Category: rEstateSG

SgCP=SG commercial property

Posted on by tiger40490

Industrial — 30Y, 60Y are common.
Shops — 30Y, 99Y, freehold are available.

Most leases are 2Y+ across SgCP.

Freehold units are more costly, therefore lower yield.

— Wife said “No need to invest spare cash even if the deal is small like 300k. We can wait until we get the Beijing sales proceeds”. Indeed I am  currently on very comfortable cash flow high ground. With a 300-600k commitment, I would lose that high ground for many years.

Is it worthwhile?

See also [21]to sis:G3specific goals@invest` #Shiller

— Steven’s checklist for SgCP (buying):
1. understand your risk level
3. understand your “purpose” .. like income or windfall
4. holding period
5. location .. comes after those 3 introspections
6. exit plan

Given the large quantum, I think a single SgCP investment can affect your entire family over decades or over generations. Therefore, it require lots of introspection and soul-searching.

If it still feels uncomfortable, then the quantum is too large for you, or the uncertainty is too high for you.

— Steven’s 3 points for SgCP buying: 1) tenanted 2) tenant profile 3) NRY

If agent says a vacant (office, industrial, shop…) unit can be rented out as xxxx or yyyy, then ask the agent to rent out first before you evaluate the unit.

Always buy with an existing tenancy lease. If it’s expiring, then ask the seller to renew it with tenant (in advance?) before finalizing the deal

— industrial
MOP: 3Y for industrial (0Y for other commercial). Why? Industrial is not supposed to be self-used, not rented out.

43R .. not allowed for industrial, but consider 60/40 rule — 60% of sqft for primary use, 40% for auxiliary use. Somehow that means some 43R flexibility??

— geo-concentration risk

— Compared to BGC2 or Aus

  • 👎 hard to exit .. few buyers? Need to confirm
  • 👎 apreciation .. Need to confirm
  • 👎 quantum .. 600k+. 300k? I doubt it.
  • 🙂 for U.S. relocation .. SgCP feels like a better babysitting asset than SEAsia or Aus properties, even though quantum is worse.
  • 🙂 loan facility .. IFF needed, I have an easy option.
  • FHR .. BGC2 has the BDYK advantage.
  • 🙂 legal risk .. SG legal system is the most familiar and efficient
  • 🙂 specific location .. A SgCP can leverage local expertise, better than unfamiliar locations like Aus/UK. BGC2 is prime location but could suffer oversupply. If I pick a SgCP in an unpopular location, then the price would reflect that.
  • 🙂 currency risk

— compared to condos

  • 🙂 BSD? yes but no ABSD. ? Not sure
  • 🙂 minimum occupancy period before you sell? none.
  • 🙂 usually no furnishing required
  • 🙂 tenancy lease is longer than residential
  • $300k minimum, but may not be suitable.
  • up to 6% rental yield, much higher than residential.

==== shops
In SG, most strata shops take a long time to find tenants. I guess the strata mall could be usable, but some units could be empty for a long time.

A common shophouse type is “shophouse on Floor1 of residential”. The 2nd floor is considered the living quarters for the shop, so entire unit is sold as a whole. It’s usually easy to have a separate entrance to 2nd floor, and therefore rent it as a independent unit. Foreigners can buy this type. MOP rule classifies it as residential.

F&B units all have water point, but some have no exhaust pipes. It’s very hard to cook unless the mall approves it.

— Sg strata mall units
windfall appr is hard for strata units. In other words, expensive.

Also hard to fill. Brand new strata mall … don’t buy.

Reit is “totally different” from physical SgCP

— FnB unit psf rent (not GRY) is higher than shops.
If unprofitable, FnB tenants tend to find takeover tenants, while shop tenants tend to give up the lease. Even a long-term lease may not provide much protection. 3Y is usually the max.

Exhaust provision is a key feature for FnB units, more important than waterpoint.

 

## HDB rental yield boosts #43R

Posted on by tiger40490

Note “booster” has a connotation of “restoring strength”.. unsuitable. “Enhancer” is better.

— when to make preparations for carve-out, such as ceiling work?
By default, it would take place before I leave for the U.S.

— Idea: reverse the main gate so that the smaller piece is near kitchen. The “tiny room” can extend all the way to the line between the two pieces of the gate.

Also, the same room can expand into the walkway leading to the kitchen. It’s currently 1.2m wide. Can narrow down to 1m.

Together, these can increase the room size by 20%.

— For #1173 as in 43R 2nd floor, I need to install a partially translucent partition to carve out a private room by the window. The remaining living room will still receive some natural lighting.

The carve-out can become bigger (higher rent) if it expand into the living room. Living room would merge with store room

Service balcony can become a storeroom

good^bad: low floor HDB

Posted on by tiger40490

— good

  • no dependency on lift
  • faster to go out for quick shopping errands
  • wifi in void deck

— bad

  • noise of people talking in void deck till 3am
  • morning trucks.. even when they park or pass by, the noise can affect our sleep
  • heavy dumping noise ..
  • more mosquitos
  • less sunlight
  • less windy

“remote”HDB estates

Posted on by tiger40490

jolt: Yishun _central_ HDB estate has nearly everything, but lower valuation mostly due to the affluent favoring d2city (how about Holland Village?). I guess Tampines, JurongEast are similar.

jolt: Bishan has worse d2city than TPY, but has better connectivity, library, jogging track.. In X years, I would not care about some of these factors.

consistent high payout: rEstate^stocks^mufu

Posted on by tiger40490

For ffree and other purposes, the rare gems are those financial assets that pay consistent annual payouts while maintaining liquid value, as defined in my 2 stringent criteria .

  • liquid value … unrealistic for rEstate
  • maintaining value … not too volatile  not losing value due to unsustainable dividend payout, as happened in many Allianz fund

So far only 2 asset classes come close towards this high bar : 1) rental properties in U.S., SEAsia.. 2) dividend stocks. A number 3 might be HY/PE

— regular blue-chip …… Among the stable, non-tech blue-chip stocks, the vast majority pay dividends below 4%.
If you buy relatively low, then a dividend aristocrat would reward you with growing DYOC.

Many U.S. stock brokers support fractional sell, so you may argue that an investor in my mindset should consider total return rather than dividend yield. I hesitate. Consider a fast-riser stock. Unlikely a dividend-aristocrat company, fast risers are managed for stock price growth, not consistent high dividend ! Its business model, its competitive landscape probably doesn’t support consistent high dividend.

— mufu … I don’t know any mutual funds that meet my criteria 🙁 They can pay max 5% dividend after annual fees. Anything higher tends to erode NAV. Their payout ratio exceeds 100%, well above the 60% threshold for safe-dividend stocks.
— SG condo … won’t pay even 3% 🙁

[22] OnePearlBank #43R #maxLoan

Posted on by tiger40490

Shall we merge this blogpost with the Gabbar post?

3BR, up to 1200 sqft. launched in 2019, 1BR and 2BR all sold out. 99Y lease.

3min walk to MRT after new road. I guess the new road has increased the value.

— rental yield .. is better for small units
Raymond said NGRY is well below 2% (3k+/M) as one rental unit, but he said up to 9K/M is possible in co-living [up to 5 small rooms in 43R]. I said most owners are not keen about the extreme 43R style.

Now I think 9K is barely achievable. More realistic is 4k/M.

Raymond confirmed my hypothesis that 43R arrangement can achieve 2-3 times rental compared to renting out to a single family. When I first analyzed 43R for U.S. and Sg, I was initially doubtful.

— risks?
LIR risk … Kevin felt Singapore LIR will remain lower than elsewhere
NAV risk .. Kevin said this is home, not investment.

He felt NAV won’t grow much, even though I said the main attractiveness (of this asset class) is windfall appreciation.

— Main push-factor — 租不起. $3k/M for a 400+sqft condo in Kovan.
Wife is more keen than husband.

If they leave SG, then they plan to rent out. We both felt the bigger units are harder to rent out.

— stamp duty .. [ABSD + BSD] is in the middle of 8 and 9%
https://www.moneysmart.sg/home-loan/stamp-duty-calculator shows $2.6M unit would incur 8.4%+ in total stamp duties.

OnePearlBank price list shows 2.6M, reported to be 3M including stamp duty.

For Umesh, transaction price is 1.30M, and total stamp duty around 7.8%

— 30Y loan. Kevin said monthly installment is probably $7k+ estimated based on 1% LIR. I know he is precise. Confirmed loan quantum > 2M
My wife posed the question “What if Kevin or his wife loses job and must deplete their savings to meet a stringent $7k+ monthly commitment?” Note mortgage commitment is the most stringent among all commitments:

  • In contrast, tax payment can be delayed, with interest as penalty. Tax authority can’t confiscate your properties
  • In contrast, credit card bills are stringent and the lender can threaten to come to your home and take your posessions, but not take your entire house
  • In contrast, If you don’t pay utility bills, you would lose power/water/gas, but usually you can survive.

Dangerous low ground(easily flooded)…. If I were him, I would build up a contingency reserve of 6M to 12M x monthly installment amount. After that, pay down the outstanding amount, but that would defeat the purpose of “max quantum”. Kevin probably wanted the max, perhaps similar to Delphia Lim (Hui Ying?) described in https://tanbinvest.dreamhosters.com/26043/sg-home-buyers-max-out-mtg-quantum/

In fact, I’m also planning to postpone the PRP or cpf housing refund, so as to max out the free cash on hand. The motivation is … investment.

Tanko: strategic missteps #home upgrade

Posted on by tiger40490

See also

Most SG wealth management programs require SGD 200k, so I will use this sum as a starting point.  In my mental picture, many investors start with 200k risk capital (typically in their 30’s [1]) and slowly build up to 500k. Along the way, we all make gains and mistakes.

I guess many (90%?) of us become too aggressive too confident too complacent and take on too much risks, almost like gamblers (rather than prudent investors), and hit over-sized losses.

I feel I have been less unlucky so far, but how long can my luck last? I remind myself that my SEA properties may get into trouble.

[1] When I paid $180k for my first HDB, Tanko and ML.J were both surprised. Also, the 2020 OC survey found 2/3 of Singaporeans has savings insufficient for 6M. But this side question is a distraction on the current blogpost.

— Tanko on huge mistakes .. When I described wq.l’s low burn rate with 5 kids, and my $4k/M carefree life, Tanko felt that cash flow can *become* a stressor for himself and esp. for his brothers with modest-incomes, even though they both seem to be as frugal as Tanko. Tanko said they really need to be careful and avoid huge mistakes. I feel it’s very likely (more than many think) to commit huge mistakes due to strategic miscalculation (like a military mis-judgement).

Q1: what big mistakes have I experienced or seen in my family?
A: 1997 trading loss
A: Majestic Village
A: sister’s high personal debt
A: lawsuits like https://1330152open.wordpress.com/wp-admin/post.php?post=15308&action=edit&classic-editor and sister’s ccard debt

Q2: any potential, hidden, missed pitfalls on my path ahead of behind ?

  • buy a luxury car (like 100k), which has no investment value and purely a consumption asset
  • How about my UChicago MSFM investment?
  • buy a luxury residence with low rental yield and high maintenance cost including pTax
  • career change of no-return. I think many techies become managers, unable to come back to hands-on jobs due to age, churn, IV-moat etc. This item is not directly relevant to net-asset, but career longevity is the real bedrock of my ffree, security of family livelihood

— free cash .. is breeding ground for strategic missteps. When you receive a windfall cash payout (inheritance, or selling a website like getrichslowly.org), the free cash is an example. But there are more common examples like bonus…

Many investment advisors start by asking how much free cash you have.

cash -> OA -> SA “top-up” actually prevents Singaporeans from wasting their hard-earned savings on wrong investments, including top schools and luxury private properties.

— pattern: big mistakes are often related to unreasonable desires

  • eg: if you have a 3k/m burn rate, but buy a 2M luxury residence (as in HK, Beijing or SG), it wipes out 50Y Fuller wealth in one go. This one mistake can sink you into low ground, and end your peaceful ezlife.
  • eg: a branded college would cost 300k. Two kids would cost USD 600k or about 20Y Fuller wealth.
  • eg: a school district home also costs a lot more than a regular home by $300k, but the extra $300k is often seen as investment.
  • eg: if you start taking drugs it could ruin your life
  • eg: if a married person starts having affairs, it could ruin a peaceful life, though many stories seem to present it as non-consequential.

[20]SG property appreciation despite high valuation #R.Teo

Posted on by tiger40490

Hi Raymond,

In 2015 when we first discussed BGC condo market, you convinced me that Singapore condo price levels “are already too high to be safe”.

In 2021, I feel SG condo price levels have not risen faster than BGC, but have been fairly stable. I wonder why.

https://data.gov.sg/dataset/private-residential-property-price-index-by-type-of-property is a price history chart for Singapore private properties.

Now I feel a lot of Singapore condo demand comes from rich foreigners including Chinese, Indians,  Australians, Europeans, and wealthy families of SouthEastAsia. In their mind, Singapore represents clean, orderly, safe, efficient, highly developed market economy, decent legal system, so the attractiveness and value of Singapore properties keep rising relative to other international real-estate magnet cities. (Singapore probably pale against Nylongkong, Tokyo, Sydney … in some metrics and is not world #1, but is rising steadily.)

So unless Singapore experiences a serious (economic or social) down turn relative to other cities, it would continue to attract regional hot money.

How about a global real estate down turn? I don’t see it coming in my lifetime. There are very few asset classes to displace real estate on global scale. Along with gold, real estate is the oldest, most established, most proven asset class in human history. Housing bubble can occur in one location relative to other locations, but not globally, not in my imagination.

— For retail residential properties, I always use 3 acid tests for overpriced valuation

  1. rental yield
  2. home price / typical, median household income
  3. home price / monthly expenditure of an average household

However, these acid tests don’t apply to cash-rich foreign investors, who are neither typical, median or average.

[19] SG condo: not for me

Posted on by tiger40490

— Two common models among my peers

  • Zeng’s model — two-mortgage. Heavy burn rate burden
  • Kun.h’s model — pay off first mortgage. Must delay the condo purchase

In both models, the SG condo price tag is a huge entry barrier and NGRY is below 2.5%

—

sg condo: everything extreme, not for a small budget investor like me
lease — mostly targeting foreigners, but what if they stop coming? what if they realize hdb are cheaper? There are more and more condos in Singapore but foreigners can’t keep growing IMHO

rental yield is inferior at downtown, high-end locations, superior in outskirt locations close to MRT.

I believe 2-br units are more in demand as sg is very attractive for executives with family

in a down turn, I guess the less attractive rental properties may get a hit, such as remote locations or studios

SG condo investors mostly looking for appreciation, but I’m more interested in rental income, not a strong feature of sg condos

12% tax on buyers of 2nd home… way too high. That’s why some sell their hdb but I can’t do that.

6-person/unit including babies? I guess strict enforcement is hard