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. 

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...

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.

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?

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)