities were able to get credit for more expensive homes. Which is certainly quite dangerous for them from a financial health point of view.

2. The installment has not yet been calculated.

One disadvantage of this approach is that it doesn’t include the number of credit installments. In fact, the size of the loan installment is also a factor in why some people buy a home for a certain price with a fixed down payment. because the lower the down payment, the more Often followed by installments that borrowers have to pay per month only.

Other Useful Rules for Investing in Real Estate

1. The 1% Rule

1% rule It is a commonly used rule to determine the amount of monthly profit from real estate investments. In this rule, the investment property must generate at least 1% of the purchase price of the property. For example, the purchase price of an apartment is IDR 400,000,000. Then the minimum monthly rental price is 4,000,000 Indonesian Rupiah (1% x 400,000,000 Rupiah).

2. Rule 72

Rule 72 It is a rule that determines when an investment can be doubled. This method is quite simple: divide 72 by the annual investment interest rate.

For example, you buy an apartment for 350,000,000 rupees, an apartment rented by a student. It has an annual fee of IDR 28,000,000, which means you get an annual interest rate of 8%. This apartment investment will create double the value of your capital. If it’s been done: 72/8 = 9 years, which means that in year 9 you’ll get 700,000,000 IDR turnover. Don’t believe it? Calculate yourself on the page. compound interest calculator.

3. Rule 30/30/3

Rule 30/30/3 is a rule that guides buying a home based on one’s financial position. in this regulation Investors must allocate 30% of their income annually to pay the mortgage, provide 30% of the house price for down payment and emergency fund. And it is forbidden to buy a house with a total price of more than 3 times the annual income.

Due to the relatively strict rules, the 30/30/3 rule is ideal as a criterion for buying a home during a recession.

But no matter what rules you use when buying and investing in real estate. You need to know the current state of the real estate market. The goal is to let you know what the average price of a property like yours in the market is. And how attractive is that real estate? so that consumers should buy Because each type and real estate market must have different attractiveness and characteristics.

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