Showing posts with label 9.7 Property Investment vs Other Investments. Show all posts
Showing posts with label 9.7 Property Investment vs Other Investments. Show all posts
Tuesday, August 12, 2008
About this Blog
In real life, many people with low income are still able to live comfortably. They manage their money properly by spending within their means. They buy only when they can afford to pay with their income or savings. They buy only what they need.
On the other hand, some rich people are always in debt. They may be rich in assets but poor in cash. As a result, they have no choice but to buy on credit or get a bank loan and pay interest. When there is an economic downturn, these rich people have to sell their assets at a great loss. Some may even go bankrupt when they are unable to pay their debts.
So, the rich maybe poor and the poor rich. The secret lies with good management of your personal finances.
May also want to read:
Buy or Not Buy: How to decide amid mixed market signals
When to Buy, When Not to by
Property Price Index Graph Plotter & Online Property Valuation
Your Property Investment Determines Your Financial Success in Your Life
Personal Finance Planning: Be a rich poor or a poor rich
In any society, there are people with low income and there are others who earn seven-figure salaries. It is natural for us to assume that those with little income will always be deprived of what they need and that those with large income will always get what they want.In real life, many people with low income are still able to live comfortably. They manage their money properly by spending within their means. They buy only when they can afford to pay with their income or savings. They buy only what they need.
On the other hand, some rich people are always in debt. They may be rich in assets but poor in cash. As a result, they have no choice but to buy on credit or get a bank loan and pay interest. When there is an economic downturn, these rich people have to sell their assets at a great loss. Some may even go bankrupt when they are unable to pay their debts.
So, the rich maybe poor and the poor rich. The secret lies with good management of your personal finances.
May also want to read:
Buy or Not Buy: How to decide amid mixed market signals
When to Buy, When Not to by
Property Price Index Graph Plotter & Online Property Valuation
Your Property Investment Determines Your Financial Success in Your Life
Saturday, August 2, 2008
About this Blog
His (Warren Buffett's) third principle involves the margin of safety. That means, as Buffett once put it, you're never that precise in your ability to calculate the worth of a stock but what you can do is estimate. He has often said investors should find properties where there is a wide discrepancy ... and if you can buy them at two-thirds of what they're worth, do it. How does an investor accomplish that? As you pick through company reports and filings, add up the numbers and ask yourself whether the price of the business (or stock) is lower than its value. In other words, if you can calculate that a company's stock is worth between $80 and $120, and you can buy it at $60, then buy it.
Applying this principle to property investment would look something like that:
If you estimate the worth of a mass market property to be from $800 psf to $1200 psf, then buy at $600 psf.
At first sight, this may look like a grossly over-simplification of a complex investment decision. But, really it's just that simple and it works. I've applied the principle myself in all its literal sense and today, I'm sitting comfortably on a property I bought in 2006 at a price which Warren Buffett would have been proud of :). On a serious note, if you are a property investor who's not under any pressure to buy property at the current high price, unlike the unfortunate home buyers, do give Warren Buffett's margin of safety some serious thought. Going forward, property price looks set to fall but precisely because I've bought my property with Warren Buffett's margin of safety, I'm not one bit nervous about the inevitable market correction. It'd have been very different if I've bought my property at the property peak of 2007. So you see, we're not talking about profit margin here, we're talking about safety margin - a necessarily, not a good to have, cushion against the market downside risk.
Click here for the lastest Financial and Economic Resources - Free Subscription !
May also want to read:
History of Singapore Property 1960 to 2008
Buy or Not Buy: How to decide amid mixed market signals
When to Buy, When Not to by
Property Price Index Graph Plotter & Online Property Valuation
Your Property Investment Determines Your Financial Success in Your Life
HDB Resales: West Sees Highest Price Increase
Property Investment Tips: Warren Buffett's Margin of Safety
The following is an excerpt from one of my favourite books, "The Best Investment Advice I Ever Received" on Warren Buffett's third investment principle which involves the margin of saftety:His (Warren Buffett's) third principle involves the margin of safety. That means, as Buffett once put it, you're never that precise in your ability to calculate the worth of a stock but what you can do is estimate. He has often said investors should find properties where there is a wide discrepancy ... and if you can buy them at two-thirds of what they're worth, do it. How does an investor accomplish that? As you pick through company reports and filings, add up the numbers and ask yourself whether the price of the business (or stock) is lower than its value. In other words, if you can calculate that a company's stock is worth between $80 and $120, and you can buy it at $60, then buy it.
Applying this principle to property investment would look something like that:
If you estimate the worth of a mass market property to be from $800 psf to $1200 psf, then buy at $600 psf.
At first sight, this may look like a grossly over-simplification of a complex investment decision. But, really it's just that simple and it works. I've applied the principle myself in all its literal sense and today, I'm sitting comfortably on a property I bought in 2006 at a price which Warren Buffett would have been proud of :). On a serious note, if you are a property investor who's not under any pressure to buy property at the current high price, unlike the unfortunate home buyers, do give Warren Buffett's margin of safety some serious thought. Going forward, property price looks set to fall but precisely because I've bought my property with Warren Buffett's margin of safety, I'm not one bit nervous about the inevitable market correction. It'd have been very different if I've bought my property at the property peak of 2007. So you see, we're not talking about profit margin here, we're talking about safety margin - a necessarily, not a good to have, cushion against the market downside risk.
Click here for the lastest Financial and Economic Resources - Free Subscription !
May also want to read:
History of Singapore Property 1960 to 2008
Buy or Not Buy: How to decide amid mixed market signals
When to Buy, When Not to by
Property Price Index Graph Plotter & Online Property Valuation
Your Property Investment Determines Your Financial Success in Your Life
HDB Resales: West Sees Highest Price Increase
Tuesday, July 22, 2008
About this Blog
Personally, I'm of the opinion that the current property price simply cannot be justified by its ROI (Return on Investment). Typically, a new property bought from the developer at today's price will generate only a 2% rental yield or less, perhaps a little higher for 99 LH property but then buyers will be faced with the risk of high capital deprecation when the property age.
Even at 5-6%, I'd not find investing in Singapore property attractive because there are other investment alternatives like foreign currency fixed deposit which pay 10% interest and blue chips stocks which pay good dividends. These alternatives are not necessarily riskier than property investment. They're generally more liquid so you can cash out easily when needed. Property is not only difficult to liquidate, renting a property also incurs a lot of headache such as tenant management, property maintenance and all the logistics of moving furniture. Having owned a rental property for well-over 10 years, my experience says property investment is not at all as attractive as many Singaporeans believe, especially not when prices are still sky-high like today and rental yields are getting increasingly lower as vacancy rate increases.
The following is a forum exchange between a bull and a bear on the return on investment for Singapore property extracted the Singapore Property Forum.
Bear wrote:
Buyers cannot ignore the low ROI from property investment. PERIOD.
Bull wrote:
Low ROI? Many projects in the market can now simply generate 7% of rental yield. Certainly, that's almost never seen in Singapore ppty history before. How can these projects generate such a high return? Because the rental market is still very strong, while housing prices is relatively stagnant or slow. In other words, the pent-up demand for housing is real and incredibly huge, but due to some uncertainty, ppl still opt for rental, instead of buying. Obviously, this is a game for only genuine risk takers, not kiasu sideline buyers, to transform the risk into a huge profit.
Bear wrote:
Try giving us some concrete examples. I bet you can't do it, using current prices and rentals.
Bull wrote:
why not? HDB easily 6-8%. LH 99 yrs, 5-6%.
Bear wrote:
When you buy a HDB, you've to stay in it. So why are we talking about ROI for HDB?? Anyway, we talking about private property market here. LH 99 yrs, new 3-rm in suburb like Hillview Regency costs about $900k-$1M which can rent for $2-3K/month at a good time like that but only $1.5-$2.5k at worse time, so let's assume average of $2K. 20,000/900,000 ~1%. Ok if we relax it, you're just talking about 2%. Meanwhile, your 99LH will suffer capital depreciation. Ps show one which gives 5-6% at today's price. Anyway is 5-6% attractive given the depreciation, the huge risk and the illiquidity?
Bull wrote:
There is many HDB rented out, commonwealth area $2.5k-3k, Redhill & Tiong Bahru, 3.5k-4k. 99 LH near MRT, 2 rm is renting at $3.5k-4k & so on. These are selling at $700k-850k. Some people don't mind a 3-4% rental yield.
Bear wrote:
3-4% is ok? Mortgage rate is ~ 3.5% and likely to go up. Your nett return is 0%!! Only ppl who can't count will think it's ok. Put your money in Aussie FD and you'll get 8-9%. Leave your money in CPF, you'll get 2.5%, no risk and no maintenance and no mortgage to pay.
May also want to read:
History of Singapore Property 1960 to 2008
Buy or Not Buy: How to decide amid mixed market signals
When to Buy, When Not to by
Property Price Index Graph Plotter & Online Property Valuation
Your Property Investment Determines Your Financial Success in Your Life
HDB Resales: West Sees Highest Price Increase
Investment Property: Low ROI, High Risk, Illiquid & Heartache: Compare with Investments in Blue Chip Stocks, Foreign Currency Deposit..
Today, I shall focus on the property investors. Unlike home buyers, property investors buy properties purely for their investment returns.Personally, I'm of the opinion that the current property price simply cannot be justified by its ROI (Return on Investment). Typically, a new property bought from the developer at today's price will generate only a 2% rental yield or less, perhaps a little higher for 99 LH property but then buyers will be faced with the risk of high capital deprecation when the property age.
Even at 5-6%, I'd not find investing in Singapore property attractive because there are other investment alternatives like foreign currency fixed deposit which pay 10% interest and blue chips stocks which pay good dividends. These alternatives are not necessarily riskier than property investment. They're generally more liquid so you can cash out easily when needed. Property is not only difficult to liquidate, renting a property also incurs a lot of headache such as tenant management, property maintenance and all the logistics of moving furniture. Having owned a rental property for well-over 10 years, my experience says property investment is not at all as attractive as many Singaporeans believe, especially not when prices are still sky-high like today and rental yields are getting increasingly lower as vacancy rate increases.
The following is a forum exchange between a bull and a bear on the return on investment for Singapore property extracted the Singapore Property Forum.
Bear wrote:
Buyers cannot ignore the low ROI from property investment. PERIOD.
Bull wrote:
Low ROI? Many projects in the market can now simply generate 7% of rental yield. Certainly, that's almost never seen in Singapore ppty history before. How can these projects generate such a high return? Because the rental market is still very strong, while housing prices is relatively stagnant or slow. In other words, the pent-up demand for housing is real and incredibly huge, but due to some uncertainty, ppl still opt for rental, instead of buying. Obviously, this is a game for only genuine risk takers, not kiasu sideline buyers, to transform the risk into a huge profit.
Bear wrote:
Try giving us some concrete examples. I bet you can't do it, using current prices and rentals.
Bull wrote:
why not? HDB easily 6-8%. LH 99 yrs, 5-6%.
Bear wrote:
When you buy a HDB, you've to stay in it. So why are we talking about ROI for HDB?? Anyway, we talking about private property market here. LH 99 yrs, new 3-rm in suburb like Hillview Regency costs about $900k-$1M which can rent for $2-3K/month at a good time like that but only $1.5-$2.5k at worse time, so let's assume average of $2K. 20,000/900,000 ~1%. Ok if we relax it, you're just talking about 2%. Meanwhile, your 99LH will suffer capital depreciation. Ps show one which gives 5-6% at today's price. Anyway is 5-6% attractive given the depreciation, the huge risk and the illiquidity?
Bull wrote:
There is many HDB rented out, commonwealth area $2.5k-3k, Redhill & Tiong Bahru, 3.5k-4k. 99 LH near MRT, 2 rm is renting at $3.5k-4k & so on. These are selling at $700k-850k. Some people don't mind a 3-4% rental yield.
Bear wrote:
3-4% is ok? Mortgage rate is ~ 3.5% and likely to go up. Your nett return is 0%!! Only ppl who can't count will think it's ok. Put your money in Aussie FD and you'll get 8-9%. Leave your money in CPF, you'll get 2.5%, no risk and no maintenance and no mortgage to pay.
May also want to read:
History of Singapore Property 1960 to 2008
Buy or Not Buy: How to decide amid mixed market signals
When to Buy, When Not to by
Property Price Index Graph Plotter & Online Property Valuation
Your Property Investment Determines Your Financial Success in Your Life
HDB Resales: West Sees Highest Price Increase
About this Blog
Only speculators ignore fundamentals such as ROI for their properties. Speculators would pay much higher prices that can be justified by the ROI, with the overly-optimistic belief that another speculator would pay them even higher prices. If you're not into such speculation, you must maintain your clarity throughout, even if property prices start to soar with speculation.
The bigger the bubble gets, the more alluring they look, and they more risky they become. If you have decided to walk away from such speculation from onset, then be blind and deaf to such housing speculation no matter how hot it gets. Until and unless the bubble bursts, you must tell yourself that you'll nothing to do with it. One thing for sure, all property bubbles will eventually burst. In fact, the longer they take, the harder the crash.
There is nothing worse than for a prudent property investor to change his mind half-way-through after watching the property price going up for a period of time because then, he'd be most likely to be caught right at the peak of the property cycle. Instead, a logical investor should look beyond property investment.
May also want to read:
History of Singapore Property 1960 to 2008
Buy or Not Buy: How to decide amid mixed market signals
When to Buy, When Not to by
Property Price Index Graph Plotter & Online Property Valuation
Your Property Investment Determines Your Financial Success in Your Life
HDB Resales: West Sees Highest Price Increase
Property Investors Never Allow Speculation to cloud your decision
A genuine property investor must not allow speculation to cloud his mind. A residential property is ultimately just a roof over the head for someone. Its real value is ultimately determined by how much a would-be tenant is willing to pay for such a roof over the head.Only speculators ignore fundamentals such as ROI for their properties. Speculators would pay much higher prices that can be justified by the ROI, with the overly-optimistic belief that another speculator would pay them even higher prices. If you're not into such speculation, you must maintain your clarity throughout, even if property prices start to soar with speculation.
The bigger the bubble gets, the more alluring they look, and they more risky they become. If you have decided to walk away from such speculation from onset, then be blind and deaf to such housing speculation no matter how hot it gets. Until and unless the bubble bursts, you must tell yourself that you'll nothing to do with it. One thing for sure, all property bubbles will eventually burst. In fact, the longer they take, the harder the crash.
There is nothing worse than for a prudent property investor to change his mind half-way-through after watching the property price going up for a period of time because then, he'd be most likely to be caught right at the peak of the property cycle. Instead, a logical investor should look beyond property investment.
May also want to read:
History of Singapore Property 1960 to 2008
Buy or Not Buy: How to decide amid mixed market signals
When to Buy, When Not to by
Property Price Index Graph Plotter & Online Property Valuation
Your Property Investment Determines Your Financial Success in Your Life
HDB Resales: West Sees Highest Price Increase
Friday, June 27, 2008
About this Blog
Fragrance
"Budget hotels
-mass market residential properties
Budget hotels are booming across singapore, i believe there will be strong demand for budget hotel rooms from 2007 - 2010 and after the IR opens, there should be even stronger demand.
However, the mass market residential properties have lost its glowing future thanks to the credit crunch and the undertone of fear that has firmly taken root. we can only monitor and make our best guess how the future will be for property in singapore.
4 for 1 share bonus proposed.
Founder owns 72.67% and has constantly bought back shares from the open market."
May also want to read:
History of Singapore Property 1960 to 2008
Buy or Not Buy: How to decide amid mixed market signals
When to Buy, When Not to by
Property Price Index Graph Plotter & Online Property Valuation
Developer Fragrance Mass Market Residential Properties Outlook Subdued
Stock watch excerpted from: The Singapore Stock Market:Fragrance
"Budget hotels
-mass market residential properties
Budget hotels are booming across singapore, i believe there will be strong demand for budget hotel rooms from 2007 - 2010 and after the IR opens, there should be even stronger demand.
However, the mass market residential properties have lost its glowing future thanks to the credit crunch and the undertone of fear that has firmly taken root. we can only monitor and make our best guess how the future will be for property in singapore.
4 for 1 share bonus proposed.
Founder owns 72.67% and has constantly bought back shares from the open market."
May also want to read:
History of Singapore Property 1960 to 2008
Buy or Not Buy: How to decide amid mixed market signals
When to Buy, When Not to by
Property Price Index Graph Plotter & Online Property Valuation
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