After agonising for almost a month now about making the leap into investment property, the intellectual honeymoon has worn off.
In this period I've created no less then three documents detailing various portfolio strategies for exploiting the market, met with two agents regarding their properties and emailed many more. I've spent a conservative 60-80 hours researching housing availability, future growth trends, market conditions and more in order to find and capitalise upon that elusive catch.
But the conclusion has not been so sweet. After such exhaustive input in a short period of time, I have been left with the bittersweet conclusion that, despite market conditions, now is not the most prudent time to invest in property. Indeed, the next 9 months may prove a different story, but... well, I'll let the future worry about itself. And while I am definitely a bit sulky at having to shelve my latest adventure, I recognise that this is just another lesson in the very big playground of life - learning to demonstrate restraint even in the midst of a very rational eagerness.
Instead, I've decided to place my hot money into a more time-tested adventure - shares. Using a compound growth calculator, I estimate that making 30 trades at 10% profit after administration costs will leave me with a fund in excess of $50,000. But while the arithmetic is simple, the reality is always a bit harder.
Making a positive trade is not so difficult - most of the shares in my current portfolio fluctuate over a margin of 15% or more every week or three. Its buying in to a share at the wrong time that will cause the most grief. You see, time is the limiting (hidden factor in this equation - I'm aiming to have achieved this goal in a 30-week period. One successful trade per week. Hmmm.
What about the trades that don't go so well? The ones that make negative profit? The trades that fall stagnant because the prices fail to trend the way I want them to and with the speed they have historically shown? What baout when the greed factor sets in and I hold onto a share for longer than I should? All of these are insults to the goal that I have set myself, Yet, despite the risks, I find myself gravitating towards the challenge of disciplinde share trading like a bee towards flowers. Discipline - that's the key.
I've had to question where God is in all of this? Am I doing it for self gain? Is my life all about me me and more me? What do I hope to achieve by accumulating so much wealth? And at such a young age?
God IS central to all that I do. He granted me this life that it may reflect His character, and I believe that my God, in His embodiment of perfection, IS excellence. So, I do what I do because I can.
Secondly, I trust that money in my hands will be better spent than money in other people's hands. I"m not interested in million-dollar yatchs or having a personal collection of very exclusive airplanes. I don't splurge on exotic food caught from halfway around the globe, buy the latest technology just to feel hip and good, or embark of regular expeditions of therapeutic shopping. No, I'll leave that for the rest of the world to do. So what do I want to do?
I want to set up an orphanage in one of the South-East Asian Nations and link it with a local church so that people from first-world countries can experience a bit of third-world suffering. I want to build a university in Philippines that will be at the forefront of an education revolutaion in that nation. I want to create an institution where broken, marginalised and questioning people can come to have a very human need met: the need to feel loved. And thats just a selection from my dreams.
I have my 5-year plans, my 10-year plans. This goes for my personal growth, as well as for my professional careers. Of course, it can all change overnight, with just a simple thing like a heart attack or a stroke. God can take me and place me where He wills. But, right here and right now, I know what He has given me. I know what tools He has placed in my hands. And I am determined to use tham, that my life may leave a single, lasting legacy.
Most people invest in the business of life. I'd rather invest in the business of love.
teDDe
Sunday, November 09, 2008
Wednesday, October 22, 2008
PILE on
The investment fundamentals for buying houses/units:
* P: POPULATION - growth in population will cause demand inflation, driving prices further up.
*I - INFRASTRUCTURE - infrastructure investment creates economic growth through employment, increased capacity, and increased quality of life.
*L: LOCATION - well-placed properties are finite, and their exclusitivity will always guarantee price premium relative to other properties that may look similar by specification.
*E: - EMPLOYMENT - people will only accept high rental conditions if they have a job that can match this level. Make sure that your investment is well placed to capitalise on multiple sources of employment in order to reduce risk.
* P: POPULATION - growth in population will cause demand inflation, driving prices further up.
*I - INFRASTRUCTURE - infrastructure investment creates economic growth through employment, increased capacity, and increased quality of life.
*L: LOCATION - well-placed properties are finite, and their exclusitivity will always guarantee price premium relative to other properties that may look similar by specification.
*E: - EMPLOYMENT - people will only accept high rental conditions if they have a job that can match this level. Make sure that your investment is well placed to capitalise on multiple sources of employment in order to reduce risk.
S2S (Student to Student)
So its been no secret that I've been in the market to purchase an investment property recently.
The property in question is a 4/4/2 student accomodation unit within a resort on the Sunshine Coast. It has a a good yield, good location, and is located in a prime suburb and is a short (10 minutes) drive away from tourism, commercial and future industrial centres.
Been reading on how to maximise the rental returns of such a property. Anecdotal evidence suggests that demographic-specific catering can raise rents exponential to the cost of extra investment.
So, I've been thinking, what would I like to have in a unit as a student who has just arrived to start university with nothing but the clothes on my back and maybe a suitcase full of sentimentals?
* A desk for study ($100 per room - $400 total once-off) +5pw x4 - +20pw
* A broadband connection ($200 installation + $60 per month) $10pw x4 - +$40pw
* A lounge bed for my friends to stay over ($300 once-off)+$5pw
* A television ($200 once-off) +$5pw
* Air-conditioning ($1500 once-off) +$10pw
So, if I potentially added all of these things onto the base price, I would be getting $80pw more. At 80% occupancy, thats an additional $3360pa. But how much is my expenditure?
In the first 12 months, my expenditure would be $3320 on those figures. Cost neutral in the first year? not too shabby! Don't forget that 'taking care' of these amenities often places the unit in higher demand because students, being somewhat lazy and prone to procrastination, don't like to handle these things much.
The next 12 months are where the benefits come into their own. All one-off payments are accounted for, meaning that the only ongoing costs are internet at $720pa. Subtracting that from the increased rental and my returns in the second year will be a tidy $2640.
Not bad at all.
What sort of additions would I include for an inner city apartment tailored for young professionals or working couples?
The property in question is a 4/4/2 student accomodation unit within a resort on the Sunshine Coast. It has a a good yield, good location, and is located in a prime suburb and is a short (10 minutes) drive away from tourism, commercial and future industrial centres.
Been reading on how to maximise the rental returns of such a property. Anecdotal evidence suggests that demographic-specific catering can raise rents exponential to the cost of extra investment.
So, I've been thinking, what would I like to have in a unit as a student who has just arrived to start university with nothing but the clothes on my back and maybe a suitcase full of sentimentals?
* A desk for study ($100 per room - $400 total once-off) +5pw x4 - +20pw
* A broadband connection ($200 installation + $60 per month) $10pw x4 - +$40pw
* A lounge bed for my friends to stay over ($300 once-off)+$5pw
* A television ($200 once-off) +$5pw
* Air-conditioning ($1500 once-off) +$10pw
So, if I potentially added all of these things onto the base price, I would be getting $80pw more. At 80% occupancy, thats an additional $3360pa. But how much is my expenditure?
In the first 12 months, my expenditure would be $3320 on those figures. Cost neutral in the first year? not too shabby! Don't forget that 'taking care' of these amenities often places the unit in higher demand because students, being somewhat lazy and prone to procrastination, don't like to handle these things much.
The next 12 months are where the benefits come into their own. All one-off payments are accounted for, meaning that the only ongoing costs are internet at $720pa. Subtracting that from the increased rental and my returns in the second year will be a tidy $2640.
Not bad at all.
What sort of additions would I include for an inner city apartment tailored for young professionals or working couples?
Tuesday, October 14, 2008
Meaningful Management
To manage...
I know many people who one day hope to become managers in their respective careers. People who hold aspirations of climbing the corporate ladder, gaining influence and power, status and, in all probability, wealth.
But sometimes I wonder whether these people realise what they are asking for. And, without being offensive, I wonder if they have, or will EVER have, what it takes to be GOOD managers in their respective fields.
I'm very cynical about this sort of stuff. You see, I believe that most people in this day and age court the position title without ever really understanding the position description. Sad to think about, really.
If memory serves me correctly, I am actually a manager for my Dad's corporation in Philippines. And have been so for about 1.5 years. Pretty cool, hey? Of course, I'm getting paid $0 per year (worse than slave labour), I don't get any company benefits and up until now I've had very little say in what happens to the company apart from using social engineering to bombard Daddy Lim with an idea until he absolutely has to do something about it.
There has to be a better way.
So right now I'm taking the liberty of defining a new role for myself in this company. Using my smattering of experience in database and webpage design, research skills honed by years of physiotherapy study, and several modules in tourism marketing, I will now assume responsibility of the Corporation's marketing department. Which places me in charge of a grand total of 0.5 staff (that means the half-hearted receptionist because she's too nice to let me do this by myself).
There's alot of work to do, as the last two days have shown me. For example, I've got several books open in front of me detailing the intricacies of creating a 'Destination Website" for hotels. And then I've got another few pages on information regarding the evolution of travel iteneraries for modern backpackers and businesses. Trying to meld all the information together feels a little bit like juggling... you've seen the rhythm of it before, but the first time you pick it up, it just won't work for you.
But I'm trying. After all, I'm determined not to accept the title without having done the required work first.
I know many people who one day hope to become managers in their respective careers. People who hold aspirations of climbing the corporate ladder, gaining influence and power, status and, in all probability, wealth.
But sometimes I wonder whether these people realise what they are asking for. And, without being offensive, I wonder if they have, or will EVER have, what it takes to be GOOD managers in their respective fields.
I'm very cynical about this sort of stuff. You see, I believe that most people in this day and age court the position title without ever really understanding the position description. Sad to think about, really.
If memory serves me correctly, I am actually a manager for my Dad's corporation in Philippines. And have been so for about 1.5 years. Pretty cool, hey? Of course, I'm getting paid $0 per year (worse than slave labour), I don't get any company benefits and up until now I've had very little say in what happens to the company apart from using social engineering to bombard Daddy Lim with an idea until he absolutely has to do something about it.
There has to be a better way.
So right now I'm taking the liberty of defining a new role for myself in this company. Using my smattering of experience in database and webpage design, research skills honed by years of physiotherapy study, and several modules in tourism marketing, I will now assume responsibility of the Corporation's marketing department. Which places me in charge of a grand total of 0.5 staff (that means the half-hearted receptionist because she's too nice to let me do this by myself).
There's alot of work to do, as the last two days have shown me. For example, I've got several books open in front of me detailing the intricacies of creating a 'Destination Website" for hotels. And then I've got another few pages on information regarding the evolution of travel iteneraries for modern backpackers and businesses. Trying to meld all the information together feels a little bit like juggling... you've seen the rhythm of it before, but the first time you pick it up, it just won't work for you.
But I'm trying. After all, I'm determined not to accept the title without having done the required work first.
Monday, October 13, 2008
House Me - Part 1
Not sure what has bitten me these last few days.
I've been obsessed with houses. Or more specifically, buying them. The market has been depressed for a few months now, which is a welcome change from the rapid growth of the last several years. Young investors will probably have about 1-1.5 years to capitalise on this brief reprieve if the economists are anywhere near accurate. I intend to be one of them.
But firstly, why the urge, and why now? I guess there are many factors: the need for cashflow; the desire to own a home; the ability to travel about to different locations without paying rent; the security of having a second low-maintenance income stream; and the urgency to mobilise dead cash. All these things together spell HOME. Oh, and I forgot to mention that, having lived independently for 3 weeks now and absolutely LOVING it (the responsibilities and chores in kind) my senses are so much MORE acutely attuned to the various characteristics of what makes a good house.
And it makes financial sense, too. Currently we (family) have two properties besides our own home. Both are fully owned. One has a house and is turning over a steady income, but maintenance is high because the house is old. The second is a piece of land with no house, and therefore generates no income. We don't want to sell either house because both are in pretty good locations - one of them has ocean views and the other is a stone's throw (meaning about 10 minutes) from Gold Coast. In the future, we're going to need a pretty robust cashflow to set up some business ideas I have in mind - which means that the current arrangement will have to change.
So how is it going to change?
The main gist of the plan is to use the piece of land that is doing nothing as collateral to secure a loan to finance the purchase of an investment property. The property in question will need to be positively geared such that it should turn a net profit of 2-8K per year. This will allow the loan to be repayed slowly but surely in addition to the contributions from mummy Lim and myself.
The second phase of the plan will involve purchase of another similar investment property in the vicinity of the first (to save on agent costs). This will occur when 50% of the loan of the original investment property has been repaid. This time, the Gold Coast property will be used as collateral. With two properties, one turning a net profit of 5-10K, two income streams refinancing the loan, the risk of defaulting and losing collateral to the banks is low. Tax credits can be gained from price depreciation in equipment and - within 1 year - we'll have added another $20K per annum onto mummy Lim's retirement income. Once the loans are fully paid off - give that about 5 years) that will be about $50K, and thats not including price inflation. And that doesn't include the increasing price of house and land values.
This all feeds into a longer term plan to secure an eventual housing portfolio of about roughly 6 properties that will eventually be used as collateral to expand Daddy Lim's property business from Philippines to Australia. Of course, it will be pretty tough, what with the property market behaving like it has, lately, but tough doen't mean undoable.
So let's get down to business, shall we?
I've been obsessed with houses. Or more specifically, buying them. The market has been depressed for a few months now, which is a welcome change from the rapid growth of the last several years. Young investors will probably have about 1-1.5 years to capitalise on this brief reprieve if the economists are anywhere near accurate. I intend to be one of them.
But firstly, why the urge, and why now? I guess there are many factors: the need for cashflow; the desire to own a home; the ability to travel about to different locations without paying rent; the security of having a second low-maintenance income stream; and the urgency to mobilise dead cash. All these things together spell HOME. Oh, and I forgot to mention that, having lived independently for 3 weeks now and absolutely LOVING it (the responsibilities and chores in kind) my senses are so much MORE acutely attuned to the various characteristics of what makes a good house.
And it makes financial sense, too. Currently we (family) have two properties besides our own home. Both are fully owned. One has a house and is turning over a steady income, but maintenance is high because the house is old. The second is a piece of land with no house, and therefore generates no income. We don't want to sell either house because both are in pretty good locations - one of them has ocean views and the other is a stone's throw (meaning about 10 minutes) from Gold Coast. In the future, we're going to need a pretty robust cashflow to set up some business ideas I have in mind - which means that the current arrangement will have to change.
So how is it going to change?
The main gist of the plan is to use the piece of land that is doing nothing as collateral to secure a loan to finance the purchase of an investment property. The property in question will need to be positively geared such that it should turn a net profit of 2-8K per year. This will allow the loan to be repayed slowly but surely in addition to the contributions from mummy Lim and myself.
The second phase of the plan will involve purchase of another similar investment property in the vicinity of the first (to save on agent costs). This will occur when 50% of the loan of the original investment property has been repaid. This time, the Gold Coast property will be used as collateral. With two properties, one turning a net profit of 5-10K, two income streams refinancing the loan, the risk of defaulting and losing collateral to the banks is low. Tax credits can be gained from price depreciation in equipment and - within 1 year - we'll have added another $20K per annum onto mummy Lim's retirement income. Once the loans are fully paid off - give that about 5 years) that will be about $50K, and thats not including price inflation. And that doesn't include the increasing price of house and land values.
This all feeds into a longer term plan to secure an eventual housing portfolio of about roughly 6 properties that will eventually be used as collateral to expand Daddy Lim's property business from Philippines to Australia. Of course, it will be pretty tough, what with the property market behaving like it has, lately, but tough doen't mean undoable.
So let's get down to business, shall we?
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