Tea with Ms. Y: Single, turned 35 and getting a resale flat?

A guest blog by Ms. Y who recently turned 35 and got herself a resale HDB flat:

I'm just a regular white collar worker with not bad a job. Work hard and long hours and get decent pay. However, I do need to provide for my parents as they age. My biggest concern is that they do not have much insurance coverage (but might be different now with Medishield life!) Anyway, they both have some medical condition which doesn't allow them to get insurance coverage now. I'm also now eligible to buy a hdb flat!

I don't worry abt a 1 time operation need. 30k or 50k, it's not difficult to fork out of my savings or even if I have to borrow, it's not difficult. What I worry is about the long term chronic illness such as chemo for cancer and kidney dialysis that is very cash draining. Who knows? I may even have to take no pay leave to look after my parents. Or at least until I can arrange nursing home, domestic help, etc. I don't know how much all that will cost but if I have to fork out 2 to 3k per month, my finances would be drained surely.

So, my plan is to buy a cash generating asset. Need to generate 3k cash per month by renting my flat in the event of need (moving back to parents' place to take care of them as reason for renting out whole flat b4 meeting 5 years minumum occupation period can be approved by hdb).

Of course, my plan needs to be backed up by a good financial standing by complying with the TDSR and MSR. MSR is only applicable to hdb flats purchased. So, I'm using less than 30% of my monthly salary to service my loan calculated at an imputed interest rate of 3.5% by regulation. Tip: b4 buying property, get a mortgage broker to calculate all these. I did so even when I studied the regulations and calculated a couple of times.

Anyways, after getting an approval in principle from 2 banks (w help of mortgage broker), I went shopping for a flat. To yield 2 to 3k of cash flow, it has to be at least 4 room flat and at a good location. Then I checked hdb website for such rental yield and decide amongst them one of a cheaper place for such yield.

Also, I'm quite sick and tired of the >1 hr travel each way to and fro work. So, I'm getting a flat near to town area. It is expensive no doubt, but it is serving my purpose. 

Oh yeah, another reason why I do this is because I know myself. I'm not such a stock whiz that I get great returns in the stock market. Not so good in fact. I do well by squirreling cash away. Out of sight, out of mind. So, I don't spend it. Haha....I have most of my savings tucked away like this. I can say that I can afford this flat quite comfortably. In fact, after I have bought it, another transaction was done with price higher than mine.....hit above the 1 year high. Seems property market is going up again.

My flat is less than 5 years old. So, I plan to stay in it as long as I can. I will downgrade when I am retired to realized gains for retirement (hopefully). Or I'll just leave it and rent it out to finance my stay in a nursing home when I need it.

I have some amt in OA tied up in investments and paid 15% downpayment, stamp duty and lawyers fees. Found that I still have a small excess in OA. I just transferred them to my SA. My mortgage loan is ending when I am 60. So, I plan to pump up my SA now with min sum cpf top up and any excesses in my OA will be trf to SA. Trying to get govt to pay for part of my flat when I am 55.  4% interest in SA vs the around 2% mortgage interest....decision making is a piece of cake.  ;)

A nursing home in Singapore run by First REIT.

Now I have half the current prevailing min sum amt in SA and hit the ceiling of my MA. The only issue I have is that as my SA hits min sum earlier, I may not be able to make further contribution for tax relief purposes.

So, this is the story of my flat. :)

Congratulations, Ms. Y!


TDSR:
Total Debt Servicing Ratio refers to how much of our monthly income do we use to pay our debts. MAS policy is that TDSR cannot exceed 60%.

MSR:
Mortgage Service Ratio refers to how much of our monthly income do we use to pay our debt secured by properties (i.e. mortgage).  Applies to HDB flats and ECs only. MAS policy is that MSR cannot exceed 30%.


Related posts:
1. Buying an apartment: Considerations for first timers.
2. Build a bigger retirement fund with CPF-SA.
3. Don't see money, won't spend money.
4. National Day Rally: Retirement funding adequacy.
5. Millionaire or not, plan for retirement.

An eye on Accordia Golf Trust, Croesus Retail Trust and Saizen REIT: 8.1 magnitude earthquake in Japan and the Yen.

On Vesak Day, a huge undersea earthquake was reported 874 kilometers from Tokyo. The epicentre was deep in the Pacific Ocean. Seismologists warned that another quake could be coming. See report here: Japan Today.

Expecting some negative reaction from Mr. Market, I looked at the prices of Accordia Golf Trust, Croesus Retail Trust and Saizen REIT this morning. Of the three, the unit price of Accordia Golf Trust retreated by almost 10%. It was a big decline but it probably had to do with the fact that the counter went XD as well.

Accordia Golf Trust announced their maiden DPU of 5.71c for the 8 months period since its date of listing. This included non-recurring gains. Based on the regular operation of the golf courses under management, it was estimated that full year DPU could come in at 6.23c. However, this was based on an exchange rate of S$1 to JPY 88.4. This was a couple of months ago.

Of course, the JPY has weakened significantly since then. The rate is now S$1 to JPY 92. This rate was last seen in late 2014 and could be the reason for the particular weakness in Accordia Golf Trust when the unit prices of both Croesus Retail Trust and Saizen REIT held up rather well. Accordia Golf Trust is, after all, the only one of the three that does not hedge currency risk and we must rightly expect DPU to reduce in S$ terms, therefore.

If we expect the DPU to reduce proportionally, we might see a revised full year DPU of 5.91c. Buying more at 71c to 72c a unit today means a distribution yield of 8.2% to 8.32%. If we need a minimum yield of 8% to make the investment worthwhile for us, then, based on the current weaker exchange rate, all else remaining equal, we should be able to accept a unit price of up to 74c or so. Coincidentally, this was the entry price of my current long position too.

Further weakness in the JPY cannot be discounted but I have made a case before on why I think the JPY's biggest declines are probably behind us. Getting into Accordia Golf Trust at its IPO was a bad idea for various reasons. At current prices, I believe that the business trust presents a decent enough investment for the income investor.

See an article in NextInsight on Accordia Golf Trust: here.

Related posts:
1. Accordia Golf Trust: Yield of 12.16%?
2. Croesus Retail Trust: ONE's MALL.
3. Saizen REIT: Deeply undervalued.