Case Study 2 - How Engineer made Half Million - Forums Forums  

Go Back Forums > The Discussion Forums: > Investments and Net Worth

Investments and Net Worth Talk all about money making exploits, shares, property, building net worth and retirement matters

Case Study 2 - How Engineer made Half Million

Thread Tools
  #1 (permalink)  
Old 07-01-2008, 11:47 PM
Posts: n/a
Default Case Study 2 - How Engineer made Half Million

This next story is about an engineer and his wife making $500k from a rather low-risk investment.

(See previous case study.)

The engineer had observed that many wealthy people like to invest in property.

These rich people follow a rather simple strategy - buy an apartment or a shop when prices are low, rent it out, and sell when the price is right.

Often, they take a loan even when they can well afford to pay in full.

The engineer saw the beauty in this. To him, investing in property is easier than investing in equities (shares) where one often has to make "informed guesstimates" based on public information and sometimes rumours.

Property seems simpler to understand - all you need is a good location and a reasonable price. For the latter, he wanted the rental income to cover at least the monthly instalment for the maximum bank loan (mortgage).

A good location implies good rental return and ensures that there's upside to the investment.

Taking a bank loan means leverage. Not risky leverage though, because a piece of property always has value, especially in land-scarce Singapore, more so if its location is good. (Note that it's harder to use leverage with shares trading, unless you play with derivatives or take personal loans.)

So, in 2002, he bought an apartment in the River Valley area for $800k - paid 20% with cash and borrowed the rest - and rented it out to an expat for $3,000 a month, which was barely enough to cover the mortgage repayment.

In 2004, when the expat renewed the tenancy, the engineer raised the rent to $3,300.

He raised it again to $3,800 in 2006 when the economy started booming again. He was getting some additional pocket money.

Then in 2007, he sold the apartment for $1.3 million, making a net profit of more than $500k.

The return on investment is more than 300%, or more than 30% per year over 5 years.

How much return are you making from trading shares?

See other case studies.

Reply With Quote
  #2 (permalink)  
Old 11-01-2008, 03:37 PM
Posts: n/a
Default 739

These are great case studies. Keep'em coming. Good work!

Reply With Quote
  #3 (permalink)  
Old 14-01-2008, 01:15 PM
Posts: n/a
Default 745

The assumption that leveraged properties investment are safer because the value will be retained is not true. It is not well known that if you buy a private property and the market value drops, the banks are obliged to ask you to pay the difference (this is their way of reducing bad loans). And also, if the leverage is very high, if you buy at the wrong end of the curve, the buyer may end up paying for losses for the next 20 years of their lives. The $800K Bishan executive flat sold a few years back come to mind.

Of course, if you read the timing well, the money earn can be a lot. The high returns comes with high risk due to the high leverage of 400% as stated in the Engineer's case.

SG Bus Timing App
SG Bus Timing App - the best bus app - available on iPhone

SGX Stocks Android App - check share prices
SGX Stocks [Android] App - check latest share prices on the go

SGX Stocks for iPad - check latest Singapore share prices
SGX Stocks [iPad] app
| SGX Stocks [iPhone] app
Reply With Quote
  #4 (permalink)  
Old 10-02-2008, 11:21 PM
Posts: n/a
Default 833

Again not a fair comparison. He got lucky although I concede that the rental = morgage strategy is a good one.

He took a big risk and deserved his returns. He called market turns which most ppl didn't.

Imagine holding positions in equities which you can liquidate today if you didn't like. Try doing the same with your property. You also cannot downsize your property investment piecemeal.
Reply With Quote
  #5 (permalink)  
Old 10-02-2008, 11:38 PM
Posts: n/a
Default 835

Kelvin, very good points. Thanks.
Reply With Quote


« Previous Thread | Next Thread »
Thread Tools

Posting Rules
You may not post new threads
You may post replies
You may not post attachments
You may not edit your posts

BB code is On
Smilies are On
[IMG] code is On
HTML code is Off
Trackbacks are Off
Pingbacks are On
Refbacks are Off

Similar Threads
Thread Thread Starter Forum Replies Last Post
Case Study 1 - How Poly Lecturer became Millionaire Investments and Net Worth 18 17-12-2013 03:39 AM
Case Study 3 - How Couple got Stuck with Property Investments and Net Worth 16 19-07-2009 04:42 PM
Case Study 6 - Bankrupt and Successful Businesswoman? Income and Jobs 8 17-07-2009 01:08 PM
Case Study 4 - How High-Income Lady Lost $33k in Shares Investments and Net Worth 4 30-06-2008 01:37 PM
Case Study 5 - Shrewd Millionaire Employee Investments and Net Worth 9 18-06-2008 01:46 PM

» 30 Recent Threads
Lawyer Salary ( 1 2 3... Last Page)
5,607 Replies, 2,366,198 Views
Q: Management Associate at SGX ( 1 2 3... Last Page)
55 Replies, 10,532 Views
Compare civil service salary ( 1 2 3... Last Page)
9,579 Replies, 5,433,282 Views
Dsta ( 1 2 3... Last Page)
802 Replies, 532,359 Views
How is life as a doctor in... ( 1 2 3... Last Page)
1,149 Replies, 876,955 Views
Career as Teacher ( 1 2 3... Last Page)
2,558 Replies, 1,546,413 Views
Whats your net worth ( 1 2 3... Last Page)
2,707 Replies, 778,586 Views
Salary working for SEA FP&A... ( 1 2)
14 Replies, 1,094 Views
High Finance Thread ( 1 2 3... Last Page)
77 Replies, 12,956 Views
Roles in accenture singapore ( 1 2 3... Last Page)
323 Replies, 239,275 Views
Q: Big4 - Yearly salary increment ( 1 2 3... Last Page)
913 Replies, 737,101 Views
anyone working at NCS ? ( 1 2 3... Last Page)
348 Replies, 273,737 Views
Anyone worked in singhealth/nhg? ( 1 2 3... Last Page)
49 Replies, 68,807 Views
Anyone jobless for a long time... ( 1 2 3... Last Page)
2,808 Replies, 1,054,974 Views
New Job Offer that only match... ( 1 2)
12 Replies, 1,909 Views
DBS Management Associate Program... ( 1 2 3... Last Page)
1,231 Replies, 231,042 Views
MINDEF DXO (All FAQ on it) ( 1 2 3... Last Page)
3,206 Replies, 1,855,318 Views
Factual Local Bank Salaries - DBS... ( 1 2 3... Last Page)
65 Replies, 60,836 Views
MCI and IMDA ( 1 2 3... Last Page)
44 Replies, 8,128 Views
All about Home Affairs Senior... ( 1 2 3... Last Page)
167 Replies, 168,894 Views
Salary negotiation for fresh grads ( 1 2)
10 Replies, 4,003 Views
Invest in D9 new condo
1 Replies, 992 Views
Civil Svc/ Statboard - Typical... ( 1 2 3... Last Page)
1,971 Replies, 914,761 Views
List of Management Associate... ( 1 2 3... Last Page)
179 Replies, 126,166 Views
Local Uni Class of 2020 - COVID19... ( 1 2 3... Last Page)
227 Replies, 43,714 Views
Our Poll Results: 45% Fresh... ( 1 2 3... Last Page)
46 Replies, 20,902 Views
Please Share DBS Average Months...
6 Replies, 770 Views
Fresh Grad from local U cant find... ( 1 2 3... Last Page)
54 Replies, 9,755 Views
Do most MNCs pay better than the... ( 1 2 3)
25 Replies, 2,314 Views
Dentist Salary
6 Replies, 5,885 Views
Powered by vBadvanced CMPS v3.2.2

All times are GMT +8. The time now is 12:11 AM.

Powered by vBulletin® Version 3.8.5
Copyright ©2000 - 2020, Jelsoft Enterprises Ltd.
Content Relevant URLs by vBSEO 3.3.2