Which HDB flat to buy?

Reader says:

I have read your posts and have been following you for quite some time. 

Have been reading your posts on purchasing properties and following up on the replies. Really interesting :) 

I would like to seek your advice for choosing a HDB flat. Hope you don’t mind helping me out.





I want to buy a flat that is more accessible and convenient, closer to the central region. 

I plan to sell the unit after 5 years of stay when my financial is ready for an upgrade. 

However the flats in the estate I am interested in are older. 

My agent keeps telling me NE region is newer and have more potential.






I really like the 20 year old resale flat which is closer to town but for the same price, I can get a 5 year old flat in NE Singapore.

I feel that the flat in NE is not so convenient even with the LRT lines and bus service there. 

It is still quite a distance away from central area.

For the amount of money I can afford I know I can’t get both new and centralised HDB flat, 鱼和熊掌不可兼得.. Please teach me how to 取舍..





AK says:

If you are buying a home to stay for the rest of your life, an older flat which has more than 70 years left to the lease is OK.

If you are thinking of selling the flat a few years down the road, an older flat could have issues especially now that more people are aware of what a shorter lease means.

You decide. ;)






Related posts:
1. HDB flat is 37 years old...
2. Buying a 99 years LH property?
3. Buy resale flat or new BTO flat?
Which one would AK choose?

A great crash is coming and I am ready (UPDATED).

Reader says...
Grateful if you could please talk to yourself on what are criteria for stock selection when buying stocks using my CPF OA?

Given that cpf money is sacrosanct, naturally we have to be more selective and careful.

Grateful for your self talk please?







AK says...

CPF-OA money? 

It is quite simple. 

I wait for a market crash. ;)







Is a market crash coming soon? 

Your guess is as good as mine.

I cannot predict a crash. 

I can only prepare for one.

WAH!!!

Say:

"I am ready for a great crash."

How to have peace of mind as investors?
I explained how the CPF-OA money should be the last war chest we use because it earns 2.5% per annum in interest, risk free.





I also said many times before not to borrow money for investments.

The reason is simple.

We don't want to be caught in a situation where we might have to liquidate our investments at times and prices not of our own choosing.

If a market crash happens, we would be glad we did not borrow any money to invest with.

There is no free lunch in this world.

Banks (and brokerages) are fair weather friends.






Related posts:
1. Simple investment wisdom.
2. Holistic approach.
A bird in hand is worth two in the bushes (provided that they are of the same size). If AK says so, it must be so.

Vote for or against selling Croesus Retail Trust?

Some might remember that the money I used to invest in Croesus Retail Trust was mostly from selling 90% of my investment in Sabana REIT a few years ago.

Since my investment in Sabana REIT was as big as my investment in AIMS AMP Capital Industrial REIT, the amount of money involved was pretty big for an average retail investor.

For those who have been following my moves over the years, they would know that I got into Sabana REIT at depressed prices, collected dividends over a 3 year period and sold as its unit price retreated from a high on the back of various red flags. 

Off the top of my head, I probably made about 13% per annum from my investment in Sabana REIT, all in.

Getting into Croesus Retail Trust after its price retreated significantly from its post IPO euqhoria and also by taking advantage of the rights issues later, I am probably looking at a total return of between 70% to 100% for the investments made at different times. 

On an annual basis, if I were to accept the offer of $1.17 a unit, the return on investment is probably between 17% to 60% per year. 






OK, please note that all numbers are off the top of my head and are only approximately right.

Now, quite understandably, not everyone is happy with the offer to take over Croesus Retail Trust at $1.17 a unit. We would be losing a good investment for income, after all.

A few readers wrote to me, asking if I would vote against the sale and a couple of readers also asked that I mobilize my army of readers to vote against the sale.

 ------------

------------

Alamak. AK is just another retail investor. AK is no king maker. So stressful.

Seriously, I will not ask anyone to vote for or against the sale but I will share a few points to put things in perspective.

1. With a DPU of about 8c, at 85c a unit, we were looking at a yield of 9.4%. At $1.17, we are looking at 6.8%. Yield has compressed by quite a fair bit.

2. Gearing is almost 50%, if I remember correctly. So, much of the yield we see is leveraged yield. If we should reduce leverage and that is possible through equity fund raising, distribution yield would drop. That makes for a fairer comparison against some retail S-REITs which have less than 40% in gearing.






3. It is not useful to say that $1.17 is X% higher than its price from X months ago. We should be interested in value. $1.17 is about 20% higher than the NAV per unit. 

Now, if we remember, Saizen REIT was bought over at a premium of about 3% above NAV and that was when I thought Saizen REIT's properties were probably worth more than what was carried in the books too. Also, remember, Saizen REIT's gearing was much lower than 50%.

4. It is true that even a compressed distribution yield of 6.8% is higher than comparable J-REITs' yields but we have to remember that the rules governing J-REITs are different which was an important reason why Croesus Retail Trust decided to list in Singapore. If they were to list in Japan, their DPU and, consequently, their distribution yield would have been lower.






Unfortunately, investors of Saizen REIT grew weary of waiting for value to be unlocked and agreed to its sale of assets. 

What about investors of Croesus Retail Trust? Obviously, many have a different attitude and are more willing to wait for a better offer, if any. Of course, being paid while waiting is not a bad deal.

This is interesting to me because Saizen REIT was a big investment for me and Croesus Retail Trust is a big investment for me too. I wonder.

Related post:
History with CRT and current thoughts.
"I like what I see. So, I stay invested."

2Q 2017 passive income from non-REITs.

After my blog on 2Q 2017 passive income from S-REITs, of course, it has to be a blog on 2Q 2017 passive income from non-REITs.

Well, 2Q 2017 was also pretty quiet for me in the non-REIT space as I also pretty much kept the status quo here.

Total income received from non-REITs in 2Q 2017 was:

$52,045.09


If we were to include dividends from 1Q 2017 which saw a total collection of $13,543.31, total dividend received in 1H 2017 is 

$65,588.40


The portfolio saw a rather significant reduction in contribution by SPH since I trimmed that investment by 50%.





However, contributions from the enlarged investment in QAF as well as dividends received from a pretty significant investment in Centurion more than made up for this.

I must also mention that the quarter's dividend income received a big boost from Hock Lian Seng which declared a generous special dividend.

This is unlikely to be repeated anytime soon. So, everything being equal, I would expect lower dividend income in 2018.

Of course, everything is probably not going to remain equal.

Last quarter, Croesus Retail Trust was the biggest non-REIT income contributor. Accordia Golf Trust is the biggest contributor this quarter.

With Croesus Retail Trust being one of my biggest investments and likely to go the same way as Saizen REIT, future passive income from non-REITs would naturally take another hit.

The upside is that I will be receiving many years of "income distributions" in advance and the cash position in my portfolio will see a big increase.

I would probably have to sit on more cash for the foreseeable future.

"It takes character to sit with all that cash and to do nothing."
- Charlie Munger

My seat is likely to be quite cushy.

Related post:
1Q 2017 passive income from non-REITs.