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China rail linked stock... a.k.a Midas Holdings

Was similar invested in this company at one point for the same reasons. Guess I got luck and decided to get out before the rail crash and the subsequent investigation to in the Rail Ministry.

(28-05-2013, 03:06 PM)Musicwhiz Wrote: [ -> ]

(28-05-2013, 02:50 PM)mobo Wrote: [ -> ]This guy's story does remind me of this Singaporean couple who was featured in the same section over 2 years ago.

The gist of it is largely similar, the couple got lucky bought and sold property within a short span of time and made some money. They subsequently poured all the proceeds which was ~$250k to set up a snack shop named "Perkies" in Changi City Point.

I frequent the mall and often wondered how they could survive with hardly any customers. The featured couple (i.e. owners) are seldom seen managing the business even though it was struggling to get a headstart and seemed to have delegated the entire operations to a revolving door of part time teenage staff who do not seem motivated to sell.

Not surpirsingly on my last trip there, the shop has folded and I suppose they lost all the gains they made from their lucky property flip in a span of 2 years.

Quite a waste of good money down the drain actually.

Yes, I do remember that feature as well, and I had visited Changi City Point last year and seen that stall of theirs. Innovative but yes hardly any customers - sad to know that the shop has folded by this time.

I guess the +ve aspect of this is that they are willing to use that profit to venture out and start a business and be entrepreneurs, though one may also argue that they probably did not do sufficient planning and research before committing their capital.

But I still think it beats someone who splurges such "lucky" gains on conspicuous consumptions items or worse, by rolling the money into increasingly higher prices/valuations of property and/or equities.

Wow MusicWhiz you also remember and actually visited the stall!

While poor planning and research might be one of the causes of failure, my personal observations suggests the main reason could be they seemed to be approaching entrepreneurship as though they were just passive investors in a stock.

I work around there and visit the mall almost every week. I saw the owners hanging around a couple of times during their first month of operation. Even then they did not seem “on the ground” as you would expect from someone who is starting the first business, more like standing around talking with various people instead of actually doing the work.

After the first month, they were seldom around and by 3 months or so, they were nowhere to be seen even during peak lunch hours. Instead they were operating like franchisers who basically outsource the whole operations to an ever changing temp staff who did not give a damm what happens. I knew they were headed to closing down sooner or later.

This is a good lesson to all aspiring entrepreneurs – When you first start out, you need to be deeply involved in the business! Taking a passive attitude as if you are a stock investor and hoping that employees will somehow figure everything out in your absence is a recipe for disaster. Even the boss of a successful large franchise needs to patrol his branches once in a while to stay tuned to the ground. I did not see either the husband or wife at all after the first few months of opening.

There are other ways to passive income other than real estate - he seems to imply rental income is the only way (see section in BOLD). And yes I think he has vested interest to say "prices will rise over the long-term", right? Notice that out of 10 interviewees, 9 will "swear by" real estate. Weird but true.

By the way, I was also surprised at his studio apartment bought three years ago which has appreciated by a mere 5%, this hardly beats inflation. His Malaysian property has appreciated +15% over 2 years.

The Straits Times
www.straitstimes.com
Published on Jun 02, 2013
me & my money
OrangeTee MD swears by real estate
1990s property boom helped him clear debt, and he says prices will rise in long term

By Cheryl Ong

It is no surprise that property firm executive Steven Tan is a big believer in putting his money into bricks and mortar.

Mr Tan, 49, has bought and sold eight properties over the years so he knows the rewards - and risks - that real estate can bring.

In fact, it was a business crisis that led him to real estate in the first place. Mr Tan started his own architectural curtain wall business in 1988 and expanded to Taiwan and China.

But by 1991, China's construction sector was failing, eventually forcing the business to close in 1993. Mr Tan says: "After I liquidated my company, I still carried some debt with me. So I had to solve my financial problems.

"Partly because of my educational background in building maintenance and management, and because I had to resolve the immediate problem of personal debt, I entered the business of property, thinking that is the fastest way to make money."

He rode on the property boom of 1994 and 1995 and managed to recover his losses in just two years.

It also led to a career in property that is approaching 19 years now.

Mr Tan took on the post of managing director of property agency and consultancy OrangeTee in January last year.

He and wife May Thong, 49, live with their 17-year-old daughter Tan Hua Sze in the Pine Grove condominium in Ulu Pandan Road.

Q: Are you a spender or saver?

Both. When it comes to good food, travelling and golfing with family and friends, I am definitely a spender.

Occasionally, I buy luxury items like my Audi A7, but my family never makes it a habit. I always ensure I save enough money for investment, as well as for a rainy day.

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

I charge about $8,000 to $10,000 monthly. This includes entertainment with clients, my personal expenses and the household expenditure. I am the sole breadwinner in the family and have to foot all the bills but I enjoy it.

I try to use the same credit card so that I can keep track of my spending every month.

Q: What financial planning have you done for yourself?

In term of investments, my top choice is definitely properties. My job allows me to feel the pulse of the property market.

Since I started work, I have always believed that property prices will rise in the long term despite the ups and downs.

It is still the best way to hedge against inflation. On top of that, it can generate passive income through rental, which other investments can't achieve.

As I am a married man, my goal is to provide better financial security for my family.

I do not like to invest in volatile and unfamiliar investments like shares or gold, because I do not want to spend my time monitoring the choppy prices.

So far, I have bought only one initial public offering stock - TA Corporation - a year ago just to show support for my friend. Fortunately, the share price has gone up by a significant 40 per cent.

The other way to ensure financial security is to have sufficient insurance coverage.

I revise my insurance policies regularly to keep up with my changing needs. My yearly premium is about $42,000.

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

I grew up in a low-income family. The same goes for my wife.

I lived in a two-bedroom HDB flat in Commonwealth Drive with nine family members, including my grandparents, parents, uncle, auntie and my two brothers.

We have never employed a domestic helper because we are just a small family of three. It also gives us more privacy to bond. Most of the time, my wife and daughter still take public transport.

Q: How did you get interested in investing?

My first investment was in my own business. I started an architectural curtain wall business at the age of 26 after working in that industry for about four years.

At that time, JTC Corporation had started installing aluminium and glass curtain walls on its new factories in Tuas, and I thought it was a golden opportunity to start a business in that.

My business boomed rapidly.

But when the construction sector went into a recession in 1991, many main contractors went bust and I did not get paid for some of my projects. My business folded. I used personal overdrafts to pay my staff.

My first business failure taught me that it is not just about how much money you make, but the importance of having enough reserve funds to tide you over a downturn. You cannot just think of expanding all the tine.

Q: What property do you own?

I own three properties - two in Singapore and one in Malaysia.

In Singapore, I have a 1,750 sq ft leasehold property in Ulu Pandan Road bought during the Sars period in 2003. I bought it for $530,000.

The other one is a 580 sq ft freehold studio apartment near Somerset, which I bought about three years ago. It has appreciated by 5 per cent in value so far.

The property in Malaysia - Face Platinum Suites at KLCC - is a freehold 1,050 sq ft two-bedder which I bought two years ago. Its value has appreciated by 15 per cent.

I lost about $100,000 when I upgraded from a house I bought in Bishan to buy my current home at Pine Grove. But I do not think it is my worst investment, because I planned for it and it is worth about $1.6 million now.

Q: What is the most extravagant thing you have bought?

I would say it is my car, an Audi A7, which I bought 11/2 years ago, and cost about $280,000.

Q: What is your retirement plan?

Too many people lose their drive after retirement. I plan to semi-retire by the age of 60, by working as an adviser or doing voluntary work at my church.

Q: Home is now...

My condo in Ulu Pandan Road.

Q: I drive...

A dark grey Audi A7.

ocheryl@sph.com.sg
-------------------

WORST AND BEST BETS

Q: What has been your worst investment?

In the early 1990s, I lost about $20,000 when I invested in the United States dollar. My friend had asked me to join him and I was also looking to diversify from property. I set a limit of $20,000 for myself and I decided not to continue investing when it was all lost.

This taught me a lesson that when it comes to investing, you cannot be too emotional, even if you think something is a trend. You need to look at all the figures and understand the numbers first.

Q: And your best?

My best investment is investing time in (OrangeTee). The benefits are not just about the job or monetary rewards, but there is a great sense of satisfaction when I work together with my staff to achieve common goals.

Well, you work with what you know and all Singaporeans know properties. Maybe it is where we live, therefore property investment remains one of the most accepted way to wealth. Even my mother have asked me why I haven't bought a house. I have worked with folks from overseas where they have more diverse investment approach and portfolios.

Perhaps when you are in an environment where property does not generate as high a potential yield as Singapore, then you will be forced to explore other options?

is curtain wall biz really that profitable?

Look like he is having a concentrated portfolio. As long as he know what he doing, know how to handle his investment, and it suits him, I guess it should be pretty ok?

From what I can decipher, very likely he is holding alot of cash,waiting sideline for the property market to correct. If not, why is his investment is currently only a studio and a unit in Malaysia?

(02-06-2013, 10:40 AM)LionFlyer Wrote: [ -> ]Well, you work with what you know and all Singaporeans know properties. Maybe it is where we live, therefore property investment remains one of the most accepted way to wealth. Even my mother have asked me why I haven't bought a house. I have worked with folks from overseas where they have more diverse investment approach and portfolios.

Perhaps when you are in an environment where property does not generate as high a potential yield as Singapore, then you will be forced to explore other options?

My Mom told me the same thing too.

Traditional Asian Chinese mentality passed down from generation to generation to generation.....

Get wealthy 101----- "Buy Property"

"Sure Mom. I can just go out and grab myself a nice property. No sweat!" LOL......

(02-06-2013, 09:38 AM)Musicwhiz Wrote: [ -> ]There are other ways to passive income other than real estate - he seems to imply rental income is the only way (see section in BOLD). And yes I think he has vested interest to say "prices will rise over the long-term", right? Notice that out of 10 interviewees, 9 will "swear by" real estate. Weird but true.

By the way, I was also surprised at his studio apartment bought three years ago which has appreciated by a mere 5%, this hardly beats inflation. His Malaysian property has appreciated +15% over 2 years.

Hi Musicwhiz,

I dont think it is weird that out of 10 interviewees 9 will swear by real estate. I believe for most interviewees who are between 30 and 40 would have bought their first property after the 1997 AFC. Between then and now real estate prices have doubled and in some cases tripled. Given the high leverage (80%) present in this asset class it is inevitable that anyone who seems like a skilled investor by the layman definition (i.e. made a lot of money) must have made it from real estate. There simply is no other easily replicable way.

Just think if your property doubles in 10 years the CAGR of your asset is 7%. With 80% leverage that CAGR becomes 26%. Something which any investor will struggle to match.

This does not take into account property allows you to unlock your CPF OA funds which is a good 23% of gross pay (due to employer contributions).

Past performance is not indicative of future performance. Hahahhaha.

(02-06-2013, 03:12 PM)davidsim Wrote: [ -> ]Hi Musicwhiz,

I dont think it is weird that out of 10 interviewees 9 will swear by real estate. I believe for most interviewees who are between 30 and 40 would have bought their first property after the 1997 AFC. Between then and now real estate prices have doubled and in some cases tripled. Given the high leverage (80%) present in this asset class it is inevitable that anyone who seems like a skilled investor by the layman definition (i.e. made a lot of money) must have made it from real estate. There simply is no other easily replicable way.

Just think if your property doubles in 10 years the CAGR of your asset is 7%. With 80% leverage that CAGR becomes 26%. Something which any investor will struggle to match.

This does not take into account property allows you to unlock your CPF OA funds which is a good 23% of gross pay (due to employer contributions).

Hi David,

Thanks for the reply and info. Haha actually I was already expecting a reply along these lines when I wrote my comments, as I was aware of the steady appreciation in real estate (especially in the last 6-7 years) since the AFC.

But I do have three points to bring up:-

1) Time Frame - It depends on your time frame of reference when you refer to CAGR. If someone had invested in property in say 1995-1996 period, and was hit by the full brunt of the crisis in 1997, then his CAGR till now may be very low (perhaps 1%-2% CAGR?) because he bought high. This also applies to equities to be fair, if you choose a period such as early 2009-present you will see an amazing return.

2) Finance Costs - We must remember that interest rates used to be very much higher in the late 90's and early 2000's. Hence, the finance costs paid could be substantial with respect to the loans taken up to finance the properties and would erode part of the computed CAGR. Though leverage magnifies the ROE on the property, we must also account for the cost of financing in the computation as we are only looking at the market price at purchase versus market price at present. This does not apply to equities unless you are on margin.

3) Replicable in Future - This was actually opmi's comment. In the 17 years since the AFC, real estate has managed a very respectable CAGR due to many reasons - foreigner influx, development of more land in remote areas for sale, overall prosperity of Singapore, GDP growth and inflation all helping to push prices up all over the island. But looking at the next 17 years (or even just 7 years for that matter), can this be replicated? Can we always assume real estate can appreciate greater than inflation?

Personally, I don't think it's a good idea to allow CPF OA to be used to purchase real estate. This has two effects - it boosts the prices of real estate as people are more willing to leverage when they use their CPF, and it also means people have less to retire on in their CPF OA as they deplete most of it on housing.

Thanks!