Compare apples with apples and learn something.

Many readers think that I don't take enough fruits and vegetables and I have been making an effort to increase my intake. 

I enjoy a particular brand of apples a lot, Envy. Crisp and sweet, it is probably more expensive than some apples but, hey, I am learning to be nicer to myself.

Envy apples sell out quickly and many times I find them sold out at the NTUC Fairprice in the HDB estate near my place. So, when I saw them on sale at a branch in a shopping mall this morning, I bought some.

This evening, after dinner in a warm and crowded kopitiam near my place, I popped into the NTUC Fairprice I usually patronise just to enjoy the air conditioning. Clever, right?

Then, I saw the apples. 

Ah, new stock has arrived, I thought to myself. Out of habit, I looked at the price and, then, I looked again.

Sure or not?

I was pretty sure I paid a higher price just this morning.

Anyway, I bought a pack, came home and checked. You know lah, we should compare apples with apples, right?

AK so witty? I also say.

See the difference?

OK, magnified for the optically challenged:

Alamak. How come like that?

Now, I know. 

Moral of the story:
"Don't buy fruits from NTUC Fairprice found in more atas locations."

A 10% difference is a big deal. 

Well, to me it is, anyway.

I know. It is hard for me to change my ways.

Comparing apples with apples, I learned something this evening.

Related post:
What a visit to NTUC Fairprice could teach us?

Sell 2 condomiums to buy 1 landed property?

Hi AK,

I chanced upon your blog recently while searching for landed property and found your blog very interesting.

I would like to have your opinion on my property search.

I am in my late 40s and owns 2 condos in the OCR with my wife.

One of the property is fully paid off and rented out. The other property where we live in, still have a loan of $800k for 20 years.

I am confidence of paying off the loan when I reach 55 because of the rental and we have a combine income of more than $20k per month.

We are considering selling off our 2 condos and purchasing a landed property. I did my sum and conclude that we still can have the similar loan of $800k if we purchase a landed home at $2.2 mil.

Now my Questions

1) Does it make economic sense to swap 2 condo for 1 landed if everything remain the same or similar? interest rate, loan tenure and amount etc.

2) Although with the landed, I will have no more rental income. But I will still be able to reduce the loan significant when I reach 55 with my CPF withdrawal.

3) Any pitfall that I need to consider seriously? Like is it realistic to have a $2.2mil landed?

Thanks in advance for any advice (professional or unprofessional) :-)

Best Regards

B

Hi B,

Welcome to my blog. :)

Financially, I believe that you are in a comfortable position now and buying that $2.2 million landed property doesn't seem like a demanding thing. It is affordable.

However, you did not mention how much you have in your emergency fund or what are your plans to help fund your retirement if you were to purchase the landed property.

Like you said, buying the landed property would mean giving up your rental income and it could also mean drawing upon your CPF money (which is really meant for retirement funding) to reduce the loan for the landed property at age 55.

I am just raising some pertinent questions and you don't have to tell me anything else if you don't feel comfortable to do so.

In closing, I just want to say that it is probably OK to up our consumption level if we have certainty we will avoid financial hardship later down the road.

Best wishes,
AK


Related posts:
1. Do I need a bigger home?
2. 2015 passive income all gone.

Solace says winter is coming and he is taking action.

Sharing a comment from Solace, an ASSI guest blogger. It has been a while since he wrote and this piece is a heartfelt one.

Solace says:

In trying to navigate through personal finance, I have learnt not to set conventional limitations on myself.

When I first started out, I thought I should only work from 8am – 5pm, Monday to Friday. No work for me on public holidays and on weekends.

Such thinking limits options to increase our income.

I know people who monetise their free time on weekend and public holidays to give tuition. Others work as relief taxi drivers on weekends.

I have 2 friends who are passionate about sports and music, respectively. Both hold full time jobs in the corporate world. One transforms himself into a swimming instructor during weekends and evenings while the other teaches music on his off days.

My industry and skillsets have allowed me to change from working regular hours to doing shift work. 

Now, I am required to work on some weekends and public holidays. Sometimes, I am also rotated to work night shifts. I would also volunteer for overtime as long as I can make it. All this translates into higher income as a result.

Human capital is limited, make hay while the sun shines.

Try our best to make more money while we are younger and healthier.

"Winter is Coming" is a motto in Games of Thrones.

The meaning behind these words is one of warning and constant vigilance. There are always dark periods (“Winter”) in our lives even if things are good now ("summer").

In our context, winter can come in the forms of economic recessions (leading to retrenchment, pay cut, pay freeze, for examples). Of course, sickness and old age are inevitable.

I do hope that I am well prepared when “Winter” eventually comes into my life.

AK hopes that all of us are well prepared.

Do the right things because our lives can be and should be better.

Related post:
A young father says money not enough.

A young father of two says money not enough.

Hi AK,

I am 37 this year. Married with 2 boys, 6 and 2 year old 

My wife not working and take care of our children 

Recently I have been feeling very fan , keep thinking money not enough to bring up our kids , I had a job which I don't really like , I am still here because I need to bring home an income to support this family.

I need advise from u. If now 1 got 100k in FD, how to make better use of it. Thanks AK

I LIKE YOUR BLOG

Hi D,

Welcome to my blog. :)

While keeping a look out for a better paying job which you might enjoy more, think about how to reduce expenses at home and increase income in other ways. Make sure that the ways you have identified to increase income involve doing things you enjoy or at least don't dislike. Of course, if you do this, what you have will be more savings. Having more savings always makes people feel better.







Ask if that $100K in FD is your emergency fund. At age 37, you should have an emergency fund that will cover regular expenses for 12 to 24 months. The excess, if any, you could invest for income. You might want to split the excess into half, investing half now for income and the rest for in case the stock market crashes. Which stocks to invest in? I will leave that to you. :)
-------




Don't be "fan" (frustrated), to use your word. You have something precious and that is your family. :)

A well known local investor, Dr. Michael Leong, said before that family is more important than anything else (including money). Don't forget that.

We only need so much money in life. The rest is for showing off.

Know how much money we need and work towards that. 

Do what you need to do for your family.

Don't compare with others.

Unless we are the richest person in the world, there is always someone richer.





Related posts:
1. Greater financial well being is not beyond us.
2. How much should we have in emergency fund?
3. Free "e-book": Do not depend on wage increases...

Have a $327K home loan and $200K in savings.

What to do?

Hi,

I have been following your blog for last two years and would like to have your opinion on whether to pay off my mortgage or to invest the money I have in my bank.

I have a mortgage loan of S$327,000 of 12 yrs tenor at current interest of 1.625% per annum.  Following year about 1.9% to 2% per annum.  Currently, I have about S$200K idle in my bank and do not know whether to pay off the mortgage or invest it in bonds, etc.  I was advised to invest in UOB United SGD Bond, but I'm not sure about it.

Appreciate your professional opinion on the matter.  Thank you.

Best Regards,

M

Hi M,

Alamak. I am not a professional. So, if you want a professional opinion, I have nothing to offer you. -.-"

This is my unprofessional opinion:

You managed to lock in interest rates of less than 2% on your home loan for the next 2 years and you wonder if you should invest your money for higher returns which really isn't difficult. However, if your investment horizon is only for 2 years (because you managed to lock in low interest rate for the next 2 years), then, better not. Investing is best done if we are using money we won't need for anything else (and we wouldn't have to liquidate our investments at a time not of our own choosing to meet those needs).

As for buying into a bond fund, er, I won't touch a bond fund even with a 5 feet pole. ;p

Best wishes,
AK

Related posts:

1. Get income from investments to pay interest.
2. Nobody cares more about our money. (Bond funds).

BREXIT and 1H 2016 income from non-REITs.

Were there any major development in the non-REIT space for me in 2Q 2016? 

Selling most of my investment in NeraTel probably qualifies. I sold about 90% of my investment in NeraTel. 

Being a relatively substantial part of my investment portfolio, the sale, as you might have guessed, bumped up the cash level in my portfolio by quite a bit.

A happy problem?

In the short term, with the divestment gains, it is probably a happy problem but if I do not put the money to more productive work, we would have to remove "happy" from the phrase. So, I put some of the money to work.

In the non-REIT space, in 1Q 2016, some readers might remember that I bought DBS, DBS and more DBS. Even now, DBS is trading at a discount to NAV and a relatively low PE ratio of about 8x. Paying out about a third of its earnings as dividends, the yield is almost 4%. 

Thanks to BREXIT, I was able to add to my investment in DBS as its share price declined, breaking a technical support. I would like to collect more on any further weakness.

In 2Q 2016, I also added to my investments in Starhub, VICOM, QAF Limited and Croesus Retail Trust on lower prices offered by Mr. Market.

Investing for income, I am interested in entities which have strong income generating abilities. Of course, they must pay meaningful dividends.


A handful of readers asked me for my thoughts on Croesus Retail Trust's proposal to be internally managed. It is quite interesting since it would be the first investment trust to be internally managed in Singapore if the deal is accepted by its unitholders.

All else remaining equal, internal management is a good thing for Croesus Retail Trust as it would mean that profits which would have gone to the external manager could be distributed to unitholders instead. The probability of conflict of interest between an internal manager and the unitholders will also be lower.

Of course, an external manager of any investment trust is a profitable enterprise, earning regular fees. No external manager in his right mind would give this up for a song. The price to internalise Croesus Retail Trust's manager is set at a princely sum of S$50 million.

For FY2015, the external manager recorded earnings of about S$500,000. Paying S$50 million to internalise the management would mean paying a PE ratio of 100x. Comparatively, ARA which manages a portfolio of REITs like Suntec REIT is trading at a PE ratio of about 15x. Go figure.

Although I like the idea of an internal manager for Croesus Retail Trust, I think paying S$50 million for this would be a price too high.

Post BREXIT, I also added to my investment in OUE Limited which I first blogged about in 2014 as a possible asset play. I basically paid 50c for what was worth $1.00. It was a smallish position as I was wary of the situation with Twin Peaks condominium. See my past analysis: here.

I decided to add to my investment because the situation with Twin Peaks has improved with many more units sold but the stock traded at an even bigger discount to NAV. While waiting for value to be unlocked, I will get some pocket money from the regular dividends OUE Limited declares.

Very much along the same line of thought, I decided to also increase my investment in Wing Tai Holdings. Although they have much more exposure to development properties compared to OUE, they have a stronger balance sheet. Mr. Market could be overly pessimistic. See my past analysis: here.

In 2Q 2016, I received income from:

1. APTT
2. ST Engineering
3. SPH 
4. PREH
5. QAF Limited
6. Wilmar
7. ARA
8. Hock Lian Seng
9. SCI
10. SMM
11. OUE Ltd
12. Hong Leong Finance
13. DBS
14. NeraTel
15. Accordia Golf Trust
16. Croesus Retail Trust
17. Starhub
18. Ascendas H-Trust


I hope I have not missed out anyone.

Total income received from non-REITs in 1H 2016:

S$ 58,545.01

That is about S$ 9,757.00 a month.

I will continue to nibble at stocks and if a correction in the magnitude of 10% or more should happen, I am prepared to buy much more.


Related posts:
1Q 2016 income from non-REITs.

Why VIVA Industrial Trust not in AK's shopping list?

AK gets asked about VIVA Industrial Trust from time to time and why AK never blog about the REIT? Alamak. It happened again today. 

I decided to share this exchange I had with a reader and without saying too much, I hope it is clear enough:

Hi, AK

I have been your reader since 2013 when my trekking friends recommended you to me. You have been talking to yourself about REITs and i faithfully followed it. Thanks to your generous sharing,  I have benefited too. 

I have 87 lots during IPO and am thinking of switching them to other REITS.I searched for Viva Industrial Trust (T8B) in your blog, but i could not get any information about it at all.  If you are free, don't mind sharing some thought about Viva Industrial Trust (T8B). Or  Viva Industrial Trust (T8B) never in your shopping list at all.

Thank you very much for your time and please keep talking to yourself.

Thank you and wish you have a nice week ahead!!

Regards,

A

Hi A,

I looked at Viva before and I was going to publish a blog post on it in 2014 but decided not to. In essence, I wasn't interested in the REIT because:

1. I was not sure that UE Bizhub's valuation was realistic.

2. I didn't like that its Chai Chee property had 17 years left to its lease. Now, 15 years left.

3. I was wary of the massive financial engineering to boost dividend yield which would otherwise have been 25% lower.

I just didn't feel good about the REIT. I still don't.

Best wishes,AK


Other examples of financial engineering:
1. K-REIT: 17 for 20 rights issue.

2. OUE C-REIT.

A blog post on leasehold properties:
OUE H-Trust: Considerations and comparisons.

BREXIT and 1H 2016 income from S-REITs.

My income from S-REITs in 1Q 2016 received an enormous boost from Saizen REIT's distribution which was partially a return of capital. I said I had mixed feelings about the matter and, actually, it has created another issue for me. 

Cash as a part of my portfolio is now quite large.

Is this a problem?

Of course, keeping some excess money in savings accounts and fixed deposits is always a good idea. These are our war chests. 





However, too much cash (earning too little) and we won't be able to keep up with inflation which is one reason why we invest for income. We want to beat inflation or, at least, keep up with it. We don't want to see our wealth eroding.

To be quite honest, I am in no hurry to re-invest all the distribution received from Saizen REIT in 1Q 2016. 

Approximately, I received 8 years worth of "dividends" (in the guise of capital gain) at one go. So, I have quite a bit of time to wait for good investment opportunities. 

In the meantime, some of my cash is in OCBC 360 and UOB ONE, with most of my cash getting 0.8% to 1.9% in interest income from savings accounts and fixed deposits which are virtually risk free.

However, being mortal (and fallible), I couldn't help but nibble a bit at some S-REITs in 2Q 2016.





1. Cambridge Industrial Trust. I have been holding to a much reduced position in this REIT for many years and in 2Q 2016 decided to make a small addition to my position at 52.5c a unit. 

To be quite honest, I feel that AIMS AMP Capital Industrial REIT is probably a more attractive investment. The two REITs have comparable yields but AIMS AMP Capital Industrial REIT has a stronger balance sheet and a business strategy that leaves less to the imagination. 

However, I decided to go with Cambridge Industrial Trust this time because my investment in AIMS AMP Capital Industrial REIT is already quite big.







2. I-REIT Global. I only became an investor after some time from the IPO which I thought wasn't attractively priced enough and I added to my investment in the REIT last August at 65.5c a unit. 

I decided to nibble at 71c a unit in 2Q 2016 because even at that price, the distribution yield is still pretty attractive. I also like the REIT for its portfolio of German freehold office properties and their high quality tenants.

If BREXIT should spark a contagion, I would become a lot more cautious in adding to my investment in the REIT as its income is in Euros although having real estate in Germany, arguably Europe's strongest economy, I feel that there is some degree of stability.







3. Soilbuild REIT. I decided to add to my investment in the REIT which has seen a large decline in unit price due to issues with one of their tenants, Technics Offshore Engineering, which did not pay their rent.

The REIT has since been paid the firm's bank guarantee of $11.85 million by UOB. This is equivalent to 18 months of rental and it will give the REIT time to search for a new tenant.

In arriving at a price which I am more comfortable to buy at, I noted that the rent payable by Technics is almost $8 million a year which is about 10% of the REIT's revenue of $80 million a year. 

Assuming the REIT is unable to find another tenant after 18 months, without taking into consideration other costs, DPU would decline by 10% accordingly. So, happy with the distribution yield at 73c a unit back in December 2015, with the latest development, I decided that I would only add to my investment at 66c or so a unit.







Together, these nibbles used up less than 10% of the distribution I received from Saizen REIT in 1Q 2016. I think it is important to put them in perspective. They are really only nibbles.

S-REITs are leveraged income instruments. So, it won't be wrong to say that I remain wary as to how rising interest rates in the future could impact distributable income negatively, all else remaining equal.

There isn't anything retail investors like me can do but to be more conservative when it comes to debt and investments which depend largely on debt to bring home the bacon especially if growth is not particularly promising.






However, thanks to BREXIT, interest rates are likely to remain low in the near future and the most disadvantaged in the financial world are probably still the savers. In the search for higher yields, S-REITs are natural beneficiaries.

So, how much bacon did I receive from my investments in S-REITs in 1H 2016?

S$ 397,294.28








S-REITs remain relevant instruments for the income investor and I will continue to keep an eye on them, buying more of the ones I like if Mr. Market should go into a depression.

Related post:
1Q 2016 income from S-REITs.