What is the best way to grow your wealth?

What is the best way to grow your wealth, relatively risk free?

On one extreme end of the spectrum would be gambling. I'm not familiar with that and the other extreme end of the spectrum, saving. I hate that. 

Being financially savvy, one would need to understand cost of borrowing, leverage and the power of compounding. So given the following scenario, a relatively fresh graduate, earning $4000, trying to gain a foothold in the property ladder with no savings yet, what can he do?

If he save for a $500,000 property, he would need for a 20% downpayment of $100,000. This could mean a 5 - 8 years of diligent savings. At the end of 8th year, when he wants to buy the property, the property would have grown at least 50% and the down payment would have grown higher still. A case of forever not able to catch the ladder. 

What can he do?

Oil Price Free Fall, the black swan event?

Were you afraid of the recent oil price free-fall? Is this the black swan event that will crash the world economy?

"On December 23, 2008, WTI crude oil spot price fell to US$30.28 a barrel, the lowest since the financial crisis of 2007–2010 began, and traded at between US$35 a barrel and US$82 a barrel in 2009."

Today the spot price is slightly over US$50. How does the low price and over supply affect the economy? Naturally the oil production for oil producing country may suffer which Russia is the main economy, lets see what effect this economy have on the world economy. 

Russia is no. 8 on the IMF world GDP ranking which is roughly 2% of the world's GDP?
According to http://en.wikipedia.org/wiki/List_of_countries_by_GDP_(nominal)

Seriously, Russia has been in sanction at some time or another, the current collapse of the Ruble will not affect World GDP much looking at the percentage of the GDP it contributes. 

Do not be worried about the short term free-fall. It just says there is an opportunity to take advantage of the blood in the streets. Wait a few months and jump in to the fallen asset class, namely energy stocks. Also, in terms of leverage, interest rate hike will be slower with each wave of crisis. Interest have to be low to entice businesses to take on risks to grow the economy. 

Is Oil price fall the 4th QE, it looks likely that the free fall will stimulate the emerging economy and for oil producing countries, a short term problem. Sooner or later, the weaker nations will give up and seek out a buyer for their future produce and that would cushion the cashflow, much like taking loan from IMF. 

I'm bullish. Cheers!

Working til 67??

The Government of Singapore is going to announce new laws for working til 67?

Wah! I could not even imagine working past 67. 

As a nation, do we need the layout force to work for 40 years to achieve growth? 

As a organisation, did it not improve on productivity to not depend on 67 YOs?

As an individual, did one not work enough to require working past 67 to survive? 

That comes down to the basic fundamentals, what exactly is wrong with the system?

Did we move too fast that some are still 20 years behind?

Did we not have a system to enable retirement?

Did the retirees not have any hobbies to sustain them when they are not working? 

This post is more questions and more questions... for the answers? wait for 20 years later when i reach 67. I will tell you if I'm not working... or not. Touch wood! 

Cheers!

Systematic Accumulation of Debts

I was once afraid of calls offering loans to me. "Dear Sir, you are our privilege customer and we are offering you a special rate for balance transfer of 1% processing fees and 0% interest rate for 6 months..." I would immediately hang up... what? what do I need to take loan for? 

Debts is good if you know how to use it. Lets rationalise it this way. There is the OCBC 360 account giving up to 3.05% per annum. Compared to the cost of 1% processing fees for loans up to 6 months? Hmm.... 2.2% effective and 1.05% free money? Why not?

In this low interest rate environment, it is an anomaly of normal situation and we must not let slip this opportunity. 

Run your life like a company. In every company there is cashflow and in most companies, debt is necessary to expand the business. Same for your own financial life. Without leverage or accumulation of debts you cannot go far, yet discipline is important to prevent misuse of the debts. All debts deployed into a business goes into capital accumulation or cashflow and they are never ever used for frivolous expenses like company D&Ds and rewards for staff. Those comes from business profits. It is the same as for your own life... debts taken are not used for holidays or merry making, it is used to enhanced your position in life. 

Accumulate debts systematically for capital accumulation and for cashflow purposes. Use only business profits for merry making.

Macro Economy and Real Estate

More often than not, we are seriously affected by the "consumer" behaviour. Does the property look nice, does it have great view, it is rare, limited in supply? Let me tell you, it really does not matter as we are not the ones staying in the unit. 

Pay attention to Macro economic indictors. If the economy is in depression, how does the government turn things around using fiscal policy such as interest, tax, labour reforms, etc to change the situation around.

US has chosen to let loose on the monetary supply to allow economy to work itself back to health. 

Europe has chosen austerity measures.

Lets look at australia the lucky country. What has the Government done to improve falling commodity price, high priced of exports, labour / knowledge shift? 

It has not in any sense of the word done anything to restructure the economy to withstand future shocks. Would it need to? Rich countries like Singapore often have a backload of infrastructure projects to spend on to create jobs when economy is down, thus enabling its economy to continue functioning and in good times, deploy fiscal policy to improve its coffers. I think without going into deep research, I hazard a guess Australia will spend its way out of economic downturn. Question is how long is this downturn, I hazard a guess again that Australia might need a little help in the labour reforms to help to achieve a more structural balanced economy.

The economy is balanced isn't it? Lets use the example of the economic policy it have. When times of economic downturn, it can adjust its interest rate to devalue its currency to boost tourism and education sector. In times of growth, it can call the shots and increase the currency value to boost exports. A perfect system! 

I would love to learn more how macro economy can be used to predict housing demand.

New Investment on the Horizon

There has been a few products on the market recently that gives wonderful yields of 17%,18% and 36%. Thats a very very big wow! right? There was a wonderful product giving 75% yield a few years back growing peppers and its doing very well now. The investors must be grinning from ear to ear.

Lets see. :

17% - Pilbara - developers financing for pilbara housing. This company has been operating this financing scheme for the last 2-3 years, offering 17% return for a 2 year period. A few companies which includes IPINglobal and wealth revolution group are marketing this product.

18% - Par Vue - developers financing plus property in Bundoora. This is to finance a property in Melbourne Bundoora region. The company offering this is future estate, check them out.

36% - Kalimantan mine - now this is interesting. Investors fund the buying of coal at bulk price and agents sell the coal. The returns can be 3% per month. 

Interestingly, I spoke to some investors sometimes, I asked them why they put money in Pilbara. They said 17% is very good yield. I told them I have 36% yield and they were scared and backed off.

As a principal, as a levaraged investor, I do not find Full Cash Investment enticing anymore. I want leverage and through leveraging, achieve higher cashflow and capital gains. It will be hard to beat 36% a year or even 17% a year but as a leveraged investor, I would like my favouritest bank to share the risk with me and for them to do their due diligence. I may not earn 18% a year but I'll be comfortable in my sleep.

I blogged about 12% yields in an earlier post explaining that 12% might be the magic figure to make people part with their money. It seems that game has been raised to 18% and this figure will continue to appear in future investment products. We are watching...

Nett Asset 1 million

Discipline is one of the most important virtue required of an investor. Like many tai kors says, it is the process not the method. Savings can also help you to reach your end goal.

I kept a meticulously done spreadsheet that had all my fixed and variable expenses, income and investment in there. It is like a financial life written for me in til the ripe old age of 45. It is tough as you planned for every single penny to be deployed into financial workings at a future time. In fact, I'm deploying future assets today at a given cost. 

I'm proud that my current Nett Asset has just passed over a Million SGD! This Nett Asset value has been fluctuating due to the movement in exchange rate and valuation for the past few months and it will continue to be so in the next few months but I'm certain I'm past the value of it. This is a BIG Milestone! A Million Dollars in asset. What this means is at a 4% withdrawal rate, I could draw $40k per annum to meet my expenses. Hmmm, then again, my assets are in properties and not in dividend yielding stocks so this 4% withdrawal rate may not apply to me. 

A quick run down of the financial health shows the following :

Total Income (Salary Earned over 11 years) ~ $1 mil
Total Nett Assets ~ $ 1 mil
Total Nett Liabilities ~ $1.4 mil

Total gross passive income ~ $ 2500 / mth

and 4 more properties on various stages on completion. 

It always feel good that your nett asset has surpassed your total earned income and it means all your spendings were paid for by others. I always tell E that once my tenants can pay for my shopping and travelling, we can travel and have fun. Right now, just be discipline and work towards financial freedom. 

Cash Performance Maximising

Are you making your money work harder? How hard do you make it work? What kinds of returns do you get from it?

Most of you would be making use of money in the pocket / bank and putting them to work... What about future money? do they have to work too? How much do you have? what is your limit?

Food for thoughts... go think about it.

Do you have enough to retire?

Some of us work to leave a legacy, some just want a simple life. Do you know if you have enough to retire? Have you been scared by insurance agents masquerading as financial planners whose sole aim is to sell you ILP which pays them the highest? Then think again. Think out of the box. I say ditch those financial agents and understand things for yourself.

There are tonnes of information and calculators out there which can help you.

a. the AARP calculator, 
b. the MarketWatch calculator, and the 
c. “Ballpark Estimate” calculator 

My own understanding is the 4% withdrawal rule and the passive income concept. 

This article appears on Marketwatch, 28th Sept 2014.

There are 5 rules of thumb.

• Make it your goal to have 15.7 times your annual pay. This comes to us courtesy of Hewitt Associates. Since Social Security will provide 4.7 times your pay, you need to save 11 times your annual pay in an IRA, 401(k), or other retirement vehicles. (See also 5 checkpoints on your race to retirement.)
• Calculate whether you're on track for your current age. This comes to us courtesy of Fidelity. They suggest that you have 8 times your ending salary by age 67 to meet your basic income needs in retirement. To accomplish this goal you should have one times your salary at 35, two times your salary at 40, three times your salary at 45, four times your salary at 50, five times your salary at 55, six times your salary at 60, and 7 times your salary at 65. (See: Retirement savings: How much is enough?)
• Use a safe savings rate to ensure income adequacy. This comes to us courtesy of fellow RetireMentor Wade Pfau, who suggests a safe level of savings of a little over 16% of salary a year might be a reasonable target. The good news is employer matching and nonelective contributions count toward the 16% rule of thumb. The bad news is people need to start early in their careers; otherwise the amount they need to save increases.
• Make it your goal to save 11%-15% of pay- According to the Principal Financial Group, maintaining a similar standard of living during retirement requires an estimated annual savings rate of 11% to 15% of income over the course of your working career. Once again, it is fair to count the employer match or other employer contributions. Principal cautions, however, that merely maxing out the company match will typically leave you short of this goal. One other caveat: High-income earners may need to save at higher rates, since a lower percentage of their income will be replaced by Social Security.
• Catch up after a late start. The Boston College Center for Retirement Research found that if an individual begins saving for retirement at age 35 and does so for 30 years until retirement, the average household needs to have an annual savings rate of 14% of pretax income to maintain the standard of living they had before retirement. For low-income households it is 11%, for middle-income households ($41, 501 to $76,500) it is 15%, and for high-income households it is 16%.

Are you more confused?! Good! 

Changes yet again in Malaysian Real Estate rules

Here I am in Kuala Lumpur catching up with my real estate friends and heard them saying that Selangor is going to introduce some measures regards to restrictions in ownership for foreigners. I am just back in the condo, and I saw in propertyguru.my the same piece of information.

http://www.propertyguru.com.my/property-news/2014/9/64622/Selangor%20unveils%20restrictions%20on%20foreigners%20buying%20properties?utm_source=pgmy-newsalert&utm_medium=edm&utm_campaign=dailynews-22Sep2014&utm_content=links

What this means is effective impacting foreign confidenc in the country. Foreigners's speculation could be curbed in Selangor.

Luckily, there is still Kuala Lumpur which is not under Selangor state government's control. I think, prices have to go up for KL. Well, I'm vested.

cheers!

Down Down Down the property in Singapore

It was not long ago when the property prices in the tiny island state shot up 100% since 2008. A series of cooling measures ensured that speculators will not find it worthwhile to enter the market anymore. Huge release of supply of properties through the HDB ensured that the nation's citizens have a roof over their head. 

Channelnews asia reported that the number of mortgagee sales at property auctions in Singapore jumped sharply during the first three months of this year. Investors... standby - sign that owners in financial difficulty are finding it harder to dispose of their properties and you can find distressed properties. 

Bankruptcies in Singapore have also risen, she added, citing statistics from the Ministry of Law that showed the number of people made bankrupt rose by 14 percent to reach 1,992 in 2013.

2015, 2016, lets bide our time for the real-estate correction. 

Wait... does it mean other countries would be affected as well by the pessimism?

Source: http://www.channelnewsasia.com/news/business/singapore/mortgagee-sales-at/1050756.html

Cassava Plots for Sale

This is the 2nd year I'm holding on to this Cassava Plot yielding >10% per annum for sale. I'm selling this 1 plot for 26k USD and 0.5 plot selling for 13.5k USD. The contracted yield for the next 6 years are, 2.42k USD and above for 1 plot and 1.21k USD for 0.5 plot, thats initial contracted yield for the next year and its going up. email me if you are keen.

thanks!

Turf guarding

As with all people, those people with the resources will say, come to me. As someone without resources you are just at their mercy. 

Do you want to be one with resources or be the one without?

Deploying Assets

Investing is very much like a war. In my youth I've seen some Hong Kong movies of stock market investments where the fund managers took to playing and manipulate the stock prices buying and selling and deploying assets to do so. It is very thrilling to do so.

In my younger days, I'm quite a good chess player. Chess is a game where you can really play "king" for a while; you have full control of your game. I love to play black and I love to play the Sicilian Defence, or in particular the Sicilian Dragon.

Defence is a misnomer. Sicilian Dragon is one of the most powerful counter attack moves. I feel empowered playing black anytime against a D4 Queen's pawn opening. 

In defence, you create a strong move for counterattack; should the enemy slip up, you could attack it with no mercy and you would be surprised with the swiftness of the deployment of assets to attack from this position.

I would like to be in this position with ready assets to be deployed. Once market crashes... its attack time.

Set your assets to be mobile and ready to move. 

1. Build good relationship with banks - they are your rooks to give you cannon power.

2. Build good relationship with agents - they are your queen to scoop for resources.

3. Build pawns - cashflow to advance positions and move into more strategic position.

All kinds of chess pieces wins you the game. Deploy them strategically and it can help you to win the game beautiful and crush the opponent... its not just winning... its crushing your opponent that is fun! 

Time vs Money

One of the main reasons why people work is to secure a retirement. I must have driven my insurance consultant to her early death when all I need is $500 a month for expenses to survive. Yes. Based on the 4% withdrawal rate and fire test it against 30 years of data, we need to have only 25 x yearly expenses to retire. That would be $125000 invested in a ETF that gives you consistent returns of > 4% nett of inflation and you can retire without working.

How sure then are we that $500/month is enough? So we build layers and layers of insurance, over capacity, buffers... til... we have no more time left to enjoy ourselves. How much is enough really? The best we can get til we retire? We have just traded time for $$$. Now try to buy back time!

For young graduates, should you understand money and time, you would not want to spend time to get money. You would spend money to buy time. Time is always a more expensive commodity of all.

Say, should you be able to use a road map that guarantees you time for life, would you buy it? for what price?

OTP Price vs Valued Price

For new comers to Australia property, it would be a very daunting task trying to establish the valuation of the properties. No one knows exactly. You buy at the Off the plan price of $X, but the valuation in 2 years time may fall short... what do you do then?

Cost of Uncertainty

Investors are often concerned about fixed rate vs floating rate when they taken a loan. A fixed rate is invariably higher compared to a floating rate, however, you can be sure that the amount you pay for mortgage remains the same each and every month.

If you live with certainty, several things can happen :

a. You can fully deploy all available resources and plan to the very last penny - which translate to better performance of your available cash.
b. You can sleep better and have less anxiety.
c. Peace and tranquility.

Choose uncertainty if you want excitement in life. I pay a little more for certainty anytime and setup a road map to grow my portfolio.

Did anyone say Stocks??!

Rumah Baik Baik!

Rumah Baik Baik means beautiful homes! This phrase was coined by one of my fellow colleagues and it stayed with me throughout the years.

Rumah Baik Baik will make people emotional and buy things that would make them lose their financial independence. Beautiful things like beautiful woman makes you lose your head. You simply lost all reasoning ability.

Best houses I've seen so far :

1. The Haven Residence

http://thehavenresorts.com

The Haven in Ipoh which came to me in 2011. Set amidst beautiful limestone cliffs... Did I make a mistake not buying it?

2. Valley Lake in Keilor East, Victoria

Next, Valley Lake estate in Keilor East. By looking at the picture below, does it whet your appetite?

http://www.mab.com.au/residential/canopi-valley-lake

To reiterate, both are beautiful projects but do look at fundamentals and see if it makes sense to invest. Buying is no problem, both are beautiful and nice area to stay in. Investment? Remember, investment does not have emotional content. It is simply a maths issue, make the numbers count!

Cash flow vs Capital Growth

I've just attended an Australian Masterclass event with an agency. "Capital growth is the way to riches, yield gives you holding power"

I've always been a follower of yield and not depend on the upside growth. Today, within 4.5 years of investment. I've grown from 40k cash to now owning 7 properties. Although my earnings are around 400k within these period, I stress to say that without consistent income coming in from my rental, I would have stopped at 2 or less and get stuck.

Today, I'm aiming for 2 million in property portfolio and equity of 900k, simply by being able to buy and being able to hold. That is each property must help to own other property by providing cash-flow to reduce expenses.

Lets take for example, a person earning $5000 a month with $2000 expenditure.

He manages to save up $3000 a month for a period of time and accumulated $120,000. He buys a off-the-plan property. He will get stuck while waiting for its completion. No income. So he starts to save for the next pot of money. Consider if he have to pay a slight outflow each month to hold his property... say $300, he would have $2700 left. It takes time to growth his equity and all these years say 5 years would have passed and he is stuck and cannot grow his portfolio.

Put it another way, he bought a rental property that gives him $300 a month straight. His income would have increased by $300. If he could raise more equity to buy more units and use the rental income to cover interests and outgoings, he would earn say $50 extra a month. Keep rolling over 5 years, he would be financially free and obtained equity. Slow capital growth is not important as his nett rental income could already enable him to be financially free and allow himself a greater risk to take!

Think about capital vs yield. I say Yield!

Sell your pants to get a property

This is very exciting! I've just booked an expression of interest for a unit that's misplaced by 100k or more as compared to a similar property just next door.

How did this happen? I was at a seminar just hanging around, learning new stuffs and networking. Met a fellow investor who bought the 1st phase of the project at $590k, a 3 bedder townhouse fronting the lake. As usual I was just checking out the girls when I overheard my agents commenting on the same project with some suspicion of mispricing. As I've researched that property earlier and found the project to be exciting but pricey. The project is Canopi in Keilor East - an up and coming area. When I heard the possible mispricing, I went to my agent and said, send in my EOI immediately. Take it off market for 2 weeks and we can see how.

The seminar is on investing and I was wondering how come these agents with such advanced knowledge of pricing change was not able to translate into a "Below Market Price" purchase? I mean all they had to do is take it off market and they definitely can find a good deal for their clients and a client for life for that matter.

Here I was excited about selling my pants to get this possibly AUD$100k below market value property. Just excited...

Be good to yourself... call up agents every now and then and get to know them better and tell them you are very rich and waiting to get into the market!

About Ponzi Scam

I first fell victim to a Gigantic ponzi scam called the stock market, then the unit trusts. Some of the exotic ponzis I've invested are 12 daily pro. I have never ever touch MLM or any product that based on your ability to resell the product for higher price or to pull in more members.

12 daily pro is so powerful a scam. You place your money, 12k usd in the system and in 12 days, you receive 12 percent for doing absolutely nothing and thats ultra high return for doing absolutely nothing! Its introduced by a very dear friend, who must had made some upline money intriducing me to the system. Now with the money locked in, you are at the mercy of the ponzi for the 12 days. You cannot withdraw the money. Needless to say, the system collapsed eventually and gone are the few thousands.

Now, what else gives you 12% returns? Dolphin Capital? IPIN Global secured investment strategy? Geneva Gold?

What is so special about this 12% that people are willing to let go their money to put into something that they absolutely have no control over? Ever since the 12 daily pro scam, I've stayed away from anything that promises 12%.

I've received my very first advice on property investment - only invest where you can get a mortgage. It made perfect sense. I was not savvy enough to ask why nor do I understand it initially. Over the years, I've gone against the advice and bought some property without bank mortgage and what I dumb dumb I've been feeling ever since I parted with my money. Thats money lost forever... depending on the whims and fancy of the ponzi operator. I did say the stock market is a ponzi as it is a "willing buyer, willing seller" market. Would banks lend you money to buy stocks? Think about it.

Why do I say you need a mortgage... The bank is a cautious creature who have to protect its own interest. The banks are lending against the value of the asset and not lending to you as a term loan. The property must have sufficient value when a bank lends you the money. Without the bank backing the mortgage, it would be a "willing buyer willing seller" system. You may not get the price you want next time you are selling. Bank mortgage helps you create a stop loss.

In an unregulated market where financial services is not so advance, take care when investing. If you think the law is going to protect you, think again. How are you going to raise the money to fight the case, in their court, taking several years to recover some tens of thousands. Also, think about who is going into the deal with you. If your fellow investors are the aunties and uncles who had just withdrew their CPF money, better stay out and advice them to stay out too.

I've met numerous aunties who have invested as a "try try"!!!! what? try try? Lost money take it as lessons learnt.

With that attitude, Ponzis are here to stay.

Super Boring is good?

George Soros: Good investing is boring

“If investing is entertaining, if you’re having fun, you’re probably not making any money. Good investing is boring.”

I'm super bored nowadays having my funds already locked up and awaiting for the returns. Is that good investment?

The lack of excitement is certainly not a reason to indulge in exciting returns. Slow and steady is the way to go. Find something to engage yourself whilst you set the plans for your money to work hard. 

Argh!!!!

Problem with Exotic Investment Schemes

There are many investment schemes all being offered to investors promising returns of XX % and for a limited time only... XX + X % just to make you feel special. Please go through the business model to understand how the scheme can make you money and what is the structure they offer you.

The recent problem with, Geneva Gold, ECO house just highlights the issue with having no control and having the property investment being thousands of kilometres away. Yes, it may be protected by law but how do you go about enforcing it? In the Brazilian Court? How do you stack up to fight a case against the locals?

Notwithstanding the basic rules of investment of buying low (below market value), sound fundamentals of the product and cash-flow and a exit strategy or two. These investments throw in a few curve balls too!

For exotic investments, you have to think and understand more :

a.  Investment structure

How are your investment structured? Is it a company guarantee? Who is guaranteeing it? Do you have title and law protection? Even if you have all these, how do you enforce it? I heard in the UK, you have to have a deposit placed with the court to commence court proceedings.

If you do not know or do not have the means to pursue the case, please be nice to yourself and not pursue the investment.

There are vendor loans property that do not give you title of the property til the vendor loan is cleared. Are you strong enough to take them on if things go sour?

b.  Market

Do you have a market if you want to sell it? Certain products practically have no market and hence you are stuck with a hot potato. You, in good faith would not be able to pass these hot potatoes out to other people.

c.  Control

The most important considerations would be Control. How much control do you have when the situation changes?


Always follow Warren Buffett's rule no. 1 = Never lose money.

Treating each investment property like a business

Each property must be treated like a "company" with its own profit and loss statement.

How do we analyse a company?

1.   There is profit and expenses statement. (Profit and loss statement)

This is the measurement of income from rent vs expenses incurred. What happens is people are obsessed with yield. Yields are just part of the equation, you have to take into account costs associated with the ownership which includes maintenance, interests, taxes and other nitty gritty expenses.

2.   Intrinsic Potential (Price to book)

This measures the potential for capital gains. What happens for a serious investor is he would only buy below market value which is a comparison against other similar properties and that would already made him some money when he buys. How else can we unlock the property's values? Say in a company we have a competitive advantage - think patent and good will. In this case, you can say a possibility to convert the place with an extra room to increase yield? 

A potential to subdivide? A potential rebuild? Structural plans to show that the area's up for regeneration? Yes, upgrading of the immediate environment will increase the intrinsic values.

3.   Full Control (ability to influence and make changes)

As in all business we own, when we put in our money, we do not want other people to manage the cash flow right? How do you know they can do the job better? even if you hire a professional manager as a CEO, you would expect to not give him full power and to seek board of directors approval for some changes, for example give himself pay rise. Control is a key factor for successful investment. No control = no investment. No control = gambling.

We have to treat each investment property like a company and when it can make you money on a consistent basis, that is a good "investment".

Understanding Structural plans - Carnegie

The Victorian Govt have introduced a new planning policy to rezone residential and growth zones. This is like plot ratio in Singapore. Plot ratio indicates how much you can maximise the available floor area. The Zoning policy implemented by the Victoria Govt dictates the height and the off-set of the building relative to the zones.

There are basically 3 zones - Growth zones, Residential zones and no growth zones. Several cities have restricted their growth through the implementations of the zonings. One of which is Glen Eira which had implemented no growth zones for ~ 78% of its suburbs. Which is by law, there can be no more growth.

With rising population, due to immigration and population natural growth, and limited supply,  due to restriction in building height, high desirable suburb such as Carnegie would likely experience capital appreciation. Lets look at what the plans entails.

The green zone are restricted to no more than 8 m height. (2 storeys)
The blue zone are restricted to 10.5 m height. (3 storeys)
The light blue zone is restricted to 10.5m height. (3 storeys)
The brown zones - growth zones - 15.5m height. (4 storeys)

If you are buying for investment, you would look for brown zones for single storey dwellings for rebuild potential or the blue zones. 

2 Morton Avenue - FRD has a 5 storey building which would be the highest in the area when built as the restrictions would be 4 storeys for all the other buildings in the brown zone. Further, the Victorian Government's transport master plan has approved and funded the Koornang Road level crossing and there would be a new train station (currently being called for proposals July 2014). 

Forex play with property loans

Stocks vs forex, which is more risky?

Many would have said Forex is more risky, thats because Forex is a high leveraged game played by high net worth people. As we understand currency, currency is a commodity driven by demand and supply - indicators of economic drives demand and supply and the float of the nations' currency is far too wide to be manipulated by any individuals. In view of the large float of currency out in the market... try shorting the currency?

In stocks, we often hear of manipulations by some fund house or bankers to short or drive up demand. Often there is a finite stock volume and it would be possible to drive up and down demand for this finite number of stocks. 

Have you seen $$ becoming zero overnight? Or have you seen Stocks delist overnight or being suspended?

The answer is clear. 

In property, there is a way to play forex at 1:1 level and that allows you to mitigate the margin call risks associated with high leverage investment like forex. You simply use a "collateral" to offset against any losses. 

Lets put this in example. 

For a $400k property say in AUD vs SGD. Historically prices fluctuates about 30% every 5 years or so.

Start point at year 1 - you have put in 80,000 and 320,000. at 1.18SGD to 1AUD. When AUD fell to parity, you convert the loan to SGD loan... hence instant 30% gains in forex = 30% reduction in mortgage liability. When AUD rise to 1.3 : 1 SGD, you can convert to AUD loan again. Such conversation over time allows you to earn the forex exchange rate without ever lifting a finger.

Money printing anyone?

Early Retirement Extreme

I've been guided by this massive goal of retirement early to develop investment knowledge and education and to take action to make things happen. Its property number 7 now. I'm extremely proud of my achievement thus far and I'm able to share with more people about my method, yet, I'm apprehensive. I'm not too sure where would all these lead me to...

I've been scouring the web for retirement formulas. I don't believe the financial planning nonsense about creating a nest egg which can be destroyed overnight in a financial crisis and when that happens at age 65; it would be a disaster. I've been impressed with Mr Money Moustache  and his philosophy of life. Mr Money moustache and his wife are financially savvy people who decided what kind of parents they would like to be when they eventually have a kid. That is the driving force towards their retirement plan. Being financially savvy gives them the knowledge how to do it and with $600,000 earned and invested in a basket of stocks, they were able to live off the dividends of $24000 a year for their next 60 years of life. Sounds great? Where does that lead us to? I questioned?

Today, I stumbled upon a new blogger, Mr Early Retirement Extreme, a nuclear physicist by training and a philosopher in deeds. He managed to lived on <$7000 a year! wow! This is extreme frugality. When I recalled, I was able to get by with $20 a day... $600 a month and roughly $7200 a year extrapolated, I found his argument intriguing. 

Early retirement extreme is a wonderful blog about the philosophy of living, choices, sustenance. Whilst Mr Money Moustache is a mathematician and statistician, early retirement extreme is much more philosophical in discourse. Do read it.

Nearer home, we found a more down to earth more mortal level of dealing with retirement planning. My 15 hour work week is written by  a civil servant who had invested in a basket of stocks that gives him a dividend yield to supplement his income. He still lives a rather "normal" life, goes to restaurant, buy the stuffs he needs. 

Where does all these lead me to? What drives me to work further? I'm drawn to the early retirement extreme in philosophy as the philosophical discourse is why I ditch the corporate job in pursuant of an utopian ideal in civil service. Alas, that too ended up broken hearted... there is no utopian in this world. Its everyman for his own life. 

My plans guided me to retire by 45 latest. A goal which is yet still attainable and the above 3 blogs are guiding me to a philosophical living when the time comes.

“A master in the art of living draws no sharp distinction between his work and his play; his labor and his leisure; his mind and his body; his education and his recreation. He hardly knows which is which. He simply pursues his vision of excellence through whatever he is doing, and leaves others to determine whether he is working or playing. To himself, he always appears to be doing both.”

— François-René de Chateaubriand

Selecting Residential Properties

It is Extremely important to Develop A Set of Criterias to evaluate Property if Making money in The long Run is your Priority. A different Set of Criterias then exists for Home Buying - We shall Not Go Into that. Every market have their Own Set of Criterias. . . . Wendy's MTL criteria is only 1 -> 8% Returns. Though that Works in Singapore, in Places Where interest rates are HIGH that may Present another Set of problems altogether. How then do You ascertain The 8% is Sustainable in The long Run. ? Finding these 8% are also quite Properties next to Impossible or they require HIGH Cost of Ownership unless You have good Network.


Since We are Into Australian Properties, We shall Take A Look at their Gurus' selection. The Following are taken from Michael Matusik's Website. I'm also sure You Can Adapt The Same Development.
http://matusik.com.au/files/2013/03/Matusik-Property-Pick-April-2014.pdf
Broad Philosophy
Our position is to only Select Broad Residential Investment opportunities with The Following characteristics:. 
Michael Matusik's TEN KEY ATTRIBUTES

1. PEDIGREE Who is The Developer? Who is The Builder? Do they have A good Track Record? Do they deliver what they say they Will?

1. SITE. How good is The Actual site? Already What facilities exist in The Local Area?

1. DESIGN The Well Project & Product Is Designed? Will it Appeal to Buyers in The Future? Will The Rental market premium to pay A Live there?

1. WHO Does The Project Appeal to at least Two Major Demographic subsets?

1. RENTALS. How Big is The Local Rental market? What has been The Local Vacancy & Rental rate growth over The past Three years?

1. NEED. How Many Jobs & Businesses are Within A 10 minute Drive?

1. DEPTH. How Big is The Local Resale market? What are The Local price points?

1. SUPPLY. Underlying demand Current Versus New dwelling supply?

1. TIMING In what position is The Local market & Product Type in The Property Cycle?

1. UPSIDE.  What are The longer-term Trends? Does this Property / Project Fit? What is planned for The City / Town & Local Area? 

   Within A ten minute commute of Major "Hard - core "Infrastructure
   Small Projects or staged
   Inner City Developments or infill
   Well priced, with support Local Resale.
   Location attributes - HIGH existing Amenity & Limited New supply.
   High Quality & Designed for existing & Local Demographic Future demand. 

The joy of Global Property Investment -updated

The joy of Global Property Investment

Global Property Investment has brought me to many places where I did not even have the slightest chance of visiting. I have come to appreciate suburbs such as Woollongabba, Toowong, Southbank, Carnegie, Rowville, Boxhill, Brunswick, Carlton, Ipswich ... Mernda ... Where? Places where I did not even know exist and would never ever even thought of visiting. the adventurer in me took up the challenge of exploration. I've learnt the population profile, wages profile, likes and dislikes, new development plans ... even more so than the locals and even the agents. Can I say I know more than I do About these few Suburbs About My Own Backyard.   Why so? 

 

Recently I've just been researching on these Australian suburbs and how do I do that? A mixture of sales talk by agents, reading lots of reports and city council data and structural plans and my best friend Google Earth even talking to australian students. I've "flown" in and out of Australia several times a day, "walked" the streets and understand the fabric of the locality.

I've also gotten to know developers such as Caydon, Fridcorp, Kokoda etc and a myriad of small time developers. I know Caydon is owned by a Italian Family, Kokoda makes some luxury stuffs. Fridcorp does really funky stuffs. If you look at all the brochures, they are more or less run of the mill luxury and quality. Australian developers do make quality stuffs. One developer stood out - Fridcorp. Fridcorp's design approach appealed to me.

Besides design, numbers and fundamentals are really what it is all about in property investment.

Caydon on its website published some guides to investing in the for Off-plan properties. You can go take a look. http://caydon.com.au/caydons-top-10-tips-buying-investment-property/

What do I look for in a suburb?

Development plans (or lack of ...).

There are several gurus that advocated looking at areas with big development plans. I think as a retail investor, by the time the plan reaches us, the price would have priced in the price appreciation of the development coming in. As such, I really find it difficult to find good values ​​in those areas.

I find value in mature suburbs where people wants to live in, where amenities are aplenty, where there are limited developments. Why do I say that? Being off The Radar have an Advantage as The Place is Not bidded up and there exists values ​​in The Medium to long term. Short term speculation is Not for Me.

Carnegie focus

Carnegie is a suburb I've grown to like through my research. It is actually unpretentious and livable. Graffitis, street cafes, transport (not a hub) few kms from university, tree lined areas. How many suburbs can boast of train station, quatics centre, library, shopping strip, treelined streets all in the same suburb? The nature of the place is of moderate buzz with population of 16000 and this fabric makes a very nice urban village atmosphere. Fridcorp did a good job interpreting this neighbourhood into their 2 Morton Avenue project.  

2 Morton Avenue

There are altogether 40 units in this small development of 652m2 of land. Built over 6 storeys, with the ground floor having a café shop. There are 2 configurations of 1 BR, one faces East which is butting 3 Morton Avenue. 3 Morton Avenue has built "a great wall of china" abutting 2 Morton Avenue. Architecturally, this is a very bad gesture. I've chosen a 1 Bedroom unit that faces West towards the city. Those facing inwards - good luck.

Lets analyse this project

Cons

A.     Too Close to Train Station - only 80m.

B.     Close to Level Crossing - 120m

C.      Unit Faces West - Hot Summers (Winter warmer).

D.       Koornang Road Unit Faces - Quite A Busy Road.

E.     Mechanical Parking

Pros

A.     Tallest Building in The vicinity

B.     West Faces The City

C.      Fridcorp Design

D.     No. amenities to Look After

E.     Cafe at The Ground Floor

If we look at the median price of the house in the suburb, this project is a bargain. Right next Door, Viva is Selling 1 BR Apartment for 365K and with a larger Balcony - 7 m2 extra compared to FRD. In terms of layout, 3 Morton really sucks as there are at least >5 sq m wasted as corridor space. The kitchen is compartmentalised which makes the space feels compact and small. 2 Morton with a smaller floor space will feel more expansive. compared against the 06 stack - 1 BR in 2 Morton Avenue - FRD by Fridcorp.


* Note : North Faces up - that is the train station.

The 05 stack - 1 BR in 3 Morton Viva Apartment.

Fridcorp design commands a premium in the market due to the striking architectural designs. It is an iconic design with few competitors. How does this translate to rental yield at a later stage we shall see.

At this point in time, I shall place my bet that this project would be a success given Fridcorp's reputation for quality build and design. At the moment, I've snapped up the last 1 BR unit and the rest are 2 BR and 2 Bath ... if you can afford it, you should go for 2 BR and 2 BR. It is only marginally more expensive, has better orientation and has better capital appreciation.

Recently, I've gotten valuation for 9 Morton Avenue 1 Bedroom Apartment which is about 2 years old. The valuation comes to about AUD395000 and this unit sits on the 1st floor (2nd floor for us) and looks very basic. 9 morton have no sinking fund at the moment and are tenanted around 370aud per week and the tenant comprises Morton Avenue Pty Investment. - The holding company for 2 Morton Avenue.