Tag: t_hdbRY

Anthony.Lin rentalProp hearsay story #divStock

Posted on by tiger40490

 

Around 2011, I met my PWM ex-colleague A.Lin in Midtown a few times. He told me he had about 5 rental properties in Brooklyn [6]. What I remember he said is now mixed with what I imagine he said…

  • I think he said he bought fixer-upper[1] properties and “worked my butt off”[2] to make them usable again — FHR improvement.
  • I think he said his parents ( in-law? ) helped in some big way, perhaps renovation or rental mgmt[3].
  • I estimated that his[4] gross[5] rental income could be 10k/M but he didn’t confirm.
  • I have no clue about his mtg and haircut [pTax, maintenance, vacancy]

This is one of my biggest moments of FOLB on my path as an investor. He became one of the role models at the back of my mind. However, as I told HF.Sun, we outsiders don’t know some of the key facts of each deal, and should not assume its value.

[1] Risk: judgment risk. In this game, High return seems to entail high judgment risk.

[2] sacrifice. No pain no gain? But such sacrifice may not be worthwhile. I feel my HDB rental yield of 4% is not so high, but my effort is much lower. My Blk 177 realized rental yield was above 6%.

[3] Risk: legal risk, as Edward experienced.

[4] the rental income, the asset ownership ,,, is not 100% his. In contrast, I did all of my rEstate investment single-handedly, without family help.

[5] Q: what is his GRY and NRY assuming no mortgage on any property. I tend to assume GRY close to 10%. NRY is around half, up to 5%.

[6] Risk: concentration risk. Brooklyn is where he lived and knows well. In comparison, my overseas rental properties are more risky and higher costs.

— enviable ptf? How about div stock ptf?

Q: which portfolio is more enviable — AA) $1.5M cash deployed in 4~7 rental units with 50% loan + 7% NRY + leg work, BB) $700k in div stocks, no loan no legwork, 7% DYOC, diversified over 70+ stocks
A: most people would envy AA

Q: which one is more risky? AA due to legwork, delinquent tenant, LIR

[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 …

HDB rental demand: decline over50Y #Zeng+Felicia

Posted on by tiger40490

— Felicia cautioned me .. HDB rental demand from foreigners could fluctuate in the long run. In the U.S. rental market, half the tenants are local Americans. Singapore rental market is more dependent on foreigners (high home ownership rate), so she sees more risk in my HDB rental model.

Why hold on so tight even after relocation to U.S.?
* low maintenance
* valuation volatility managed by PAP

When I explained to her why I won’t sell my HDB even while I’m settled in the U.S., I realized my deep bias and sky-high confidence in the PAP and SG economy. Over the long term, my confidence would be put to the test. Compared to China, U.S. and SEAsia, I still feel far more confident about SG HDB property. This is a heavy bias, not based on enough data. Once I live through and understand U.S. rental property risks, I might conclude that SG rental market is low maintenance but low yield and not-so-stable.

— Sheng.Zeng’s views:

  • The entire SG economy has traditionally relied on foreign workers. If you worry about HDB rental demand till 2064 (age 90), then you have bigger things to worry about, including SGD strength, CPI inflation, medical inflation, cpfLife… all of which are more impactful than HDB rental yield.
  • Q1: Why must you keep the HDB flat? Legacy? I now feel leasehold is not the best form.
  • Q2: What do you need the rental income for, exactly? If for a modest retirement [CRBR $3k] you don’t need this income, then no real worries about “decline”! If the decline represents a sub-optimal return, then there are many sub-optimal returns in my career.
  • Now I think 50/50 chance I would treasure this “extra” disposable income. In that case we can consider various ways to cash out. Lease buy-back or downgrade to a smaller home
  • Jolt: So taking a step back, the preoccupation with HDB rental yield is perhaps a self-imposed, /hallucinatory/ dependency. My retirement doesn’t depend on it .. Zeng’s wisdom.

[21]OC Felicia discussion: HDB rental, eqMufu

Posted on by tiger40490

Main topics of the Felicia discussion: HDB purchase; eqMufu

— diversify .. I told Felicia I’m well-diversified but my concentration in property is too high to be comfortable.
Bonds .. only bond mufu. Bonds are a reliable, popular, useful asset class to consider. Remember the K.Hu discussion?
China .. not a lot of geographical allocation except the Beijing property. I think eqMufu is a reasonable idea.

— Felicia thinks net rental yield of 3-4% is not very high. eqMufu can beat that. In U.S. market I favor MOETF. In SG, without converting my excess SGD, I may need to be more serious about more eqMufu.

With caution against “100% into eqMufu” she pointed out that DIVA has generated 10% annualized return since inception. This is the fund manager’s claim, not her claim, she said. She’s personally very confident about DIVA, based on trec. I believe since inception, probably 3 years out of every 10 had negative returns.

Over the next 50 years, I believe SP500 would outperform most eqMufu including DIVA.

needed$3mil 4ffree: what changed since2015 #JL.Yuan

Posted on by tiger40490

In a 15 Nov 2015 mail to JL.Yuan, I wrote ..

“Financial freedom/security is the term you used. Many people ask how much bank balance would provide  the freedom/security, and our answers are usually disappointing, like 3 million… I feel it’s more healthy, more stable, and long-sighted to shift my focus to career longevity.”

In a 23 Apr 2021 follow-up mail, I observed that my position on financial freedom/security… has changed since Nov 2015. My position has become more grounded, based on real observations, less on hearsay and marketing propaganda.

  • #1 change: medical .. I now rely on medishield. In addition, I will maintain a tiny reserve ($20-50k?).
  • G3 change: CPF-life .. (paying out from 2039 till I die) can provide sufficient retirement income. In 2015, the same payout amount was dismissed as insufficient
  • G3 change: Inflation .. was a long-term concern and depends on the chosen home country. This worry has subsided for the “Singapore plan”, after witnessing Singapore inflation since 1991
  • no change: I still want to work till old age, perhaps as a developer till 70, and a lower-gear job till 85
  • change: longevity goal .. I now aim at 95
  • change: college funding .. is no big goal for me, and ironically the biggest departure from my cohort’s mainstream thinking.
  • change: NNIA .. (nonwork net income from assets) has increased. We talked about it before.
  • change: retirement destination .. Now I like the idea of roaming retirement between familiar low-cost cities (like Malaysia +  Chinese cities) to cut my monthly burn rate. Hopefully, My Singapore home can be rented out long term.
  • ^^^ bottom line: bank balance to provide financial freedom .. Given sufficient NNIA (cpf-life + Singapore HDB rental income+..), adequate healthcare, I (didn’t calculate but) guess $400k-$800k might be enough to support the family from now on, without any salary. I no longer feel enslaved by a huge savings goal of $3,000,000, presented as the price tag of “financial security”.

## 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

credit risk overshadow` %%NNIA #cushions #div

Posted on by tiger40490

k_cpf_life ,,,,, k_FLI2

As mentioned in other bloposts, seeking 100% reliability is futile, disappointing, doomed ,, similar to seeking perfect a life partner.

  1. — ranked by my confidence in the perceived dependability
  2. [S] CPF-Life and other insurance products, but over longer horizon, inflation risk is higher
  3. FLI2
  4. investment-grade bonds
  5. [S] HDB rental income — I know the market, the location, currency
  6. The dividend aristocrats have maintained DYOC for decades. See the Zeng discussion
  7. BGC rental — currency risk, asset-country risk. Luckily, it features mature country and mature location. Thank God I have NCT and Aleris to help me.
  8. PeakRetail — CapitalLand, currency, asset-country risk
  9. BridgeRetail — similar
  10. MIH — grade-A office has lower rental yield than shops; less mature location
  11. What about China rental income? Low yield.
  12. [S=thanks to Singapore government]

— fake NNIA paid from principal .. Fundamentally, I feel that part of my NNIA (GRR) is paying out from principal, similar to some high-yield mufu. In comparison, CpfLife, BGC, FLI2,,, are sturdier

— credit risk

I think even an A+ bond has a non-zero risk of default. In contrast, a junk bond has a higher default risk than investment-grade bonds, but still below 2.5% probability. My Ritz junk bond did default.

My PeakRetail presumably has a higher credit rating than BridgeRetail. Flatiron’s credit “perception” is mostly due to Ascott.

Energy12 presumably has a low credit rating.

My HY/PE (MajesticVillage and AsiaProperty Partnership) has junk bond credit risk.

The dividend aristocrats (see my blogpost) have maintained DYOC for decades. No credit risk per-se.

In my ffree projection, it’s dangerously naive to treat GRR as guaranteed like cpf-Life. We need to factor in the credit risk and market risk.

— “cushions” (not ‘protections’) against credit risk #open question

  • dev-till-70: health and in-demand tech skills
  • diversify the passive income streams
  • CPF-Life as bedrock
  • HDB rental
  • BGC rental

[17] HDB Exec condo #Jun.Z

Posted on by tiger40490

update — Jun.Z has some first-hand experiences

Prerequisite — Singapore citizens, with combined income below $16001/month. Must sell existing HDB flat within 6M after getting the key.

  • Good: Buy from HDB, not private developer. Ballot if necessary. First timers have higher chance.
  • Good: Price is discounted compared to private condo. Discount is similar to Genn’s BTO flats.
  • Good: After 5 years, can sell to PRs. After 10 years, can sell to foreigners.
  • Good: if I can get a mortgage (say 20Y) and If i dump in all CPF (250k?) my monthly installment might be 2k and I free up S$500k cash

After getting the key, you could rent it out immediately by appealing to HDB that you family is overseas. HDB might approve for 2 years at a time. Your 5Y MOP will start after you come back.

  1. Action plan — any time my income drops below, I would apply. Convenient location is less important than rental demand.
  2. Long term plan — rent out, satisfy MOP then sell at a handsome profit.