HDB Home Value Will Not Go Down

After contemplating on the option to buy a 2nd property or invest in real estate investment trust (REITs), I have more or less come to a conclusion that investing in REITs is perhaps the more viable option for me now. And that is the reason that I bought some AIMSAMP REITs into my portfolio recently.

I was also heartened to read the news today where Minister Mentor Lee Kuan Yew opined that since 85% of Singaporeans lived in HDB flats, the government would strive to make HDB homes the most valuable possession they own. In his words:

"85% of Singaporeans are living in HDB flats and we intend to keep the values of these homes up. It will never go down."

This was spoken as the MP for Tanjong Pagar GRC announced the 5 year master plan for Tanjong Pagar which includes upgrading programmes. Since I live in a HDB flat, I am glad that the government is committed to making the value of my home rise. In fact, I am glad that I am an owner of a HDB flat as I have witnessed the value of my home increase significantly over the years.

Bought AIMSAMP REIT

Just entered into AIMSAMP REIT. It is a REIT that nearly went bankrupt during the financial crisis. After asking for some advice on whether to buy a 2nd property or just invest in REITs, I think I pretty much know the answer.

I don't earn enough and have enough savings to buy a 2nd property just yet. Thus, the only option is for me to invest through a real estate investment trust (REIT). The benefit of investing in REITs instead of a direct property investment is that I do not need to invest a large sum of money and I also do not need to take on additional debt which banks will not lend to me (since I earn too little).

Buy a 2nd Property or Buy REITs?

Should one buy a 2nd property or invest in Real Estate Investment Trusts? I have been thinking about this for sometime. The minimum occupation period for my HDB flat is almost up. That means that I can actually sell my flat in the open market pretty soon. At the same time, I really love the place where I am staying at now. So it is going to be a tough decision.

The remaining mortgage on the HDB flat is now $238,000. Market value based on a similar size flat sold at the opposite block is estimated at $600,000. Bought the flat for slightly over $300,000. Currently monthly mortgage loan is $1096. Right now, I have been thinking about the following few options. Family's gross monthly income is around $5600 (really average!).

Option 1 - Sell the HDB and Buy a Private Property

This will mean selling the HDB flat, giving it up and buying a new private property. It is going to be difficult as I will have to buy a private property that is less than $1mil I guess. If I can only take 35% loan based on family's gross monthly salary, that means the maximum monthly mortgage loan that we afford is around $1900+. As we are still paying for the car we bought, it probably means that we can only afford a mortgage loan of around $1,400. I don't think the banks will be willing to land us to much. I figure that means we can only borrow around $350k (pls correct me if I am wrong). Selling the HDB and buying a private property also means that this does not count as my 2nd property and I am not obligated to set aside the 50% minimum sum in both my wife's and my CPF account. We can probably use the gains from selling the HDB to pay for the private property.

End of the day: I am probably saddled with more debt but have effectively upgraded to a more expensive property. There will be less money to spend as I have to pay more each month for mortgage.

Option 2 - Keep HDB flat, Buy a Private Property to rent out.

This is option 2 which I have been thinking about and which I am leaning towards. But it seems almost impossible to do this. This is because of the following reasons:

1. No money in CPF-OA to pay for it. Will have to use all cash to pay for the downpayment. Even if all assets (stocks + bank accounts) are liquidated, I figure that we only have slightly over $220k. Not too sure how much the bank will actually lend us for the 2nd property but I guess it is around 60-70%.

2. Will also have to rely on cash to pay for the monthly mortgage. That is impossible considering that existing HDB loan is already $1096. It means I can only get around $800 per month more in mortgage loan. Will also have to repay off the car loan so that I can borrow the $800 per month more in mortgage loan for the 2nd property. That leaves very little options for me as I won't be able to find such a cheap property that only costs $800 per month!

Option 3 - Keep HDB and Buy REITs.

REITs are easily liquidated. I also collect dividends. This seems to be a very feasible option with little downside.

Option 4 - Sell HDB and Buy 2 Pte Property

Lately, I came across this strategy which advised to sell 1 property and buy 2 properties. In this manner, you can rent out 1 and stay in the other. Not too sure whether this strategy will work at all cos it will probably mean that I have to buy 2 really small pte property.

Wise folks out there. Any advice on all the options???

Recycling in Singapore

In Singapore, recycling takes on a different form. Having been overseas before, I have always been impressed with their efforts at recycling. Well, in Singapore, there are recycling bins around. But I don't really think that has been particularly effective as I have witnessed many times people actually "looting" these recycling bins for their own personal gains. I guess they must have sold the drink bottles and cans to the recycling companies directly to earn some extra cash.

Anyway, I heard the karang guni man as he came over to my block today. There are lots of these karang guni man plying their trade at my block and it seems that they are coming almost everyday. The karang guni man is basically a person who works for one of these small recycling companies that collects old newspapers, electronics, and whatever you can think of. Anyway, I wrote about the karang guni man sometime back. I guess those people who stay in private apartments or condominiums in Singapore perhaps never get a chance to meet one.

Today, I sold 5 kg of newspapers to the karang guni man. That earned me a small tidy sum of 50 cents. Not bad I must say.

Just doing my part for recycling and I get to earn money at the same time. But there is a question that I have. If the recycling man pays me 10cents for 1 kg of old newspapers, I wonder how much he actually earns from re-selling it. Anybody knows?

Japan Earthquake and Tsunami

Read and watched the news last night. It was actually quite frightening to see the impact of the earthquake and the tsunami. It wasn't too long ago that the last tsunami stroke. That was boxing day in 2004. Only 6-7 years have passed and another tsunami has occurred. Watching the videos on BBC, CNN and CNA just gave a deja vu feeling. It also felt almost like the end of the world kind of feeling. As we often read in the Bible:

"When you hear of wars and rumours of wars, do not be alarmed. Such thing must happen, but the end is still to come. Nation will rise against nation, and kingdom against kingdom. There will be earthquakes in various places, and famines. These are the beginning of birth pains."

It really makes me thankful that we live in a safe place like Singapore. Where there are no earthquakes, and we do not face the threat of tsunamis.

Dividends for March 2011

Received dividends from a few of the REITs that I have been holding. Total amount of dividends collected adds up to $278. Not really a lot. But guess it is better than nothing.

Have been pretty weary the past few weeks. Running about and busying myself with things that do not really matter. But they still need to be done. Weekends always seem to come and go so fast. And then the new week comes. Hardly feel rested at all.

Week after week just seems to pass and it does not seem that much has been accomplished. Already, we are into the 3rd month of 2011 but I don't really have a clearer picture of where I am actually headed in life. It is really just living day by day and week by week.

Old Book from Ebay by James R Rutland

This is a picture of the book (that I bought off Ebay) as requested by one of my readers (LP) . This book really looks like any other ordinary book out there. I am pretty sure an online version exists since the copyright most probably has ceased.

Anyway, it is just cool to know that I am holding a book that is out of print. Using eBay to carry out my transactions is also something that I am pretty comfortable with since I have bought quite a number of items using eBay and so far, all the items have been shipped and are always in good order.