Category: z_SBH

[21]nestEgg enuf2preempt stressful return2U.S.

Posted on by tiger40490

How does CAD and additional potential health declines affect my answer?

As of 2021, we have a fully paid home enough for 4. I will also earmark enough for two FRS cpfLife accounts. Such a high_ground is an achievement, but might be harder to maintain after SBH.

Q: Beyond those assets, what level of nest egg would preempt/eliminate the need to migrate to the U.S.?
A: I used to (and still sometimes do) feel the cautious answer is $3M. However, based on the below assumptions, we need SGD 800-1600k to justify shelving the U.S. migration idea.

  • Assumption 1a: in terms of SGD monthly burn rate [excluding tax outlays, including bx], I will assume S$5-6k total outlay is “comfortable” even after the recent (2022-24) elevated inflation
  • Assumption 1b: in terms of Singapore salary.. for simplicity I will pick a nice number of $100k/Y from age 47 to 55, but $0 afterwards (in Singapore) -> 700k work income.
  • ^ ^ Those are the big assumptions ^^
  • Assumption 2: after kids grow up, we really don’t need more than $1500/person (inflation considered), so FRS cpfLife can be sufficient
  • Assumption 3: Unlike [1], I may choose to set aside an elastic S$100-200k/child for college -> up to S$400k.
  • Assumption(methodology) 4: Count cpfLife but Ignore NNIA + inheritance + grown-up children’s contribution + ..
  • No assumption about lease spread on HDB flat, even after 2035, since grown-up children may stay with us.

— the calc done in Nov 2021, before selling the #1173 home. I have the spreadsheet in github.

  1. Nov 2021 to 2035 when meimei graduates, we need 6k * 12M * 14Y = 1008k, marginally higher than [1]
  2. 2036 to Jan 2039 wife+I need 36k * 3Y ≅ 110k, matching [1] 100%
  3. Sometime before Jan 2039, top up 200k to my cpfRA to the max, ignored in [1]
  4. 2039 to 2043 we need only $0 assuming my cpfLife ERS starts paying around $3k/M (as I would max out on my cpfLife). This amount is explicitly ignored in [1].
  5. Sometime before Aug 2043, top up wife’s cpfRA by an increment of [$0] to generate $0/M payout. Together we need only $3k/M payout. This amount is explicitly ignored in [1].
  6. ^ ^ ^ Adding 400k [Assumption 3] to the above ≅ 1720k total outlay ^ ^ ^
  7. 700k total salary according to Assumption 1b
  8. nest_egg_needed = S$1020k, excluding our CPF balance as of Nov 2021

However, I stand resolute against lifestyle creep, so S$5k/M is more than enough, and S$200k/child is unnecessary luxury.

— Some implications
Looks like my nest egg is barely enough to justify staying in SG for good !?

Need more analysis from different angles before I would feel assured.

Based on the above analysis, the #1 j4/advantage of U.S. migration is … dev-till-70. Right now with my MLP job I can extend my Fuller Wealth quite fast thanks to low burn rate, acceptable health conditions …. So I would go to U.S. only when I could “extend” faster in the U.S.

— Q: why most of my middle-class peers don’t feel so self-confident if they are in my (financial) shoes?
A1: Assumption 1a amount needs to balloon to 10k+ for them
A2: Assumption 2 amount needs to balloon to 6k for them
A3: Assumption 3 amount may not suffice for them

— Q4: what type of portfolio adjustments would improve my high ground and help obviate/preempt forced flee to the U.S.?

  1. term insurance for occupational disability till 65?
  2. more NNIA with limited appreciation, such as SgCP on mtg? Hig ground would sink. Poor liquidity , heavy debt.. TBD.
  3. USD 100k into SP500 .. no loan. Better buy-n-forget, more like rEstate, but lower DYOC than some rEstate.
  4. more NNIA with USD 100k into div stocks .. (hard to imagine myself persuaded) with some growth potential? Too risky. My high ground would sink.
  5. USD 100k into growth stocks? even more risky.

$500k mtg: j4, risk mitigation,,

Posted on by tiger40490

== risk@default.. 15th of each month (or the following Monday). If low balance in the MSA[mtg service acct], then OC will retry for 7 calendar days (not 7 weekdays). If still unsuccessful, then $80 late charge. Each late charge is reported to credit bureau as a default.

Sugg [implemented]: salary deposit into the MSA
Sugg [implemented]: keep this account for one purpose only, and thereby reduce the probability of unexpected fall-below.

Pre-emptive paying? Not possible.
— alerts .. First few times, OC will call me during the 7D grace period. If too many late charges, then OC will call me after grace period. No SMS alert.
— fallback .. The only fallback mechanism is “After cpfOA deduction, any shortfall will be deducted from MSA”
Sugg: So we could do housing refund to cpfOA continuously.
Sugg: set the cpf deduction to roughly match the mtg-P. A by-product — a lower quantum on the bank acct deduction.

Problem: mixing cpf and MSA would mess up my calibrated/fine-tuned recon

== Hui Ying
– 18 bps over board rate (currently 80 bps). 1Y lock-in
* can pay down 50% within lock-in
* after 1Y can reprice, stretch to 25Y or wipe out

Max Loan tenor is probably 28Y i.e. 75Y minus income-weighted-avg-age, iFF below 55% of valuation.

Interest is accrued (and displayed) daily using 365D convention, worked out to be $13+/Day. To see transaction details, need to request statement on a ad-hoc basis. Can log in to send secured email. OC would call back to confirm before sending the statement.

== Why I preferred MBR instead of SORA .. based on email sent to Delphia.

  • fact: My last mortgage was based on OC board rate, but I think that rate is a different benchmark. The current benchmark was started a few years ago.
  • fact: I can see that the benchmark was adjusted in Aug 2018 (to 1.55%), and adjusted again in Aug 2020 (to 0.8%)
  • Question: Was it also adjusted once in 2019?
  • Rumor: most brokers and fellow borrowers have nothing positive to say about board rate from OC, UOB or any bank in Singapore. Unanimously they prefer Sora as floating benchmark. They complain about non-transparency and huge hikes in these opaque benchmarks. They say those hikes would be bigger than the hikes in Sora. However, when I looked at the actual data, I don’t see any evidence. So it appears a superstition.
  • Perception: I perceive OC board rate as a less volatile cousin of 3mSora. The all-in rate is likely comparable.
  • judgment: I will put my faith in the OC MBR decision-maker, and trust that he/she won’t increase this benchmark more than 3mSora climbs.

If my judgment turns out as a misjudgment, then many MBR borrowers would all suffer along with me. I’m not the only MBR borrower in Singapore!

  1. I would receive 30D advanced notice (by email and paper mail?) and decide whether to switch to 1mSora package. This (albeit minor) flexibility is missing from the Sora packages from OC or Maybank. It underlines the fact that MBR is designed to be stable.
  2. More importantly, I will immediately pay down my outstanding to reduce exposure to hikes, probably to 50%.
  3. After 1Y I will pay off if rate stays high
  4. ^^ With these 3 strategies, the potential damage of a misjudgment of OC MBR is hopefully limited.

#1169 reno contract details

Posted on by tiger40490

Zofia,

Easy to end up in a blame game, so both husband and wife must take an active part in the decision. Here are some of the important details we have hashed out.

  • Some labor costs are pay-per-use (i.e. no use no pay); other costs are integral parts of the deal, such as design, clean-up…
  • (pay per use) if window grille or circuit breaker found to be too old, then will be replaced at additional costs
  • nominal price is $34k, but we are likely to avoid installation costs (pay-per-use) for toilet bowl + basin + heater etc, and cut $800
  • payment schedule:
    • 50% (cumulative 60%) of $34k payable at start of physical work;
    • 35% (cumulative 95%) of $34k payable at start of wood work;
    • final (up to) 5% of $34k payable after buyer accepts end result
    • any additional items is payable upon agreement and won’t affect the above.
    • any unwanted items (deductions)? presumably can be kept in some account and used to offset the additional costs

https://bintanvictor.files.wordpress.com/2022/02/reno1169contract.pdf is the scan of the contract.

Design4space has a clean record in HDB renovation contractor database https://services2.hdb.gov.sg/webapp/BN31AWERRCMobile/BN31SSearchContractor?searchAction=linkContrDetail&regNo=CA003067H&caseTrust=Yes

300k LIR-arb: end2end int tally

Posted on by tiger40490

— end-to-end interest netting .. To confirm, I would need an accounting System to keep track of my IR income since 1 May 2022. May take a lot of legwork, but possibly recreational.

  • I guess CPF int is possible to estimate. Need to tabulate the monthly balances. Ask CPF hotline whether it exists.
  • BOC int is tractable
  • DBSMP monthly int is easy
  • SSB int is easier
  • tbill (held to maturity) is easiest.

— During the crunch time of 20 Sep – end of Oct, boy had exams, Quark expectation was growing,,, the cashflow front was a well-planned execution, a source of joy, satisfaction,

  • — During 20 – 22 Sep, I did well:
  • was not too fast (esp. FD slicing) leading to stress
  • was not too slow. Enlisted wife… Important to get most of the transfers done within one “hot window” rather than dragging over multiple days
  • kept a focus to earmark 300k
  • kept a focus to keep wife’s 13k liquid

SBH= SlightlyBetterHome 4her

Posted on by tiger40490

XA.S is the first to point out that my proposed upgrade to a 4-room flat in the same block is a minor upgrade. Now I recognize it as a SlightlyBetterHome:

  • same rental amount
  • same size
  • same location in every aspect
  • similar age

Q: Why is SBH a potential problem?
A1: we are striking a balance:

  1. If I spend “too little” on this SBH, I am fine as a minimalist, but not my better half. I often feel I have “too much” spare cash, not giving her enough quality life. She sacrificed a lot for the family and deserves a more comfortable, more modern home. She deserves splurge.
  2. If we overspend then ROI is too low. ROI in terms of rental yield or appreciation. In this case, ROI is low but not as low as a bigger upgrade. I do foresee a loss of rental yield. It hurts my self-esteem because subconsciously, I want every dollar to work hard and generate returns.

If we look at maximizing ROI, my wife and I are very different personalities. For me, ROI means rental yield (or appreciation), so $0 spending is maximal ROI. For wife, low-floor living is becoming intolerable, so some amount of investment even without rental increase is a good ROI.

A2: Since late 2019, we have enjoyed a cash flow high ground…

  1. If I overspend on this SBH, I give up a lot of high ground. In this case, the loss is tolerable. Am reluctant not resentful about it.
  2. If I spend “too little”, the home improvement is too much hassle about nothing. In this case, it’s mostly higher floor + better renovation… non-trivial improvements for wife.

[22]next HDB: choosing a flat #bargains, regret

Posted on by tiger40490

— satisfy wife’s needs along with my needs
For wife, we are likely to stay 5Y minimum, so higher floor is important to her. Including lighting, insects, blocked view, traffic noise.

For me, really important factors are 1) rental yield 2) appreciation, so #10-1169 is one of very few units that can match #2-1173.

Q: realistically, what type of units may suit us?

  • size … slightly smaller as long as 4BR possible
  • floor .. higher for wife, but not too high (psf)
  • age .. same as now
  • d2mrt .. same as now.  Further out by 2min is a big sacrifice for me, but doesn’t translate to lower price at all.

— My two investment objectives
1) Rental yield — rental amount depends on location, not so much on age or floor! The newer flats probably have lower rental yield due to higher psf 🙁

Susan said yes although some high-end renters would offer a premium for unblocked view + renovation. However, I think high-end renters usually avoid HDB altogether.

YLZ said higher floor can command a slight rental premium.

2) Appreciation — is also questionable. Given size is about the same as #1173 but purchase price is higher, what’s the valuation 20Y out? I think it depends on location rather than age, so it might be same as #1173. Susan also feels this way.

Location-wise, most buyers don’t prefer TPY central. When they look around, my area stands out due to close proximity and the underpass. So I would say my location beats 79AD.

— newer .. Among units of comparable size in comparable locations, premium is on the currently newest (like on-the-run Treasuries). As the 79AD ages, the premium on it would decay like put/call options. In X years when you sell, it’s harder to sell an expensive flat for a profit. At that time, the Blk 79AD would be viewed as similar to Blk 155.

  • size, location are permanent factors
  • age differential has diminishing effect
  • floor ?

Q: Suppose the newer flat is smaller but higher floor, then in 2041, which HDB unit would fetch a higher valuation? I think the smaller 79AD unit is unlikely to beat my #1173 since the age advantage would diminish over the decades.

Q: Why are the newer units higher in psf?
A: As I told Susan, the buyers who bid up the valuation of newer flats are non-investors with other goals beside 1) current income and 2) appreciation. Their other goals may include comfort, luxury and vanity (feeling superior).

— bargains .. In any investment decisions, we bad better look for bargains. In other words, undervalued assets.

( U.S. housing market has many bargains. ) In HDB resale flats, what bargains can we look for?

  • very old flats .. most buyers worry about depreciation but I want to rent out.
  • Malay/Indian flats
  • low floor

If we can’t find bargains, at least we need to avoid buying overpriced units. The newest flats have the worst investment value.

— when upgrading home, it’s easy to end up with regret in terms of location
I hate higher floors
I hate the road crossing. I also resent the long walk from MRT

— flexibility to carve out additional room is valuable for rental yield and my own private space
Need wide windows in living room.
So far, only the #1169 and the Blk 142 units …

next HDB: biggest financial decision #risks

Posted on by tiger40490

One of the 20 punches on my punch-card. The amount is bigger than all Blk177, #1173, Beijing home, all my Cambodia investments [1]

  • [1] However, I know the location, the legal system very well.
  • [1] However, career longevity has bigger impact on family livelihood
  • [1] However, health and family unity have even bigger impact on family livelihood.

— Biggest risks are

  1. overpaying .. (a misstep) overestimate of appreciation + yield,
  2. missing a good opportunity to satisfy wife’s needs at a reasonable price.
  3. neglecting hidden issues

— rental yield decline .. pretty much inevitable whenever we go upsize. Rental increase is slower than resale price. If this decline is a misstep, then just about any upsize would be a misstep.

— depreciation .. (short term or long-term) is a well-accepted risk. I have always accepted the risk in PAP government including SGD, cpfLife, Singtel stock… So when I imagine HDB depreciation after I buy, I basically feel “Fine. That was my own judgement, evaluation and assessment.”

— overpaying .. With #1173, I actually overpaid compared to subsequent price level. This is basically another aspect of the depreciation risk described earlier.

Q: Did I feel the pain of misstep? Not really.
A: (jolt) in 2012, I had a good change of home overall. Even though #1173 was overpaid, it was dwarfed by my Blk177 good sale.

When I eventually sell, I guess my profit could be $30k vs $100k profit of a neighbor who bought lower.

My rental yield is currently, say, 4%, vs 5% of that enviable neighbor.