Me & My Money Series (Sunday Times)

[KopiKat]

see. why invest in stocks when everyone gets rich through property.

Sorry, but everyone makes it sound way too easy. I guess I tend to be a skeptic.

For me so far, equities are a "slow but steady" method of getting rich. No complaints if you are not in a hurry.

I quickly put in all the figures in a spreadsheet and got the following Gross Profit / year for his properties,

HDB : 20%
Condo : 8%
Apartment : 3%
Terrace : 9.1%
Kovan Melody : 13.9%

The Nett Profit / year would be a lot lower as there will be different type of expenses incurred. But, if they'd employed leverage and have rental income, it may be enough to cover the expenses and the returns will be higher (also lower base - Capital outlay).

Still, except for the HDB flat, the returns don't appear very fantastic to me. I didn't consider the last 2 properties as it's based on a valuation figure (as they are staying there) and may not be realisable.

IMO, Stocks Investments are a lot more "difficult" (that's probably why we don't see a lot of success stories in Sunday Times, but rather, those who'd been profiled usually made money from properties but loses in stocks) as you have to put in a lot more time and effort (as compared to properties). But, it can be a lot more rewarding (see Warren Buffett - he doesn't invest in properties). Thus far, I'm getting good returns from stocks (even though my investing ability is nowhere near that of many in this forum) and I don't see myself going into properties in the near future. Instead, I'd focus on improving my stocks 'kung-fu' and try to improve my % returns.

[yeokiwi]

see. why invest in stocks when everyone gets rich through property.

Sorry, but everyone makes it sound way too easy. I guess I tend to be a skeptic.

For me so far, equities are a "slow but steady" method of getting rich. No complaints if you are not in a hurry.

I do not mind to take a short cut if the risk-reward ratio is low.
But I think Mr Roger Yuen is a rather prudent person. His last property purchase was in 2005, a condo at Kovan Melody.

[Musicwhiz]

IMO, Stocks Investments are a lot more "difficult" (that's probably why we don't see a lot of success stories in Sunday Times, but rather, those who'd been profiled usually made money from properties but loses in stocks) as you have to put in a lot more time and effort (as compared to properties).

Hi KopiKat,

I don't necessarily agree that you have to put in a lot more time and effort into equities as compared to property. After all, property is a physical asset and therefore you would need to thoroughly inspect the asset before committing to a purchase. This is unlike equities which are "scrip-less" and the analysis is done by studying the business model, financial statements and Management quality. Although it does pay to visit the Company's premises before a purchase is made and also speak to the Management, this is usually far less tedious than say, looking at 20 different properties' showflats and talking to sales agents. Let's not also forget that one has to flip through a lot of news and review transacted prices for sub-sales transactions to get a "feel" of whether a property purchase is of value for consideration.

All the above constitute the necessary homework for a property purchase, and I haven't even included the leverage portion which requires talking to (perhaps) a mortgage broker and a host of many banks to compare rates to see which are the most competitive.

So I would think investing in equities (which usually does not require leverage) involves a lot less hassle than properties.

[jamzc]

see. why invest in stocks when everyone gets rich through property.

Sorry, but everyone makes it sound way too easy. I guess I tend to be a skeptic.

For me so far, equities are a "slow but steady" method of getting rich. No complaints if you are not in a hurry.

I quickly put in all the figures in a spreadsheet and got the following Gross Profit / year for his properties,

HDB : 20%
Condo : 8%
Apartment : 3%
Terrace : 9.1%
Kovan Melody : 13.9%

The Nett Profit / year would be a lot lower as there will be different type of expenses incurred. But, if they'd employed leverage and have rental income, it may be enough to cover the expenses and the returns will be higher (also lower base - Capital outlay).

Still, except for the HDB flat, the returns don't appear very fantastic to me. I didn't consider the last 2 properties as it's based on a valuation figure (as they are staying there) and may not be realisable.

IMO, Stocks Investments are a lot more "difficult" (that's probably why we don't see a lot of success stories in Sunday Times, but rather, those who'd been profiled usually made money from properties but loses in stocks) as you have to put in a lot more time and effort (as compared to properties). But, it can be a lot more rewarding (see Warren Buffett - he doesn't invest in properties). Thus far, I'm getting good returns from stocks (even though my investing ability is nowhere near that of many in this forum) and I don't see myself going into properties in the near future. Instead, I'd focus on improving my stocks 'kung-fu' and try to improve my % returns.

His ROC is likely to be way higher. the reason why property investors appear so wildly successful is mostly tied to both the climate, as well as the inherently leveraged nature of the investment. %tage absolute return may appear so so, but a 1% return on 1 million is still 100k. and if you consider that the 100k is made on a 200k downpayment, then the returns are substantial. (minus off interest, transaction costs etc of course)

stock investment isnt more or less difficult in terms of % returns. but in terms of absolute returns, it would be quite a diff story. your typical margin account doesnt give more than 1.4 times leverage or so. Property is 5x leverage.

[KopiKat]

His ROC is likely to be way higher. the reason why property investors appear so wildly successful is mostly tied to both the climate, as well as the inherently leveraged nature of the investment. %tage absolute return may appear so so, but a 1% return on 1 million is still 100k. and if you consider that the 100k is made on a 200k downpayment, then the returns are substantial. (minus off interest, transaction costs etc of course)

stock investment isnt more or less difficult in terms of % returns. but in terms of absolute returns, it would be quite a diff story. your typical margin account doesnt give more than 1.4 times leverage or so. Property is 5x leverage.

Let's look at the figures again. Using your example, a $1Mil property using 80% financing ie. $200k Capital is sold for a $100k Gross Profit.

At 1st glance, the returns seems fantastic with a 50% ROC. But, let's not forget about Stamp Duties, which'll eat up a sizeable chunk of this profit. Way back, I paid 3% for Stamp Duties and ~0.4% for other Legal fees (but it may be lower now that they'd liberalise the Legal Profession's pricing structure) for my home.

So, in the worst case, for a 2-way (buy and sell) transaction, you'll incur 6.8% expenses.The $100k Gross Profit reduces to $32k ie. 50% profit drops to 16%. With the new anti-speculation measure in place, I guess we may have to hold for at least 3 years (?) or the usual bank clause for no penalty for early Capital Repayment. The profit reduces substantially to 5.13% p.a. If you hold for 5 years, this drop to 3.2% p.a. Not so attractive now, eh?

The returns can be improved if you are renting out the property, but the extra Nett Rental Yield is likely to be in the region of <5% after factoring in all the additional expenses (Maintenace, Renovations, Property Tax, Income Tax, Agent Fee, Legal Fees, ...). In the meantime, you may also experience negative cash-flow (the mortgage payment also includes Principal Repayment).

IMO, not worth the hassles when I can easily get 6-10% Dividend Yield from REITs (if I want exposure in Property Assets) and with active management, another 2-3% Capital Gains. Once a while, when Mr Market goes into manic depression, I can also get additonal ones at a good discount for additonal profits when market recovers.

Addendum : I went to check IRAS site. The anti-speculation measure is for 4 years (16% - <1yr, 12% - 1-2yr, 8% - 2-3yr, 4% - 3-4yr) . The Stamp Duty for a $1Mil property is $24,600 or around 2.5% (lower than the 3% of my above estimates).

http://www.iras.gov.sg/irasHome/page.aspx?id=1832

[KopiKat]

IMO, Stocks Investments are a lot more "difficult" (that's probably why we don't see a lot of success stories in Sunday Times, but rather, those who'd been profiled usually made money from properties but loses in stocks) as you have to put in a lot more time and effort (as compared to properties).

Hi KopiKat,

I don't necessarily agree that you have to put in a lot more time and effort into equities as compared to property. After all, property is a physical asset and therefore you would need to thoroughly inspect the asset before committing to a purchase. This is unlike equities which are "scrip-less" and the analysis is done by studying the business model, financial statements and Management quality. Although it does pay to visit the Company's premises before a purchase is made and also speak to the Management, this is usually far less tedious than say, looking at 20 different properties' showflats and talking to sales agents. Let's not also forget that one has to flip through a lot of news and review transacted prices for sub-sales transactions to get a "feel" of whether a property purchase is of value for consideration.

All the above constitute the necessary homework for a property purchase, and I haven't even included the leverage portion which requires talking to (perhaps) a mortgage broker and a host of many banks to compare rates to see which are the most competitive.

So I would think investing in equities (which usually does not require leverage) involves a lot less hassle than properties.

Hi Musicwhiz,

You are an accountant by training and practice, so naturally, analysing Financial Statements is not a lot of hassle.

Contrast this to someone like me.

When I first started, the moment I looked at the Financial Statements of a stock, I start to feel fear and panic! Why? During my study days, I had to do Financial Accounting as a compulsory subject on two occasions. I think it was meant to equip us with some financial knowledge but the exams always involve having to balance the figures and yes, mine usually don't balance!

After overcoming this fear and panic stage, my eyes usually turn bleary. So many figures and don't know what to look out for! It was only after years of working where I had to do some simple budgetting and other financial reports for my department that I start to appreciate some of these figures. Also, with the intenet, it became easier to educate myself on financial analysis.

I can assure you there are many people out there who're like me. Many have not taken the first step to learn how to analyse stocks and think it's either 'black magic' or a form of gambling. Yet, these same people are able to easily pick up knowledge in Property Investments.

So, that's why I say stocks require a lot more time and effort.

[koh_52]

I do not mind to take a short cut if the risk-reward ratio is low.
But I think Mr Roger Yuen is a rather prudent person. His last property purchase was in 2005, a condo at Kovan Melody.

Yeo san,
You may have to wait till 2013/14 for low risk/reward ratio or so called good margin of safety, but no guaranteed.
I only can see good chances of HDB over supply in next 3 yrs, however I doubt private ppty will crash or in deep correction, in the next 2 yrs.

Btw, just heard fron news, Thomson Grand was sold at $1600 PSF for bigger size unit and not shoe-box unit, despite the 16% SSD ppty is still hot....another news just heard from my neighbour few hrs ago his son had bought a HDB Executive mais directly below mine at a record price for my block of $620K,near Hougang area his COV is $70k....well, well, well..how to dun make money from property the way it go......
I dun believe my eye, just saw the ura caveat....A 40yrs old Studio 409 sq ft at People Park Complex sold for 530K, in 2003 the same unit was only 160k...location is still the essence.
i
Those make good money in ppty are those who entered the market in 2003 like me and stop buying in 2005...for me i carry-on to invest n divest. In 2007 sold and in July 2009 buy...Dip in again in 2010, due to QE2...2011 still on buying mode but stop here by year end, thereafter should be planning for 'divest' mode.

Many whose missed the boat now hoping KBW will sail the boat back to shore for them to board...will this happen...only printing of fiat paper money completely halt and interest rate hike begin.....For sure there will be another crisis at some part of the world, when and where, nobody know....if u have patience just wait and build up your opportunity fund, but remember dun missed the boat.

My motto ' Wealth Protection is as important as Wealth Creation"

[Musicwhiz]

Seems this guy is leveraging on his parent's "empire", rather than starting from scratch and building his own? that's my impression. And why can't ST find some local people to interview, instead of interviewing a super-rich foreigner from Dubai? Run out of local entrepreneurs who got wealthy?

Jul 17, 2011
me & my money
Travel agency owner is going places
He is looking into setting up overseas offices and opening a shisha outlet
By Lorna Tan, Senior Correspondent

Mr Mohammad Fayyaz Buwt knew he wanted to be an entrepreneur since he was young. Growing up, he watched his father and the elder of his two brothers run the family carpet business, and helped out in the family's retail outlets in Dubai and Singapore during school vacations. A Pakistani, Mr Buwt, 24, was born and brought up in Dubai.

After his A levels in 2005, he came to Singapore about a year later to pursue his tertiary education. His younger brother was already here since 1996 when their father set up Handmade Carpet Gallery at Tudor Court in Tanglin Road. In 2009, he obtained a Bachelor of Science degree in banking and finance from SIM-University of London.

Although Mr Buwt had a choice to continue in the family's business, he decided to start boutique travel firm Fayyaz Travels, named after his father, in September last year. He and his younger brother, together with their father, invested an initial sum of $100,000 in the venture. With no prior experience, he had to start from scratch learning how to handle the complicated travel reservations systems.

Now, Fayyaz Travels offers everything from flights and hotels to tours and cruises. 'We specialise in travel design where we design the whole trip according to the clients' interests, likes and expectations, ensuring complete satisfaction,' said Mr Buwt.

Besides his business, he helps to look after his family's extensive property portfolio, which includes a factory in Dubai and two bungalows in Pakistan.

Q: Are you a spender or saver?

Currently, I'm more of a spender as I am single, and also because I am looking to expand my business. I don't save a fixed amount every month but I do try and put aside some extra cash. I do believe that one should save as life is unpredictable. In the last two years, I started noting down all my expenses.

Q: How much do you charge to your credit cards every month?

I have a credit card only for my company expenses. I charge about $7,000 to $11,000 a month. I do not believe in credit and pay off all my dues on time. I try to spend only the money that I have. I also have a debit card for my personal expenses. I withdraw more than $2,000 a month for food and entertainment. I love gadgets like mobile phones and iPads.

Q: What financial planning have you done for yourself?

I have a hospitalisation plan and critical illness insurance of about $400,000 as my family has a history of heart and kidney diseases.

At the moment I am focusing on my business, expanding it to related areas like inbound tours and corporate customers. I am also looking into the feasibility of setting up overseas offices. Of the initial investment of $100,000 into Fayyaz Travels, half came from my father while the other half came from my younger brother and me.

I consider myself a conservative investor as I will take into consideration all opportunities and do the necessary research before making my decision. I plan to invest in stocks at a later stage. My family's investment portfolio comprises stocks and forex.

I'm looking into setting up a shisha (Turkish smoking) outlet with two friends. It is a healthier option than smoking cigarettes.

Q: Moneywise, what were your growing-up years like?

I have three sisters and two brothers. I am the fifth child in my family. My father has lots of experience in his family business of manufacturing handmade carpets. He helped my grandfather in the business in Pakistan before expanding into carpet retailing in Dubai in 1974 and in Singapore in 1996.

My mother is a housewife who controls the household finances. I was blessed with a loving family and enjoyed a comfortable childhood. We lived in a 2,500 sq ft, three-bedroom condo in Dubai. Our parents did not spoil us. I was never really given any pocket money by my parents as a child. They managed our spending until they thought we were mature enough to understand the value of money.

My elder brother is in the family business and my younger brother just graduated with an aerospace engineering degree in Dubai. Two of my sisters are in Dubai while one is in London.

Q: How did you get interested in investing?

My father has always told us that land is for keeps and it is an asset that only increases in value over time. My family has always been investing, but I first made a joint family decision to invest in an apartment in Dubai, which was of course with family money as I was 21 then.

Q: What property do you own?

I don't own any property in Singapore. My family has a portfolio of property investments which include a four-storey factory in Dubai, two bungalows in Pakistan and three parcels of land in Pakistan.

Q: What's the most extravagant thing you have bought?

I guess for personal use, it would be watches. I love watches as they are jewellery for men and I believe they are for life, or that's what I tell myself when I buy them. Two years ago, I bought a Cerruti watch on my birthday for about $900. I also own a Tag Heuer, an Armani and a Nautica. Together, they cost me $10,000.

Q: What's your retirement plan?

I do not have any plans to retire any time soon as I just started working. Besides, my father, who is 73, is still active. He still makes it a point to visit his offices in Dubai and Singapore. I really love what I do now. Keeping a lookout for other businesses to venture into is also in the pipeline for me. I aim to generate different streams of passive income from different businesses by the time I'm 40.

Q: Home is now....

Home is a 3,200 sq ft, four-bedroom apartment in the Orchard Road area which my family is renting for about $10,000 a month.

Q: I drive....

A black Mercedes E200.

lorna@sph.com.sg

Quest for more businesses

'Keeping a lookout for other businesses to venture into is also in the pipeline for me. I aim to generate different streams of passive income from different businesses by the time I'm 40.'

Mr Mohammad Fayyaz Buwt, who runs Fayyaz Travels. He had always wanted to be an entrepreneur so instead of continuing in his family's carpet business, he decided to start a boutique travel firm.

-------------------------------------------------------
WORST AND BEST BETS

Q: What has been your worst investment to date?

That would be the first property investment decision I made on behalf of my family.

We paid $2.6 million for a one-bedroom condo in downtown Dubai, near the Burj Dubai (renamed as Burj Khalifa). It qualified as the worst decision as we had paid for it just before the 2009 global financial recession.

The property's value plunged 60 per cent in two months.

However, I managed to trade it in for two freehold apartments at a higher combined value of $2.8 million, 18 months later. One is a one-bedroom, 800 sq ft unit and the other unit is 1,900 sq ft and has two bedrooms. My family is occupying one of them and we plan to rent out the other.

Q: And your best?

That would be my travel business. It has been only nine months and we are already looking to break even soon by the end of this year.

We try to stand out from other travel agencies by customising everything for clients based on their budgets and preferences.

We've introduced trekking, helicopter rides, jungle stays, horse riding and private sea planes. We started with outbound tours and we're now expecting inbound customers from India and Russia.

[mottainai]

I'm looking into setting up a shisha (Turkish smoking) outlet with two friends. It is a healthier option than smoking cigarettes.

Smoking shisha is healthier than cigarette smoking??? Who is he kidding?

[Musicwhiz]

Wow, didn't know Navy people spend so much, haha! $200,000 on a sports car is really very extravagant, considering the money could have been compounded through investments in equities or perhaps property. The gains from property through leverage are not considered high, as the property purchase was shared with someone else. I feel it is more important to be mindful of spending, and only spend on appreciating assets instead of depreciating assets.

Jul 24, 2011
me & my money
Ex-Navy man sets sail for charity work too
More than 3,000 underprivileged kids have received help from his aid group
By Lorna Tan, Senior Correspondent

Former naval officer Terence Quek enjoyed his stint in the Navy's corporate communications department so much that he decided to set up his own firm focusing in that area.

In 2006, he co-founded strategic communications consultancy firm Caelan & Sage with a friend, Ms Deborah Chew, 35.

This was a year before Mr Quek, 36, left the Navy after having spent 13 years there. He joined Caelan & Sage full-time in 2007. That year, the firm managed events such as tennis player Maria Sharapova Live here, among other projects.

In 2008, he set up visual communications firm Thinking Designs with Ms Chew, who used to manage executive programmes, and Mr Mark Lim, 33, a former creative head at an IT firm. And last month, he and Ms Chew set up communications training firm Right Impact Training.

Besides his business, Mr Quek's investment portfolio comprises unit trusts, shares and insurance. Having bought and sold two condominium units in the recent past, he is on a constant lookout for investment properties.

He also wants to give back to society: In 2008, Caelan & Sage set up Project Happy Feet, which supports the education of underprivileged children in developing countries. In 2009, Project Happy Feet was registered as a public company.

It has raised more than $180,000 to date and supported more than 3,000 children here and in Vietnam and Cambodia. Those interested to find out more of its inaugural Project Happy Feet Slipper Race in November can check out www.projecthappyfeet.org.

While in the Navy, Mr Quek trained as a naval officer in Britannia Royal Naval College in Dartmouth, Britain, as part of a military training award. In 1996, he returned to Britain under an academic training award. He graduated with a Bachelor of Science degree in psychology from University of Sheffield, Britain in 1999. He is single.

Q: Are you a spender or saver?

I used to be a big spender when I was in the Navy. I didn't think very much about savings, and had a high-risk appetite when it came to investing in stocks and shares. I had bought and sold two condominiums, but had also lost about $100,000 in investing in start-up businesses and shares. After I left the Navy in 2007, I took a different approach to money. Now, I would save at least half of what I make, and am more prudent with investing.

Q: How much do you charge to your credit cards every month?

I have three credit cards and charge about $2,000 a month to them. I would always pay off the bills before the interest kicks in. I draw about $1,000 each month from the ATM.

Q: What financial planning have you done for yourself?

I have about $100,000 invested in shares in companies such as Koh Brothers and Low Kian Huat. Since 2003, my parents have been managing my stock portfolio on my behalf. To help them in their selection criteria, they read newspapers, analysts' reports and annual reports.

I also have another $150,000 invested in unit trusts, of which $120,000 is invested via four investment-linked insurance plans. Some of the funds include DBS Shenton Global Opportunities fund, Henderson European Property Securities fund and First State Regional China fund.

I also own a health plan, an endowment plan, two whole life plans and two accident plans. My life cover is about $350,000. In addition, I have some equity in a material trading firm and a fitness and sports performance firm.

Q: Moneywise, what were your growing-up years like?

I come from a family of four and I have a younger sister. My father used to be a quality and safety manager in an American oil company, while my mother helped out with her father's garment business every now and then. My parents have always advocated thriftiness although both have been avid investors in stocks and shares till this very day. My parents are very generous people when it comes to friends and family, and that is where I also learnt that while money is important, relationships are even more so. For instance, I recall that my mother would cook for friends during mahjong games. We used to live in a four-room HDB flat in Telok Blangah.

Q: How did you get interested in investing?

I became interested in investing when I was in the late 20s. My parents and friends were all buying and selling on the stock market. However, my first significant investment was actually a property. I didn't have sufficient cash for the down payment but I had enough savings in my Central Provident Fund. So I combined my resources with a friend and bought my first property at Caribbean at Keppel Bay in 2004. When the property market improved, we sold it off, and made a small fortune.

Q: What property do you own?

In 2004, I bought a 1,281 sq ft unit at Caribbean at Keppel Bay with a friend for $860,000. We sold it two years later for $1.1 million. It was rented out at $3,400 a month.

I just sold off my second property - also a joint purchase with another friend - of a 905 sq ft unit at Domain 21 at Delta Road for about $1.2 million. We bought it in 2009 for $1.05 million and were renting it out at about $3,000 a month. I'm currently looking for my next property and am considering investing in Bangkok and Vietnam.

Q: What's the most extravagant thing you have bought?

It's got to be my black A4 Audi convertible which I bought when I was 29 and foolish. It was bought in 2004 for $199,000. I sold it off about three months ago for $57,000. It set me back by about $200,000 after accounting for interest paid. I could have invested in another property with the money.

Q: What's your retirement plan?

I don't think I'll really retire because I know I'll get bored not challenging myself. I aim to be financially independent by 42. I think I'll be quite comfortable with $2,500 a month, and about $15,000 a year for travel and leisure. I also plan to put in more time and energy into Project Happy Feet, a not-for-profit organisation I helped set up. Of course, plans may change when I get married.

Q: Home is now...

A four-room HDB flat, also at Telok Blangah, which my parents bought 10 years ago for $220,000. It's not the Telok Blangah flat I grew up in.

Q: I drive...

I take the bus, MRT and taxi or get chauffeured by my colleagues, or drive my family's silver Toyota Corolla.

lorna@sph.com.sg

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WORST AND BEST BETS

Q: What has been your worst investment to date?

In 2007, I invested about $100,000 in a start-up textile supplier business here. In less than a month, my business partner's father absconded with the money. I learnt that I would be better off investing in my own firm because I would have more control. I also learnt to be less hasty when making investment decisions.

Q: And your best?

My investment in Caelan & Sage. Not only did I not put in a single cent, but also the company has grown exponentially over four years. We're looking at crossing the million-dollar revenue mark this year and we are in the midst of conducting due diligence in preparation for a merger with a high-performing local company.