Wednesday, 23 April 2014
Apex Property Investment: Working for a Reason
Apex Property Investment: Working for a Reason: I'm sure there are many people who have different views about investment. For mine, its simply not having to work anymore and have passi...
Monday, 10 February 2014
Hotel Room Investments and Student Housing Investment
Hotel rooms and student housing investment belongs to a special class of real estate assets. They are strata titled property with a "business" elements to it. They are normally leased back to the operators to rent to prospective rentees with proper management put in place.
Would I buy this?
Needless to say, for me yield is the ultimate determinant of the investment. Such investment yields typically are from 7-10% nett yield.
Hotels are generally running at 60% yields and above. In SG, Hotels are running at newr full occupancy most of the time. You can imagine the cash flow coming in from hotel rooms business. They often have no competition over other accomodation modes and they are priced a premium over residential developments. In SG, perhaps a room at a luxury condominium at prime district can be rented for $1800 a month. A hotel room might set you back at $300 / day. In essence, there simply is no comparison for such short stay arrangements for tourists. The risk is due to economic downturn, and any pandemic, war issue, tourist arrival rates might fall and the business might go bust.
Student accomodations or dorms can be had in any place. Dorms are high yielding properties however due to the long tenancy period, students can often rent at residences outside of the Dorm for about the same price. Hence, premiums for student accommodations are priced at a lower end of the spectrum to attract students. Students can always rent a room at a normal residence at about the same rate. Students are also price sensitive to rate changes and hence, the prospect of increasing yields are not high.
Hence, looking at both investment, hotel rooms offer a higher rate of returns, higher risks, so choose wisely. For student accommodations, choose something that is 100% occupied and rents that justify their existence. Both of which you can't really stay in when things go bad.
Would I buy this?
Needless to say, for me yield is the ultimate determinant of the investment. Such investment yields typically are from 7-10% nett yield.
Hotels are generally running at 60% yields and above. In SG, Hotels are running at newr full occupancy most of the time. You can imagine the cash flow coming in from hotel rooms business. They often have no competition over other accomodation modes and they are priced a premium over residential developments. In SG, perhaps a room at a luxury condominium at prime district can be rented for $1800 a month. A hotel room might set you back at $300 / day. In essence, there simply is no comparison for such short stay arrangements for tourists. The risk is due to economic downturn, and any pandemic, war issue, tourist arrival rates might fall and the business might go bust.
Student accomodations or dorms can be had in any place. Dorms are high yielding properties however due to the long tenancy period, students can often rent at residences outside of the Dorm for about the same price. Hence, premiums for student accommodations are priced at a lower end of the spectrum to attract students. Students can always rent a room at a normal residence at about the same rate. Students are also price sensitive to rate changes and hence, the prospect of increasing yields are not high.
Hence, looking at both investment, hotel rooms offer a higher rate of returns, higher risks, so choose wisely. For student accommodations, choose something that is 100% occupied and rents that justify their existence. Both of which you can't really stay in when things go bad.
Working for a Reason
I'm sure there are many people who have different views about investment. For mine, its simply not having to work anymore and have passive income coming in month after month.
When I started my investment journey, I scorned at the yearly returns of 10% yield. I wanted more... I thought the promise of Unit Trusts were much better. 5% per annum compounded and end of 30 years at retirement, I would have XX amount of money. I have changed my views of investment after so many years. The promise of price appreciation, inflation is but a "promise".
I've also met people who wish they could live the dream of a working in the 3rd world with a sustainable income. I say hey, get a house here in SGP and you can live your life. Some went on to find their dream home, renovated it to their delight and live a life of debt. Instead of "freedom" you got a liability. A Big One. I say, "thats not your objective for owning the house right?" "thats not even your objective for working in the first place!" You work to achieve a goal? No?
What do we work for? Have your even ask yourself that? Well, you know mine.
I've recently read Mr Money Moustache and it is a good read. This dude has retired since 30 years old. Not because he is very rich but because he has controlled his spending. He has rationalised that having a passive income of $27000 annually for him and his family would suffice and he and his wife are stay at home parents spending quality time with their two kids, cycling to schools and have all the time in the world to entertain their friends at home and doing whatever that pleases them.
Approaching why do we even work... have you found yours and have you figured out how you could reduce working life to improve living life?
When I started my investment journey, I scorned at the yearly returns of 10% yield. I wanted more... I thought the promise of Unit Trusts were much better. 5% per annum compounded and end of 30 years at retirement, I would have XX amount of money. I have changed my views of investment after so many years. The promise of price appreciation, inflation is but a "promise".
I've also met people who wish they could live the dream of a working in the 3rd world with a sustainable income. I say hey, get a house here in SGP and you can live your life. Some went on to find their dream home, renovated it to their delight and live a life of debt. Instead of "freedom" you got a liability. A Big One. I say, "thats not your objective for owning the house right?" "thats not even your objective for working in the first place!" You work to achieve a goal? No?
What do we work for? Have your even ask yourself that? Well, you know mine.
I've recently read Mr Money Moustache and it is a good read. This dude has retired since 30 years old. Not because he is very rich but because he has controlled his spending. He has rationalised that having a passive income of $27000 annually for him and his family would suffice and he and his wife are stay at home parents spending quality time with their two kids, cycling to schools and have all the time in the world to entertain their friends at home and doing whatever that pleases them.
Approaching why do we even work... have you found yours and have you figured out how you could reduce working life to improve living life?
Wednesday, 4 September 2013
Maths Modelling for property investment
They say the numbers don't lie, Maths and spreadsheet is your best friend in making decisions. Here I am, obsessed with creating and modelling life using numbers and spreadsheet. How can one develop a property investment strategy safely and retires in 20 years? I crunched some numbers to see what could happen.
How do you like a strategy that allows you to replace your salary after 20 years of working.... conservatively speaking. My assumptions are based the following :
a. Iron rice bowl salary with fixed increment of 5% a year.
b. Mortgage downpayment of 20%.
c. Nett cash flow of 5%.
d. No cash out.
e. No cap gains.
f. Interest only loan. (for easy calculation)
g. No vacancy.
h. Increment of 2% rental / year.
| Year | Base Salary | Increment 5% | Cumulative | Mortgage Payment | Passive Income Prop 1 (5% nett) | Passive Income Prop 2 (5% nett) | Passive Income Prop 3 (5% nett) | Cumulative Passive Income | Total Loan |
| 1 | $50,000.00 | $50,000.00 | |||||||
| 2 | $50,000.00 | $2,500.00 | $102,500.00 | ||||||
| 3 | $50,000.00 | $2,625.00 | $155,125.00 | ||||||
| 4 | $50,000.00 | $2,631.25 | $207,756.25 | ($200,000.00) | $10,000.00 | $10,000.00 | $800,000.00 | ||
| 5 | $50,000.00 | $2,631.56 | $60,387.81 | $10,200.00 | $20,200.00 | $800,000.00 | |||
| 6 | $50,000.00 | $2,631.58 | $113,019.39 | $10,404.00 | $30,604.00 | $800,000.00 | |||
| 7 | $50,000.00 | $2,631.58 | $165,650.97 | $10,612.08 | $41,216.08 | $800,000.00 | |||
| 8 | $50,000.00 | $2,631.58 | $218,282.55 | $10,824.32 | $52,040.40 | $800,000.00 | |||
| 9 | $50,000.00 | $2,631.58 | $270,914.13 | $11,040.81 | $63,081.21 | $800,000.00 | |||
| 10 | $50,000.00 | $2,631.58 | $323,545.71 | ($300,000.00) | $11,261.62 | $15,000.00 | $74,342.83 | $2,000,000.00 | |
| 11 | $50,000.00 | $2,631.58 | $76,177.29 | $11,486.86 | $15,300.00 | $85,829.69 | $2,000,000.00 | ||
| 12 | $50,000.00 | $2,631.58 | $128,808.86 | $11,716.59 | $15,606.00 | $97,546.28 | $2,000,000.00 | ||
| 13 | $50,000.00 | $2,631.58 | $181,440.44 | $11,950.93 | $15,918.12 | $109,497.21 | $2,000,000.00 | ||
| 14 | $50,000.00 | $2,631.58 | $234,072.02 | $12,189.94 | $16,236.48 | $121,687.15 | $2,000,000.00 | ||
| 15 | $50,000.00 | $2,631.58 | $286,703.60 | $12,433.74 | $16,561.21 | $134,120.90 | $2,000,000.00 | ||
| 16 | $50,000.00 | $2,631.58 | $339,335.18 | $12,682.42 | $16,892.44 | $146,803.32 | $2,000,000.00 | ||
| 17 | $50,000.00 | $2,631.58 | $391,966.76 | $12,936.07 | $17,230.29 | $159,739.38 | $2,000,000.00 | ||
| 18 | $50,000.00 | $2,631.58 | $444,598.34 | ($400,000.00) | $13,194.79 | $17,574.89 | $20,000.00 | $172,934.17 | $3,600,000.00 |
| 19 | $50,000.00 | $2,631.58 | $97,229.92 | $13,458.68 | $17,926.39 | $20,400.00 | $186,392.85 | $3,600,000.00 | |
| 20 | $50,000.00 | $2,631.58 | $149,861.50 | $13,727.86 | $18,284.92 | $20,808.00 | $200,120.71 | $3,600,000.00 | |
| Nett Cash Position | $349,982.21 | ||||||||
| Passive Income | $52,820.77 | ||||||||
| Total Mortgage | $3,600,000.00 | ||||||||
| Nett Worth | ($3,250,017.79) |
Tuesday, 23 April 2013
High Net Worth Potential
Many people earning a standard salary think their net worth is only defined by their savings. However, I want to let you know that you are very rich! In today's loose monetary policy, where the cost of borrowing is less than the cost of inflation, why would you want to wait and save the money...?
This period is hard to come by, in today's economic condition is favourable to borrow and invest. The returns on investment is often more than the cost of borrowing. Today if you earn $5000 a month, your net worth potential is 4x$5000 per bank! If you have good relationship with 10 banks... your net worth is $200,000.
Now where is the risk limit?
Each bank can give you an unsecured loan at about 6% today for up to 4 x your monthly salary.
The repayment, interest plus principal is about $500 a month per loan for up to 5 years.
Say you have $3000 cashflow per month.
You potentially can leverage 6 x $20,000 - $120,000 at a cost of $3000 a month. Use this money to invest in an asset that gives you at least 8% rental yields per annum. You can have a forced savings plan in place. People talked about leaving an asset for their family, instead of insurance policy, why not consider property? You can apply for a insurance that covers your loan in case anything happens.
A good asset is property. As we know property cycle, property price doubles every 7 years, in 5 years time, we conservatively estimate the previous property gained 20% at 4% per annum. You could earn 2% yields * 5 years = 10% plus 20% capital gains. A total of 30% yields.
Learn to use bank loans to help you achieve your investment goals.
This period is hard to come by, in today's economic condition is favourable to borrow and invest. The returns on investment is often more than the cost of borrowing. Today if you earn $5000 a month, your net worth potential is 4x$5000 per bank! If you have good relationship with 10 banks... your net worth is $200,000.
Now where is the risk limit?
Each bank can give you an unsecured loan at about 6% today for up to 4 x your monthly salary.
The repayment, interest plus principal is about $500 a month per loan for up to 5 years.
Say you have $3000 cashflow per month.
You potentially can leverage 6 x $20,000 - $120,000 at a cost of $3000 a month. Use this money to invest in an asset that gives you at least 8% rental yields per annum. You can have a forced savings plan in place. People talked about leaving an asset for their family, instead of insurance policy, why not consider property? You can apply for a insurance that covers your loan in case anything happens.
A good asset is property. As we know property cycle, property price doubles every 7 years, in 5 years time, we conservatively estimate the previous property gained 20% at 4% per annum. You could earn 2% yields * 5 years = 10% plus 20% capital gains. A total of 30% yields.
Learn to use bank loans to help you achieve your investment goals.
Phillipines - the Emerging Star in Real Estate
When we look into areas to invest, I always start at the Macro Level, Strong GDP growth and strong demographics. The outlook for Phillipines is great and it has one of the highest population growth rates in Asia at 2.04% according to a 2010 census and its population is set to grow even further in the coming years due to improved economics and healthcare. According to a research report, the population of phillipines may reach 101.2 million by 2014.
Phillipines' main city is Manila and it is an urban metropolis and is ever expanding due to rural, urban migration and a strong economy. It is a MEGAPOLIS.
As an investor, I am concerned about the working population and the educational level. The rate of urbanisation is great at 2.3% and the main bulk of the population is 25-54 which is 36% of the population. This is a fantastic demographics. 36% of the workforce is at a productive age and the next wave in the next 30 years, the 0-14 age group is at 34.3%. It just screams " We need housing " to you!
Looking at the GDP Growth rate of 6.2% shows that its economy is strong and the wages should be rising as well. Phillipines is indeed a rising star in Real Estate.
Before you embark on any investment, it is always wise to conduct your own research into the laws and management. A property without management is not going to work.
Here are some facts for you to digest :
rate of urbanization: 2.3% annual rate of change (2010-15 est.)
The following Websites for more information.
http://en.wikipedia.org/wiki/Demographics_of_the_Philippines
http://www.indexmundi.com/philippines/demographics_profile.html
https://www.google.com.sg/publicdata/explore?ds=d5bncppjof8f9_&met_y=ny_gdp_mktp_kd_zg&idim=country:PHL&dl=en&hl=en&q=philippines%20gdp%20growth
Phillipines' main city is Manila and it is an urban metropolis and is ever expanding due to rural, urban migration and a strong economy. It is a MEGAPOLIS.
As an investor, I am concerned about the working population and the educational level. The rate of urbanisation is great at 2.3% and the main bulk of the population is 25-54 which is 36% of the population. This is a fantastic demographics. 36% of the workforce is at a productive age and the next wave in the next 30 years, the 0-14 age group is at 34.3%. It just screams " We need housing " to you!
If Manila grows at 2% a year - it will require about 69,000 new housing a year at 3.9 pax per household. If Manila's population is mostly yuppies, we can even estimate to be 138,000 new housing a year. Thats a lot!
Looking at the GDP Growth rate of 6.2% shows that its economy is strong and the wages should be rising as well. Phillipines is indeed a rising star in Real Estate.
Before you embark on any investment, it is always wise to conduct your own research into the laws and management. A property without management is not going to work.
Here are some facts for you to digest :
Age structure
0-14 years: 34.3% (male 18,175,763/female 17,452,488)
15-24 years: 19.1% (male 10,107,717/female 9,753,268)
25-54 years: 36.6% (male 19,065,843/female 18,941,091)
55-64 years: 5.6% (male 2,663,592/female 3,102,247)
65 years and over: 4.3% (male 1,948,152/female 2,564,841) (2012 est.)
15-24 years: 19.1% (male 10,107,717/female 9,753,268)
25-54 years: 36.6% (male 19,065,843/female 18,941,091)
55-64 years: 5.6% (male 2,663,592/female 3,102,247)
65 years and over: 4.3% (male 1,948,152/female 2,564,841) (2012 est.)
Urbanization
urban population: 49% of total population (2010)rate of urbanization: 2.3% annual rate of change (2010-15 est.)
Major cities - population
MANILA (capital) 11.449 million; Davao 1.48 million; Cebu City 845,000; Zamboanga 827,000 (2009)The following Websites for more information.
http://en.wikipedia.org/wiki/Demographics_of_the_Philippines
http://www.indexmundi.com/philippines/demographics_profile.html
https://www.google.com.sg/publicdata/explore?ds=d5bncppjof8f9_&met_y=ny_gdp_mktp_kd_zg&idim=country:PHL&dl=en&hl=en&q=philippines%20gdp%20growth
Monday, 22 April 2013
The Greater Fool Theory
The greater fool theory posits that rational people will buy into valuations that they don’t necessarily believe, as long as they believe there is someone else more foolish who will buy it for an even higher value. The human tendencies described above lead to a fairly predictable outcome: After an innovation is introduced and a market is formed, people believe both that they are among the few who have spotted the trend early, and that they will be smart enough to pull out at the right time.
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