Which investment method yields higher?

[phantom_opera]

just when u think the whole world is destined for inflation ... there is such thing called Black Swan

just be prepared

[DKSG]

just when u think the whole world is destined for inflation ... there is such thing called Black Swan

just be prepared

Phantom knows something?

Share leh ...

I thought most people assume that the Black Swan has been slaughterd by Yong Keh in HK. Haha!

DKSG

[newbie11]

U mean yong Kee?

[DKSG]

U mean yong Kee?

Yea! Looks like N11 is indeed more of a foodie than property guy! Haha!

DKSG

[princess_morbucks]

I read an article on reits which I find informative.

http://www.milliondollarjourney.com/...ning-reits.htm

One part of the article states:
"Even if the REIT is strong, a weak market can irrationally decimate share prices (see crash of 2008) thus potentially reducing portfolio value."

Some questions:
If the reit is strong, will the dividend be lower?
Who decides on the dividend and usually how much is it?

Has any strong reit become worthless before?

[samuelk]

watching this movie makes me think when the market is flooded, everyone going to start to speak this way

http://www.youtube.com/watch?v=vBeLtlqE1tI

[princess_morbucks]

watching this movie makes me think when the market is flooded, everyone going to start to speak this way

http://www.youtube.com/watch?v=vBeLtlqE1tI

Wow. Thanks.
Will watch it when I get home.
From the reviews, it sounds good.

[roly8]

watching this movie makes me think when the market is flooded, everyone going to start to speak this way

http://www.youtube.com/watch?v=vBeLtlqE1tI

thx for sharing! look like an excellent movie to watch!

[Santro]

Sis one more factor to include here.. property agent commission for renting out and property maintenance/repairs every few years.

Assume 1 mil property’ rental is around 3.5K (either OCR 2 bedder or CCR MM) and a particular REIT returns 6%. Which one will return higher?

I did a simple maths calculation for the amount of $445K upfront capital.

Condo:
Upfront $$$: 1mil x 40% (down payment) + 6% stamp duty = 455K

Rental: 3500/mth
Installment: 2110 ( from property guru with interest rate 1.09%, term of loan: 20 Years)
gross cash: 3500 – 2110 = $1390
***must deduct mgmt fee, property tax and income tax

REIT: 455K
Dividend: 455K x 6% = 27.3K per year = 2.275K per mth

From cash flow point of view: REIT is better as $2275 >> $1390, and it’s tax free!

From capital appreciation point of view: Condo may be better, as property price may inch up year by year. And after 20 years, you will have a fully paid house.

So which one is better investment method at today’s situation? which one will you choose?

[henryhk]

Buy property is for capital gains, and tis cannot be underestimated.....just buy wen u know wat and where to buy.....holding power is key!

[edwinleeap]

Sis one more factor to include here.. property agent commission for renting out and property maintenance/repairs every few years.

Don't we need to consider 2110 out of 3500 rental income actually goes into paying the loan principal of the condo. Assuming property prices do not depreciate over the long term, this amount is considered forced savings.

[Rosy]

One clear advantage is that residential mortgage loan is lower compared to other types of loan.

[Rosy]

Don't we need to consider 2110 out of 3500 rental income actually goes into paying the loan principal of the condo. Assuming property prices do not depreciate over the long term, this amount is considered forced savings.

Yes.

Using 250k to buy a property. At the end of the loan tenure, the 1mil property is fully paid up and assuming the property price remains the same, you effectively have 1mil cash when you decide to sell it. Chances are the property price will be higher.

Whereas using 250k to buy REIT, what are the chances of it appreciating by 4 times?

[edwinleeap]

Yes.

Using 250k to buy a property. At the end of the loan tenure, the 1mil property is fully paid up and assuming the property price remains the same, you effectively have 1mil cash when you decide to sell it. Chances are the property price will be higher.

Whereas using 250k to buy REIT, what are the chances of it appreciating by 4 times?

Power of leveraging. Unfortunately 40% downpayment is very restrictive.

[Rosy]

Power of leveraging. Unfortunately 40% downpayment is very restrictive.

60% or shorter loan tenure is the end for me.

[Allthepies]

I read an article on reits which I find informative.

http://www.milliondollarjourney.com/...ning-reits.htm

One part of the article states:
"Even if the REIT is strong, a weak market can irrationally decimate share prices (see crash of 2008) thus potentially reducing portfolio value."

Some questions:
If the reit is strong, will the dividend be lower?
Who decides on the dividend and usually how much is it?

Has any strong reit become worthless before?

If u die die must buy REIT, go for REIT with all Singapore properties. But these have one of the lowest yield. REIT need to pay out at least 90% of earning to
maintain it's tax free status. I'm recalling from memory pls verify the information.

[stiook]

Power of leveraging. Unfortunately 40% downpayment is very restrictive.

comes with the risk as well. Nobody seems to think about that... kinda worrying.

[Shanhz]

all this yield calculation, very cheem. my maths very poor.
can i ask a simple question:

if we put ppty play into the context of gold play:

REIT = paper gold
ppty = physical gold

is solid asset better or paper asset better?

[princess_morbucks]

all this yield calculation, very cheem. my maths very poor.
can i ask a simple question:

if we put ppty play into the context of gold play:

REIT = paper gold
ppty = physical gold

is solid asset better or paper asset better?

REIT - no headache, paper gold is light - drop on your foot, will not hurt it, at most not careful, gets torn only. then if you need the money, you just sell the reit easily.

PPty - must have substantial amount to put as downpayment. must pay stamp duty, absd, etc, pay agent to find tenant, cope with tenant, maintenance of ppty, property tax.

So I think, it is best to diversify.
If you have to beg, borrow for the additional property to invest, I think you will be better off with REIT.

[East Lover]

REIT - no headache, paper gold is light - drop on your foot, will not hurt it, at most not careful, gets torn only. then if you need the money, you just sell the reit easily.

PPty - must have substantial amount to put as downpayment. must pay stamp duty, absd, etc, pay agent to find tenant, cope with tenant, maintenance of ppty, property tax.

So I think, it is best to diversify.
If you have to beg, borrow for the additional property to invest, I think you will be better off with REIT.

Are you saying -If big amt of cash with hand, buy property, Otherwise buy REIT first?

[Laguna]

I was reading this thread and so compelled to write something. I hope this piece of work can help some of you.

1. REIT and property are the same asset class. Ie PROPERTY. REIT is liquid and can be traded in small quantum but not property.

2. REIT – pays out 90% of income vs those pay only20-30% of income as dividend, as such cash call is needed for major acquisitions. Dilution of control is irrelevant to small investors. And in fact, before the cash calls, the underwriters have most of the time, gotten the consent from the major shareholders.

3. Property market is subject to heavy “manipulation”. Not just the six rounds of cooling measures you know, but back to 2007, withdrawal of deferred payment, interest absorption, payment of stamp duty 14 days after S&P instead of TOP etc. And of course, the famous GLS.

4. There is hardly any government intervention tothe equity market, they cannot and will not. Govt most of the time intervenethe FX market and of course, the property market.

5. REIT is trouble free, income is tax free. Maintenance of physical property is not as easy.

6. REIT has outperformed market STI this year andthe gain is much higher than the PPI. Some up 50% this year.

7. You can have leverage on your REIT investment ofabout 60%, and on top, REIT themselves have a gearing ratio of in average30-35%. Ie, you have double leverage on REIT properties

8. You will not attract attention from IRAS for share trading, but not for property trading

9. Overhead cost for property is high, stamp duty, agent fee, for share is only 0.18% commission per trade.

10. If you are smart, you still can find undervalued REIT with good dividend. Some REITs are still doing under their NAV. P to NAV below 1.

11. You can achieve better diversification in REIT.Eg, $400,000, you buy one property, and same amount you buy into REIT, which cover industrial, commercial, hotels, local and overseas. Next, if you buy BUC, you have no income for 4 years but not for REIT.

12. During bad time, there is no way you can sell your property but you can sell your REIT within seconds.

13. If you are good in timing the market, you can trade REIT, but you can’t trade properties that easily

14. REIT pays the manager like ARA fee to managing the assets. It is like engaging agents to manage your property. All these are operating cost. Ie, You need someone to manage the property.

15. REIT is indirect investment in property, ie paper. It is like all other equity investment in the capital market.

[phantom_opera]

welcome back Laguna ... really miss your willingness to share and no-nonsense style

let me repeat, buying both properties and REITs expose you to the same risk .... when a black swan event happens ... you will be burnt for both

I keep seeing the word diversify ... I can tell u today most asset classes are all highly correlated due to yield compression ... it is really really hard to diversify

[hyenergix]

Saying u own Reit n saying u own property is different. Chinese love physical property n it is in their blood. Let me guess u prefer physical property too

[zeamybro]

Laguna, welcome back and thanks for your valuable sharings!

[phantom_opera]

沧海一声笑 滔滔两岸潮
浮沉随浪只记今朝
苍天笑 纷纷世上潮
谁负谁胜出 天知晓


Be preparad for Blackswan

[august]

13. If you are good in timing the market, you can trade REIT, but you can’t trade properties that easily

trade pty? the minute u do, or IRAS thinks u are trading even if u are not, u will be taxed.

[East Lover]

Dear laguna, welcome back! We miss u so much!

Thanks a lot for you solid sharing! Really appreciated

I was reading this thread and so compelled to write something. I hope this piece of work can help some of you.

1. REIT and property are the same asset class. Ie PROPERTY. REIT is liquid and can be traded in small quantum but not property.

2. REIT – pays out 90% of income vs those pay only20-30% of income as dividend, as such cash call is needed for major acquisitions. Dilution of control is irrelevant to small investors. And in fact, before the cash calls, the underwriters have most of the time, gotten the consent from the major shareholders.

3. Property market is subject to heavy “manipulation”. Not just the six rounds of cooling measures you know, but back to 2007, withdrawal of deferred payment, interest absorption, payment of stamp duty 14 days after S&P instead of TOP etc. And of course, the famous GLS.

4. There is hardly any government intervention tothe equity market, they cannot and will not. Govt most of the time intervenethe FX market and of course, the property market.

5. REIT is trouble free, income is tax free. Maintenance of physical property is not as easy.

6. REIT has outperformed market STI this year andthe gain is much higher than the PPI. Some up 50% this year.

7. You can have leverage on your REIT investment ofabout 60%, and on top, REIT themselves have a gearing ratio of in average30-35%. Ie, you have double leverage on REIT properties

8. You will not attract attention from IRAS for share trading, but not for property trading

9. Overhead cost for property is high, stamp duty, agent fee, for share is only 0.18% commission per trade.

10. If you are smart, you still can find undervalued REIT with good dividend. Some REITs are still doing under their NAV. P to NAV below 1.

11. You can achieve better diversification in REIT.Eg, $400,000, you buy one property, and same amount you buy into REIT, which cover industrial, commercial, hotels, local and overseas. Next, if you buy BUC, you have no income for 4 years but not for REIT.

12. During bad time, there is no way you can sell your property but you can sell your REIT within seconds.

13. If you are good in timing the market, you can trade REIT, but you can’t trade properties that easily

14. REIT pays the manager like ARA fee to managing the assets. It is like engaging agents to manage your property. All these are operating cost. Ie, You need someone to manage the property.

15. REIT is indirect investment in property, ie paper. It is like all other equity investment in the capital market.

[Laguna]

沧海一声笑 滔滔两岸潮
浮沉随浪只记今朝
苍天笑 纷纷世上潮
谁负谁胜出 天知晓

Be preparad for Blackswan

我对苏子有独爱, 我回你

人生到处知何似，
应似飞鸿踏雪泥。
泥上偶然留指爪，
鸿飞那复计东西。

[mcmlxxvi]

cheem cheem

Laguna 闭关数日,功力大增

可喜可贺也!

[Khng8]

Welcome back.
Missed your insights.