Tag: t_origContent

These posts could move into either bold or critical, but it would take too much time.
We can also keep this tag with a distinct meaning. It highlights and /chronicles/ my analytical and creative effort, even if not so worthwhile. I want to honor myself as I deserve it.

appreciation=less predictable than NGRY #YH

Posted on by tiger40490

In a given location, there’s uncertainty in both 1) rental income and 2) appreciation.

Some prime locations have very predictable appreciation;
Some good locations have very predictable rental yield.

I think within the tristate area, about 5-10% of the locations have predictable rental yield, but how many percent of the homes have predictable appreciation? i would say below 2%. This is because of hot money. Investors can bid up property prices very quickly. I believe many parts of Jersey City waterfront, Queens and Brooklyn Eighth avenue are overpriced, so appreciation over the next decade is unpredictable.

Rental yield is different. Take any rental tower in Jersey City waterfront (or Flushing). Entire tower is for rental not for sale, with 150 rental units. It’s managed as a business. This business model has been proven over 30 years. The rental rate almost never drops. When vacancy is too bad, the business would give discounts.

Now forget the prime locations. Look at other parts of Jersey City or Queens or Brooklyn or Bayonne. There’s a healthy and robust demand for rental property. (Bayonne has a few new multi-storey buildings under construction in prime locations, and I think they are rental apartments, not for sale)

In my observation, property valuation can overheat and then stagnate for years, affecting the predictability of appreciation. Rental market operates under a different model. The demand comes from renters, not investors. Less volatile, more predictable.

current_payout^windfall_far_out

Posted on by tiger40490

https://www.richdad.com/resources/rich-dad-financial-education-blog/january-2010/wealth-is-measured-in-time says

Most people are only familiar with capital gains investing (including windfalls). In other words they are focused on trying to get rich. When you focus on investing for cash flow, you are focused on building your wealth, creating passive income that earns you money without depleting or selling the original asset.

I used to prefer a high annualized return, despite a long wait, such as Chinese properties, land banking products, forestry,,, but in my 40’s I feel I need current income to provide for education, better commute, better home, recreation, self-growth, interest, hobbies, … I have experienced a few show-down cases of current income vs far-out windfall , that shaped my perceptions and preferences.

  • eg 🙁 land-oriented investment is advocated by Alan Shi, but such a remote location has low rental demand. Low current income. In fact, automobile burn rate could be higher. I probably won’t like it.
  • eg 🙁 life insurance — zero income for an extremely long “wait”
  • eg 🙁 endowment plans such as Manulife Universal Life — zero current income + paltry return
  • eg 🙁 land banking promising a windfall? I don’t think there’s any current income.
  • eg 🙁 Allianz IncomeProtector — zero current income + delayed high income. I don’t like it because I need income now, not later.
  • xp: monthly payout — funds on FSM. Overall not impressive since most of the current income seems to come from the NAV
  • xp: Energy 12 — good guaranteed current income + some appreciation potential
  • xp (long): #4-116 — huge appreciation (Realized!) + current income (in terms of realized rental since 2005 + my rental savings). So this is the #1 biggest success story in my entire life.
  • xp (long): Beijing property — huge appreciation + zero current income for me but indirectly my parents are enjoying the rent-free benefits. This is the 2nd biggest successful story.
  • xp: BridgeRetail — high current income (Realized!) + long-term appreciation potential.
  • xp: PeakRetail — lower current income, bigger potential for windfall
  • xp: BGC — promising current income + long-term appreciation potential.
  • xp: Goldman Sachs dividends
  • xp: My 2009 Roth401k voluntary contribution was a regrettable decision. The money is now locked-up when I need it (now). When the money someday gets unlocked, I won’t need it as much as now.

I have concerns over the long wait for a “windfall” (I have never been convinced to buy any):

  1. With such a long horizon, things may not work out as planned. The more “guaranteed”, the smaller the windfall, like the /paltry returns/ of insurance products. On the other extreme, the big windfall of land banking often disappoints investors
  2. our health? Wife or I might get a condition too early and can’t really enjoy the windfall. Even if we can enjoy it at that advanced age, I don’t want to wait for that time, in poor health.
  3. my lifespan? If the windfall comes at 67, I have a few decades to enjoy it, but I would rather get the windfall 40 years before end of life.
  4. inflation? Singapore is OK so far. U.S. is less stable.

U.S.condo: good4modest renters !!investor unless hot location

Posted on by tiger40490

update: some renters prefer simpler life in a condo.

I now feel condo is very popular for renters, with

  • relatively new facilities
  • location — high rise buildings are worth building only at prime locations, often near transportation and shopping.

However, investors are often better off with SFH or 2FH because

  1. can subdivide into tiny rooms
  2. can live on one floor and rent out another floor
  3. can expand to add a room
  4. land appreciates
  5. no HOA to erode the rental yield

time saved{commute ⇏ more exercise

Posted on by tiger40490

An hour a day (two-way) free time saved … doesn’t really get me even 3 minutes more exercise [1].

However with that much more time taken up by commute I feel severely constrained in terms of exercise time. I feel impoverished!

When I’m in the mood to exercise, if the time is available I would exercise.

[1] It’s reality of human limitation

mufu: y recover slower than ETF: illustrated #1.5% typical ExR

Posted on by tiger40490

Buffett said: “If returns are going to be 7 or 8 percent and you’re paying 1 percent for fees, that makes an enormous difference in how much money you’re going to have in retirement.”

Q: why statistically most mutual funds under-perform the benchmark?

1.5% is a typical management fee, similar to GSAM/PWM quarterly fees. Suppose I invest the same amount in two similar funds — an ETF vs a mutual fund.

  1. 12k -> $180 fee = 1.5%. Second year my ETF becomes
  2. 10k -> $150
  3. 8k -> $120
  4. 9k -> $135
  5. 8k -> $120
  6. 8800
  7. 10k -> $150
  8. 11k -> $165
  9. in this year ETF recovered to 12k, but mutual fund is about 10% (at least 1k) below break-even.

It took 8 years for ETF to recover, but it would take the mutual fund a few more years.

in https://www.newretirement.com/retirement/the-lockbox-strategy-and-10-other-retirement-income-tips-from-nobel-laureate-william-sharpe/, Sharpe pointed out the same annual fee eroding a retiree’s returns.

— William Sharpe concluded that active fund managers underperform passive fund managers, not because of any flaw in their strategies, but because of the laws of arithmetic. In order for active fund managers to beat the market by just 1%, they would need to achieve an excess return of more than 2% just to account for the average 1.19%  management fee.

https://www.investopedia.com/terms/m/managementfee.asp

[17] financial discipline towards private uni+学区房

Posted on by tiger40490

In my experience, Financial discipline has proven to be a good thing. My sister my disagree. I am not good at predicting what she would comment on this tricky topic, but I feel her mortgage has induced a healthy financial discipline.

Looking around, most folks are not disciplined at saving for long term.

  • When our income increases, our spending increases invisibly, unknowingly!
  • When our income drops, we find it hard to cut spending initially, but most folks will manage to adjust and cope (unless required to cut to 1/3).

Income drop is less common than a new financial commitment like a new born or a mortgage. I have seen multiple examples where we decide to start saving substantially more every month, so as to pay down a heavy mortgage. Without a well defined purpose and motivation like this, financial discipline is rare. For most folks, It’s too “tiring” to be always conscious (“vigilant”) of what we spend on. So we end up spending on many things not worth spending on:

  • buying “things” that we don’t use again
  • throw-away toys
  • too many enrichment programs for the kids
  • “rent-like” spends like hotels, taxi
  • more fast-worn-out, devaluing products. Car is the prime example. Gadgets are another.
  • more short-term pleasure with a sizable total bill. Overseas vacation is the prime example. Staycation is not inferior in my view but many consumers somehow feel the novelty is worth the huge price difference.

How about saving for private uni? A double-edged sword.

  1. One one hand, I feel it’s unnecessary commitment and burden. 500k requires a lot of sacrifice. Not worth it.
  2. On the other hand, such a big commitment induces financial discipline.
  3. …. Overall, I feel it’s a question of degree. Discipline is healthy and constructive but too much peer pressure is not.

Compare to spare time utilization — Before UChicago MSFM, my spare time utilization rate was much lower, but I also had more family time.

U.S.cohorts’property^%%Asia property

Posted on by tiger40490

One thing potentially significant is the upward potential. Look at the Beijing curve and the Singapore curve. The initial increment was more than increment — more like multiplication.

  • AA) appreciation — My SEA investments offer potential for faster, larger appreciation that’s unlikely in a mature market like the U.S.

Familiarity is the opposite side of the coin. The initial increment usually correlates with unfamiliarity to the global affluent investors. BGC enjoys higher valuation partly due to the longer growth track record. U.S. market is familiar to U.S. investors.

Of course there are also risks. Among the risks, these /nascent/ property markets may not take off as Mumbai or Beijing.

  • BB) rental yield

Against the backdrop of these uncertainties, the reliability of rental income looks extremely attractive. This feature is missing from all of my U.S. peers’ property investments I have heard of. Also look at Ashish’s Pune apartment — regular rental income + appreciation.

  • CC) quantum — this factor is even more important to a small investor like me. I don’t have enough cash to buy any of the U.S. properties I have heard of.

Therefore, I feel my overseas properties are superior.

Can we afford not2invest excess fund@@

Posted on by tiger40490

Some people (Group 0) don’t choose or like to buy a home or any long-term investment.

Some people (Group 1) only buy a single home for own use. No other investments. They leave the spare cash (if any) in CD.

Q: Can we afford not to invest spare cash@@
%%A (short answer): I can afford to be in Group 1 not Group 0

I feel Group 0 tend to save less, even though they leave money (if any) in CD. When I have a mortgage to pay off, I feel the constant motivation/pressure to save. (Look at Aunt Genn.) Now I have no mortgage but I have firm plan to buy a house. I feel a lower pressure but still a real pressure to save.

My ex-colleague Trevor is a special case in Group 0. He invests in stocks and other liquid securities and grows his portfolio steadily. He targets 10% growth every year on his entire portfolio. I don’t know anyone else doing that.

I feel Group 1 is fairly common. Perhaps the default choice. I feel these people are missing out property opportunities [1], but perhaps the property price is so big that their entire savings can buy only half a house and they don’t like a heavy mortgage (me before 2015).

[1] every investment opportunity comes with non-trivial risks.

I feel in that case Group 1 should seriously consider stocks and bonds, or risk losing out in the long run — See Inflation due to property appreciation. However, for me, most of these investments were low return (i guess 2% to 6% annualized)  or stuck for a long time, so I’m not impressed and I am pulling out as of 2017.

Until 2015, Most of my USD was sitting in the bank — like Group 1.

My Biggest concern for Group 0 — they keep paying on rent .. going down the drain. Therefore, the higher the rent, the worse I would feel if in Group 0.

In Singapore, with the public housing provisions, HDB BTO prices are managed and won’t grow out of control. So young Singaporeans could afford to wait till 35 (or 40)? A major benefit as Singapore citizens. Other countries don’t have this policy.

I (Yinghui?) was lucky not to be in Group 0, because I bought a small home early.

passive income^inactive management(property

Posted on by tiger40490

Completely passive income is too strict a requirement and realistic only for the wealthy. A minimal amount of /legwork/ is usually unavoidable and acceptable to the retail investors:

  • cross-border fund transfer
  • tax filing
  • currency conversion
  • monitor a stock position in order to receive dividends.
  • /keeping tabs/ of passive income accounting

Now, one level above these effort, some inactive management effort may be required, but some laid-back investors will refuse to put in such simple efforts like:

  • maintaining the relationship with the local agent. Is she reliable and diligent?
  • property maintenance
  • monitor market trends, make long term, gradual adjustments to fend off competition and stay relevant. Gradual adjustment is less stressful.
  • Avichal suggested another form of inactive management —

Form a partnership with a trusted local agent and run it like a business. Perhaps like airbnb. He feels such a business could grow.

Perhaps you could find gainful employment to keep yourself engaged and helpful to your customers and other people. Better than passively collecting rent.