Thursday, 30 April 2015

Working Capital

As in all businesses, properties generally don't make money from day 1. What do you do? You factor in Working Capital and let time do the work. You cost of ownership will rise but it will be well covered by capital growth over time.

The efficiency is an art and a well crafted piece of engineering.

Listen to the accountant - Chris Gray

We have all been conditioned to be poor by being the same.

To be different from others and retire rich, you need to relook your lifestyle. 

Chris Gray is one guy who gave up his job, his home and purely invest. Why? The numbers worked. The accountant in him figured what most people earned in their primary residence is more than what they earned in their lifetime. That revelations was verified by other accountants as well. The house is the main source of wealth. 

Listen to the accountant and see if it makes sense for you. It certainly did for me.

What event make you change?

Saturday, 18 April 2015

All that glitters is not Gold...

I just emerged from Gerry Robert's talk on entrepreneurship book publishing, publish a book and grow rich. He revealed many secrets / strategies that you can start to sell your book even before it is published. These are common strategies used by marketing teams to achieve results. Mind you, he is not frauding but creating confidence and desire to kick your own butt to get moving. You may not have the contents, but once you collected people's trust in you to put money in your hands, you WILL WRITE it and Deliver it.

This is not my biggest takeaway from the talk. The biggest take away is your mind is only as small or as big as you want it. If someone shares a big idea with you, don't fight it, internalise it and make it happen. I'm glad he opened my mind bigger in this 2 hours.

Well, he did offered his bootcamp for FREE and this is good. I have paid my dues with other gurus already and will not in the near future pay another one. I walked away. 

Thanks Gerry Roberts. I confirmed that books authors are no authority now. All that glitters is not gold but just a marketing tool for them.

Taking a Mortgage for Australian Properties, SGD or AUD?

In the next few months, I'll be making a decision to go AUD or SGD. Especially in rising SIBOR Rates and decreasing fixed rates in AUD. Lets first analyse the situation. 

Rule of taking loan in the country of origin.
1. Always take loan in the home country's currency as much as possible. 
- AUD win

Leverage power
2. AUD - 80%, SGD 75%
- AUD win

3. In Singapore, all loans originating from SGP will be subjected to TDSR, which means, there could be no more loan. SGD loans are still one of the cheapest loans around. Whilst, AUD is not subjected to TDSR. This secondary source of funds is very important to continued leverage and Capital growth.
- AUD win

Interest Rate
4. 2.5% - Sibor plus 1.4% spread. This is a variable rate which can rise to 5%. Whilst AUD gives a interest only 3.99% lowest spread now for a fixed 3 years. (AUD interest rates can go 9%). A 1.5% spread is good for insurance against rates rise. I'll take that.
- AUD win

Switch of funds
5. AUD is at all time low vs SGD, hence it would be a good opportunity to take advantage of the low exchange rate and switch funds when the time comes. If the rate changes 10% in the borrowers favour, based on 70% loan, the borrower earned 7% by switching. 
- SGD win

Given $200,000 start point and assuming all properties being $500,000. The AUD loan can buy 2 and the SGD loan can buy 1. Assuming Cap Growth to be the same - 5%, AUD borrower makes 2 x 5% of $500,000 - $50,000 and the SGD Borrower makes 5% of $500,000 - $25,000 per year.

Assuming forex moves 10%, the SGD borrower makes a nett 12% vs the 10% of the AUD borrower.

Assuming they both hold long... 5 years and each year the properties increase by 5% and for simplicity sake, they did not acquire more properties.

The AUD borrower would get (5x $50,000 per year) $250,000 and the SGD borrower assuming he makes the right decision and the exchange rate went back to normal. - he makes 30% on forex gains 30% * $105000 and (5 x $25,000) - $125,000 on cap growth, total of $230,000. The SGD borrower will probably have a greater cashflow of about (1.5% spread) ~$6000 (includes principal repayment) per year and for 5 years - $30,000. The total nett for the SGD borrower would come up to $260,000.

Thats a $10,000 difference in favour of the SGD borrower. - $2000 per year. Would that be good enough to offset forex risk and exposure to TDSR to take loan in SGD?

What do you say? 

Friday, 17 April 2015

Choosing to be poor... your choice.

With regards to the subject of money, people still view it with despise and taboo. I had a conversation with my colleague. I asked her if she could be retired if she gave up her car and then she could have $3k less to spend. She could be frugal and be retired and time rich!

She gave excuses, like she have 3 kids to provide, car is a necessity and blah blah blah... UNLIKE me who is single, blah blah blah. As I calculated for her, she simply shut down and refuse to engage anymore. 

Well... what can I say.

Saturday, 4 April 2015

Retirement Readiness

I visited Prof Wade Pfau's blog

This is a very interesting topic of research, retirement readiness, how ready are you?

Actaully, it is all about efficiency, once you have accumulated enough, you stop and sit back to relax. How then do you know how much do you require or are you so inefficient that you overworked?

I asked many financial planner, they always turned around and ask you is required, they as with their typical sales talk came back to ask you how much do you need. By the time they worked out the number, you find that by 100 years old, you still cannot retire. This cannot be right?

Mr Money Moustache retire when their portfolio hits $600,000 USD. My Singaporean friends found this number to be insufficient. Well, on what basis do you say you need more money and less time? 

Continue to research to understand how this calculation can be done and how much do you need. Live an efficient life and not having to be confined to working til 65. 

Wednesday, 1 April 2015

Do you have enough debt?

I don't sleep well if I don't have enough debt?

Why do I say that? The very basis of the investment mindset is to make your money work harder than you! If you have money which is not used isn't it losing its value by the seconds? Lets see, inflation decreases the value of money at around 4% a year. 

Personally, I subscribed to maximum leverage, dangerous some may say, as R. Kiyosaki says, dangerous is in the uneducated mind. Take Action and learn and be educated. When you are ready, you will feel that you may not have enough debts. 

Have fun investing.

Are you robbing your self poor?

"How could anyone possibly complain about having money problems, while simultaneously paying tens or hundreds of dollars per month to have passive video entertainment and commercials streamed into their house? People are simultaneously robbing themselves of money and the necessary mental quiet time that is a prerequisite to getting ahead – building skills, meeting people, getting better jobs or starting better businesses." 

- Mr Money Moustache.

Let's start from the very beginning. I had been a cadet pilot and in my course, there was a person whom have left such an impression on me, I have to always bring him up during my story telling. His name was "cookie monster", thats all I can remember of his name anyway. He always carries a tin of biscuits with him and munches all day long. Why? He had saved every single penny towards his impending marriage and not spend any money on canteen breaks. 

As a newly minted officer cadet drawing $1600 per month, who can resist not to spend a little on himself and indulge a little. I do not understand what this life is all about as I have no trusted mentor to guide me, but a life of decadence is something that feels wrong. Why do I need to be entertained? Needless to say, I quitted Radio and TVs and CDs as I feel it is something wrong.

A whole lot of my time is spent spending how to live life efficiently. Is working til 65 and retiring on the CPF savings the only way out? As I looked at the old retired personnel cleaning tables to get by living, I questioned why? but I decided that I will not be one of them.

Property is always a dream for me, alas, economic situation does not allow me to do so. I bided my time, I learn and I tried different means to grow that elusive deposit. I was swayed like most people to pursue my interest, spending money for enjoyment and going to restaurants. I ROBBED myself of the deposit.

2008, I woke up again from this mindless pursuits again. Wait, am I suppose to put away all my savings and HOPE to retire by 65? I saw retired officers having their 'pension' halved. I can't have this. I decided to change.

And as you know, I spent nights doing readings on theory, research and understanding why?

To change a mindset, WHY is the most important aspect to how and what. If you find your WHY, you will stop robbing yourself of the future and not live the "life" they say now. So start finding your WHY and start living your life and build the future you want.