Getting paid more while waiting for opportunities.

I have blogged about the importance of having a war chest or a few (i.e. money in the bank, SRS, CPF-OA and CPF-SA). I also blogged about how I have a preference to put most of my money in the bank in fixed deposits for higher interest income.

Of course with fixed deposits, there is a lock up period but if we should need the money, breaking a fixed deposit simply means forfeiting the higher interest income and nothing else. So, try to have several fixed deposits instead of putting all our money in a single fixed deposit and try to go for shorter lock up periods.

We want to keep a good percentage of our money in the bank liquid enough to react quickly to opportunities. Unfortunately, with interest rates in local savings accounts around 0.05% to 0.1% per annum, we have to pay a pretty steep price for having liquidity. As I have a relationship with UOB, I am paid 0.2% interest per annum for money in my savings account. Yah. Big, fat, hairy deal, right?

Although some have told me about other banks like OCBC offering up to 3.05% per annum in interest on savings (up to a maximum of $50,000 deposited in the OCBC 360 account), I have been slow to act because of the various conditions which look complicated to me and I am a simple (or, some might say, lazy) person. Conditions? Must go online to make 3 bill payments a month and must charge $400 worth of purchases to a credit card issued by OCBC per month, for examples.

Taken from OCBC's ad.
3.05%? Sounds good, doesn't it?

Well, to be fair, why shouldn't OCBC have conditions which have to be fulfilled if they are paying us so much more? Even if we met only 2 out of the 3 conditions, it would mean getting 2.05% interest per annum and for $50,000, that would be a nice $1,025 a year in interest income. Good enough for a short holiday. OK, lazy, er, I mean simple AK, put this is on your "to do" list.

Also, recently, I opened a savings account with CIMB because they are offering 0.5% per annum in interest and 0.8% per annum if I were to deposit $500 in the account every month. No minimum spending required. No payment online required.

To save me the trouble of depositing $500 each month, I could even give them a lump sum upfront which I did and they would treat it as monthly deposits in advance. I get an ATM card and a free cheque book too. I am still very old school and believe that a cheque book represents convenience.

Like OCBC, there is a cap on which the higher interest rate would apply. In OCBC's case, it is $50,000. In CIMB's case, it is $750,000. Wow! I don't have that much liquidity. So, it doesn't matter to me but I know where I should be squirrelling my excess liquidity now.

An interest rate of 0.8% per annum is 4x more than what UOB is paying me. Sheesh. Why should I not consider parking more money in CIMB from now on (after parking $50,000 in OCBC 360, that is)? OK, need to visit OCBC soon.

If you should be interested, here are the links:
CIMB Star Saver Account
OCBC 360 Account

In case you are wondering, this is not an advertorial. Just talking to myself, as usual.

Related posts:
1. A foreign chest for emergency funds.
2. A special chest for emergency funds.
3. Why fixed deposits over structured deposits?
4. $350,000 gets peanuts? Upsize the peanuts!
5. If we want peace, be prepared for war!

CCR, RCR or OCR for rental income? AK talks to himself.

When we buy properties in Singapore, there is often this idea that if we buy one in CCR (Core Central Region), we should do OK. It is like amateur watch collectors gravitating towards Rolex watches because the brand is deemed safe. To a certain degree it is true as many foreign investors naturally gravitate towards properties in CCR when they invest in properties in Singapore.

Those who are more familiar with Singapore will be braver in venturing out of CCR and into RCR (Rest of Central Region) or even OCR (Outside Central Region). This is probably a prudent choice if they are investing for rental income as well since it is not uncommon to hear of properties in CCR with rental yields of 2% or lower. Sheesh. Why bother?

According to the Singapore Real Estate Exchange Property Index, rental for private non-landed properties in CCR peaked in the months of July and August 2013, post GFC (Global Financial Crisis). It was some 30.8% higher compared to January 2009.  Since August 2013, rental has declined by some 6% by June 2014.

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For properties in RCR, rental peaked in the month of February 2013 and was 38.6% higher compared to January 2009. Since then, rental has come down some 6.7% by June 2014.

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For properties in OCR, rental peaked in the month of January 2013 and was 33.8% higher compared to January 2009. Since then, rental has come down some 7.5% by June 2014.

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From these numbers alone, it would seem that there is more resilient rental demand in the CCR and buying a property in CCR provides greater resilience in rental income. It is also probably because there is more limited new supply of properties in the CCR compared to RCR and OCR.

In terms of percentage growth from January 2009 to June 2014, rentals in CCR, RCR and OCR were higher by 23.2%, 29.3% and 23.7%, respectively. Interestingly, these numbers show that, in general, properties in RCR are clearly the winners when it comes to growth in rental income for the real estate investor, not properties in the CCR.

Also, if we should look farther back to the peaks achieved in January 2008 for all three regions, we would see a startling outperformance for properties in RCR and OCR compared to those in the CCR.

Rentals in RCR and OCR surpassed their peaks achieved in January 2008 by a wide margin while rental in CCR barely recovered to the same level. So, in the last few years, people who bought properties in RCR and OCR before the GFC for rental income would have done better and are still doing better than those who bought properties in the CCR during that time.

Buy a new condo in Queenstown?

Of course, we are only looking at rental indices here. We have not looked at purchase prices. For sure, if we managed to buy an undervalued property anywhere in Singapore, we would do better than the average property investor because we would have a margin of safety.

Where do we find undervalued properties in Singapore? You tell me. I am sure there are some around but they are just harder to find these days. Sounds like a lot of work and we might not even find anything for all our efforts.

So, I prefer to ask another question. When do we find undervalued properties in Singapore? If I were looking to invest in a property for rental income in Singapore now, I would wait. (Hint: Read related post #5.)

Then, CCR, RCR or OCR? You decide.

Source: URA

Related posts:
1. Don't think and grow rich.
2. Real estate: Affordability and value for money.
3. Apartments with rental yields of 4.95% to 7%.
4. Where to buy a shoebox apartment for investment?
5. Smaller apartments' prices more resilient.
"we expect the private vacancy rate to rise ... to 9.9 percent in 2016," ... noting that historically when vacancy rates hit 8 percent, rents and prices start declining.
(Source: CNBC)