Calling it quits!

Originally Posted by whizzard

Hi Sahm,

Besides making your calculations on how much leverage you can afford, do build in some contingencies so that if any unforeseen events occur, you would have some buffer to counter them. I have some investment properties which are leveraged and the rentals are more than adequate to cover their mortgages but I made sure that I do not rely solely on my rentals to meet the mortgage payments because in a recession, rentals do come off and sometimes, it may take a while between tenancies. From my own experience, the Singapore property market is fairly efficient and rental vacancies are usually not too long but you'll never know for sure. Also from my personal experience in investing in overseas properties, the rental vacancies can be very long especially so when you can't afford to be on the ground to manage them even if you have agents managing the properties for you. That was the main reason why I decided to sell them off and take my capital gains, not really worth the trouble to eke out the extra returns.

Besides putting away some spare cash, perhaps you may want to consider getting a Mortgage Reducing Term Assurance ("MRTA") for your husband (if not already done so). I am not trying to imply anything other than in the investment community, sometimes we require the main driver of the business to get a key man insurance just in case anything happens to him/her, there's an insurance payout. In your case, the mortgage will be covered by MRTA in case anything happens.

In essence, what you are trying to do is to buy a second property on leverage. It's a pretty common aspiration amongst Singaporeans. Based on what you described about your family's income, even if you lose all the money from the mortgage in the markets, it would not kill you. Painful yes, fatal no!

Your family is still young and you can afford to take some risks. However, a lesson I learnt is to exercise restrain and patience i.e. even if I have loads of spare cash, if I don't see any compelling investments, I'd stay on the sidelines. I am not a fund manager who needs to beat the index so I can afford to stay out if I don't have any compelling views and only jump in when the proverbial moons are aligned. I have learnt, especially applicable to me personally, that having a loaded gun ready to fire is a dangerous thing unless one has strong discipline.

Whizzard, would you recommend high dividend local stocks like Starhub and M1?

[whizzard]

Originally Posted by Unregistered

Whizzard, would you recommend high dividend local stocks like Starhub and M1?

I have some of these including REITs in my portfolio as I like the cashflow. However, with the expected recovery in the US and other economies, many equity strategists are advocating switching into cyclical stocks. The REITs have gotten hammered recently and are well below their highs due to investors switching out to cyclicals and the fear of interest rate hikes. I will add more when the price is right and I am happy with the yields.

Whatever the case, you got to ask yourself what is your investment objective? That is the starting point. Once you are very sure of what you aim to achieve, then pick the instruments that will get you there.

I have 2 portfolios of equities; one which I will hold for a number of years unless the fundamentals of the company or the sector is expected to deteriorate substantially and the other for quick trading gains of 5-10%. My buy and hold portfolio comprises mainly high dividend yielding stocks. These days, I only buy large cap stocks (at least mkt cap of $1 billion). You may get it wrong but it will always rebound, just a matter of time and opportunity costs in the meantime. Tested through the last few cycles from Asian crisis, SARs, dotcom bubble and Lehman. But, that's my own experience ..... you may have different ideas and experiences.

I recently missed my trade on Apple. I was waiting for it for a long time ever since it hit its high of $700+ and corrected. There were 2 opportunities for me, in Apr and June this year. I am still berating myself for missing the boat. It's not hindsight, it's lack of guts and conviction on my part to pull the trigger when the time came for it. I must not let it happen again, not only for Apple but for other stocks too.

Originally Posted by Unregistered

You must be some young punk fresh from some no name uni trying to sound smart. You don't know much but talk a lot. Overleveraging at a time when market has peaked and on the way down is stupid. When you leverage to 80%, and market crash by 50%, you will be under water. Your stocks value will also crash by 50% or more. You will be in deep ****. If your banker ask you to top up, you can't cos the loan you took from your home equity was invested in stocks which has shrunk in value. Worse, if you lose your job. Recipe for disaster. Youngsters nowadays are so stupid.

then you must be some diploma kid who is always drooling over someone with a degree keke

hahahaha .... i laugh when i read this forum. 60 year olds arguing with 30 year olds. old so harsh, young so rude .... sign of the times ...

let me share my views. i am not so old nor not so young. i'm in my mid 40s. i have benefitted from the property bull run over the past 10 years. i have now cashed out all my property investments except my own home, which is paid off. if the market crash, i will go in big time. while it is true to say that our property prices will rise in the long term of 100 years, there will be times when market will go down. so if you leverage up today and the market falls, you risk being under water and the banks calling you. but if you have the ability to meet cash calls and hold for the long term, you will be ok. most people lost and got out of the game because they were greedy and get caught with their pants down because they were overleveraged and thinking the market will continue to go up in the short term. in the past, there were many people who got bankrupt when they overleveraged (i define this as more than 50% debt), and when crisis hit, they plunged into misery. million dollar businesses just went up in smokes, they went from a tycoon to a pauper overnight.

so, to sum up, there is a big risk market will crash in the short term but if you hold long enough, you will be ok. up to you to decide, dont blame anyone when things go wrong.

For those of us who can leverage easily off our properties or stocks through a private bank, I would rather increase my overall leverage, say to 50% during bad economic periods which affects both property and stock markets, and reduce to about 15% when I think the economy is overheating and markets are at a high. Similarly, I buy high beta investments (small caps) when things are really dire and retreat to defensive high dividend plays (banks, telcos) when the market is overheating. Haven't always practiced what I preach because of "Greed" and "Fear", but when I do, which is more often than not, it works incredibly well. I think were at a midpoint now and those who sold out and are waiting sold out too early and are going to wait for a long long time. The danger is that they wait so long that they get itchy and plunge back in right before the crash. Haha

Dear SAHM,

Life is full of uncertainty, we all make our moves in life based on our risk assessment, given our circumstances. While it is understandable why you want to lever up and own a second property, you must weigh the various possible scenarios. If you are comfortable with the worst case scenario, then you can make you move.

What is you worst case scenario:

You lever up to 80% debt, based on the CURRENT value of your landed, and you use the home equity loan to buy another landed or stocks. You base your ability to service your mortgage based on you husband's income. In the worst case, your current home value drop by 40%, your second property value dropped by 40% or your stocks dropped by 50% and your husband lose his job, you have no tenant for your second landed. If you are still ok with this scenario, then you can do whatever you like.

Take care dear.

Buying property to rent out (investment property) is a bad idea. Read this latest stats.


Chart of the Day: Vacancy rate of private homes jumped to 5.6% | Singapore Business Review

Sensible advice.

Originally Posted by Unregistered

Dear SAHM,

Life is full of uncertainty, we all make our moves in life based on our risk assessment, given our circumstances. While it is understandable why you want to lever up and own a second property, you must weigh the various possible scenarios. If you are comfortable with the worst case scenario, then you can make you move.

What is you worst case scenario:

You lever up to 80% debt, based on the CURRENT value of your landed, and you use the home equity loan to buy another landed or stocks. You base your ability to service your mortgage based on you husband's income. In the worst case, your current home value drop by 40%, your second property value dropped by 40% or your stocks dropped by 50% and your husband lose his job, you have no tenant for your second landed. If you are still ok with this scenario, then you can do whatever you like.

Take care dear.

[whizzard]

STI -50
HSI -500

Jakarta down 5%!

Steady, steady ..... bring out the battle plans!

Originally Posted by whizzard

STI -50
HSI -500

Jakarta down 5%!

Steady, steady ..... bring out the battle plans!

what are your battle plans? greatly appreciate just an outline to enlighten the uninitiated ones like myself.