Home for Living and not for profit taking (9)

Real People. Real Story!


Read? Home for Living and not for profit taking (8)

Read? Home for Living and not for profit taking (5)


Don't mix up residential home and investment property.

In the next one to two decades when baby boomers starting to down grade or right sizing or pass on to their children; hmm ...

Upgrading before it is too late??? (2)

Read? Eschew the too-good-to-be-true carrot



How true is this! Heavy financial commitments such as monthly mortgage payments are a good deterrent against worker bees from leaving their hives.

CW8888: Carrying on mortgage payments at low net worth after retirement or forced retirement is scary; but how many folks can feel in their bone before upgrading as they are decades away?

Read?  Upgrading before it is too late???

Home for Living and not for profit taking (12)

Read? Home for Living and not for profit taking (11)


HOME as an asset class is NOT what we are thinking when we still have control over our thinking and know how to count it financially. But, when the day arrives and we can't count. It will be totally different and sad story!

There are many known cases of financial hardship of those asset rich people living in landed properties. They just can't let it go even they are suffering now. They rather die asset rich!

HOME can be very emotional and not as easy as we are thinking now as we cannot know how we are thinking in the next 20 or 30 years time living in the same HOME.

Home for Living and not for profit taking (11)

Read? Home for Living and not for profit taking (10)


To get a shorter HDB housing loan or get the max?

To pay up periodic lump sum and become debt free earlier?


These are simple answer to these difficult questions.



How you feel towards your house?


a) This is my or our Home where I or We would rather die in it

 or

b) Just another financial asset to be monetized when necessary.



This is all about your own feeling but more importantly how both of you as married couple feel  when you first bought your house or home!


What is Home?


You may have the answer now!

No answer. Check with your spouse?
 

Home for Living and not for profit taking (10)

Read? Home for Living and not for profit taking (9)


One way to avoid evaluating it too emotionally is to ....

Think of it in term of Mathematics.

 
Read? Passive Income??? Why must have more of it!

Uncle8888's Wealth Formula:
 
Wealth = Asset value + Cash flow   ------ (1)

Substitute "Asset value" with "Home" ---- (2)


Wealth = Home + Cash flow   

Does your Home currently generate any cash flow to supplement your living expenses?

Yes or No?

Don't defend your answer with your emotions.

In our retirement phase with no or little earned income, we will need to have good level of cash flow coming from our current assets to support our living. 

Can our Home provide that level of cash flow now?

Our Home is our future Asset that can generate cash flow with some trade off. That trade off is the necessary Evil!


 
 



 

 
 

Upgrading before it is too late???

Real People, Real Story ....

Down-grading at their 60s when they realized it is too late???



One Guy:


 ...   He told me he has no any other investment plan except to leave it in CPF to service his housing loan - another 11 years to go!!!

Read? leave it in CPF to service his housing loan - another 11 years to go!!!




Another guy:


He is 59. Instead of looking forward to his retirement, he is hoping that his boss will recommend him to work till 65.

HOW COME????


He took profit on his first HDB home and then took a second housing loan for his replacement home.

He still have another 7 more years to clear his housing loan.



Read? Home for Living and not for profit taking (8)

HDB flat is a Home and not an appreciating asset!!!

 

 

HDB flat is a Home and not an appreciating asset!!!

 

It is social need. It is our home to build our family.

 

 

 

Be bold and correct the big mistake made by the

Old Guards and save our future generations!

 

Why???

 

Uncle8888 didn't have to take 25 or 30 yrs housing loan and

has three children.

 

Isn't that the answer?

 

 Read? Home for Living and not for profit taking (9)

 

 

 

 

 

 

Home for Living and not for profit taking (9)

Read? Home for Living and not for profit taking (8)


Read? A prudent taxi driver


He shared the experience of a neighbor who sold the first HDB flat, took out the profit and spent it away. The neighbor took a full loan on the resale HDB flat and now had to pay $1,000 a month up to age 75. This was very stressful.

Another friend sold the HDB flat on two occasions and took out the profit. He invested in the stock market and lost the money entirely. He could not pay the mortgage on the 5 room HDB flat which was repossessed. Now, he had to downgrade to a 3 room HDB flat, and was in a worse condition than the taxi driver.

The Moral of the Story

Is your only residential home as an investment instrument and for profit taking?

Like any drivers on the road, they believe that they are above-average drivers.

Same as for many retail investors, they too believe they can compound their investment return well above inflation and interests rate over market cycles.

How many retail investors can afford to lose substantial capital and still manage to recover and build up enough retirement fund for next 25-30 years?

Home for Living and not for profit taking (8)

Read? Home for Living and not for profit taking (7)


He is 59. Instead of looking forward to his retirement, he is hoping that his boss will recommend him to work till 65.


HOW COME????

He took profit on his first HDB home and then took a second housing loan for his replacement home.

He still have another 7 more years to clear his housing loan.

It is exactly what my ex-neighbour did except my ex-neighbour is a taxi driver and can drive his taxi till 70.



Home for profit taking???

In life, we all reap what we sow when we are much younger as we don't think decades away.

Some flat owners sitting on a goldmine???

ST, Saturday, May 26, 2012

Queenstown estimated profit: $420K
Punggol estimated profit: $330K

Did my ex-neighbor living one floor below me really strike a lottery by selling his goldmine?

Read? Did he strike a lottery by selling his goldmine?

Anyone believe that he really strike a lottery by selling his goldmine?

But, I think his banker will love him for the next 20 years of his life. 

Home for Living and not for profit taking (7)

Read? Home for Living and not for profit taking (6)

 

Warren Buffett's Home

Warren Buffett the Worlds 3rd richest man with $ 47 billion dollars still lives in the same house in the same Happy Hollow neighborhood where he bought the home in 1958 for $31,500. It has 5 bedrooms, 2.5 bathrooms and is 6234 square feet, the house was built in 1921. In 2005 it had a taxable value of $ 690,000.

Createweath8888:

This man teaches the greatest lesson in the concept of  "Home is for Living". A home is for personal and family comfort living; it is your nest and anything beyond that is just for showing off. 

Home for Living and not for profit taking (6)

Read? Home for Living and not for profit taking (5)

Reading is easy and writing is hard. To keep writing more to defend a particular view is even harder. When it becomes necessary to defend it further, I will have no choice but to do it.

I will have no issue when peoples start debating Property vs. Stocks investing. Each side will share their own investing experiences and performance results. Each side will try to convince each other that one of them is more right than the other and I have no problem in accepting either conclusion. But, when some people start to compare their HOME vs. Stock investing, then I will have strong view. That is the reason why I have been writing several blog posts on "Home for Living and Not for Profit Taking."

Stocks are for investing or speculating. There is no doubt about it. If you have two or more houses; one of the houses will become your home and the rest of them can be for investing or speculating. But, if you only have one house and that is your home. Home is for living and not for investing or speculating for profit.

Why do we buy a house?

We will want to buy a house when we plan to get married and start a family. Some married couples may choose to remain as DINK (Dual Income No Kids) while some other married couples may SINK (Single Income aNd Kids) and most family will have kids.

Most of us when we married we will want to buy a HOME to begin a different phase of our life. A family life either with kids or without kids. A home is for living with our family. Unlike singles, they can choose to live in their existing home (in fact, it is their parents' home but one day can became theirs too). Singles can choose to buy a home for living and then have absolute freedom to do what they like within their home. Their parents cannot stop them.

Single can also choose to buy a house as second home to live and at the same time it can be a house (property) for investing or speculating. He/She can later sell his/her house for profit and return to his/her home (parents' home).

Home has Utility Value

Home has utility value. We utilize it for our living as a creature of comfort. Stocks don't have any utility value and we don't utilize our stocks for our living at all. Because home is a utility when we sell our home we have to replace it either by renting, buying a second home or moving back to stay with parents. But, when we sell our stocks, it is not necessary to replace them as stocks have no utility value.

Even if you sell your first home and replace with it a second home to live. The utility value of the two home  can never be the same. One of the them will have higher utility value.

Let get back to the case study of my ex-neighbour as it is easier to understand the utility value using real life example.

His first home sold will have higher utility value since it is just one bus stop away from the MRT station and his second home bought is a few bus stop farther away from it. In the past, he and his family members can comfortably walk to MRT station from their home within 5 minutes. But now, he and his family will have to walk so much farther distance to the MRT station or incur additional transport cost to take bus to the MRT station. So there is some hidden cost in his second home.

Profit taking from stocks are pure monetary gains and there is no hidden costs associated with it. Profit taking from home will have monetary gains as stocks; but it is never pure monetary gains like stocks. Your monetary gains in your sold home may come in the way of lower utility value in your second home with hidden costs often are unaccountable.

Do you still want to compare HOME vs. Stock Investing in term of monetary gains?

Think again. Home for Living and Not for Profit Taking.

Home for Living and not for profit taking (5)

Read? Home for Living and not for profit taking (4)

Let re-visit the story of ex-neighbour who used to live one floor below.

After selling his 4 rm HDB flat and he bought another 4 rm HDB flat which is a few bus stops away from his previous flat.

So as case study, let us simplify some figure to make it easier to understand the Maths involved.

Cost of 1st flat = $55K
Sales of 1st flat = $300K
Paid back to CPF OA including back-date interests = $100K

So profit = $200K

Do you think that he made $200K multi-bagger profit on his 1st flat?

Let continue with the Maths.

His 2nd flat is just few bus stop away from his 1st flat and the 1st flat is just one bus stop away from MRT.

We can safely assume that the selling price of 2nd flat is definitely lower. Let assume $50K cheaper at $250K. He took a new 20 years loan of $150K with a bank after offsetting paid back to CPF of $100K.

Now he has $200K cash and $150K debt.

Did he actually make $200K multi-bagger profit on his 1st flat?



What is your answer?

A. He made $200K multi-bagger profit.
B. He didn't make any multi-bagger profit, his profit is just $50K i.e. $300K - $250K
C. He didn't make any multi-bagger profit. He made some profit. He swap $150K debt for $200K cash.

My answer is C. What is your?

Will You Try To Pay Off Your Housing Loan ASAP If You Have One? - Revisit

Read? Will You Try To Pay Off Your Housing Loan ASAP If You Have One?

When I told a few colleagues that I have dumped all available CPF money to pay up and took up only 5-year housing loan. I believe some of them might think that I was stupid not to take advantage of the cheapest loan available.

"debt-free and that, to me, is richness enough" - Tabitha Wang

I am telling you that from my own personal experience in the worst crisis I have encountered - 1997 Asian Financial Crisis that what Tabitha said is definitely the Truth
 
In 1997-98 Asian Financial Crisis (AFC), I have witnessed few colleagues broke down in tears when they were told that they were lay off. Some were so worried about their mortgage payments.


 
At that time, I was less worried than many other colleagues as I was debt-free after paying up 5-year HDB housing loan some years back before the Asian Financial Crisis. Then I finally realized that "I am not Stupid!"

Home for Living and not for profit taking - Part 4

Read? Home for Living and not for profit taking - Part 3

"Don't sell your homes prematurely for a quick buck": PM Lee

Well said. It is timely that PM Lee reminded people that home is for living and not for profit taking. Get a second property for investment if you really love property as investment vehicle.

Some animal build up their home and live there till they die or forced to leave by circumstances not within their control.

Do you live in your dream home or you are just staying at a place waiting to sell your dream home and counting your dollars and then search for another a place to stay?

There is good reason why the standard method of counting a person's Net Worth is to exclude the value of the residential home and it is not treated as part of a person's wealth.

Home for Living and not for profit taking - Part 3

Read? Home for Living and not for profit taking - Part 2

SuperMum was telling us the story of her friend who has sold her Seng Kang flat at profit of $100K after 5 years and then bought another older flat at Hougang. The profit is so shiok!

This is the same story but different actor only. May be SuperMum should check with them at the next recession.

Home for Living and not for profit taking - Part 2

Read? Home for Living and not for profit taking

I happened to meet this ex-neighbour again. I am not surprise that he was retrenched last year, and now he is a full-time Taxi Driver.

I believe now he will have a harder time keeping up with his housing loan. The lesson learn:  Never under-estimate the risk of losing your job in the future; and it is not wise to use your residential home as a profit taking financial instrument or product.

Is Home For You to Retire Or to fund your Retirement?

You probably heard those home buyers at new property launches being interviewed saying: "This is for retirement investment." There are just too many home buyers thinking that their residential home can be used to fund their retirement.

But, before you start thinking and counting the value of your residential home and your estimate of its appreciation rate. You may want to start thinking about the implications. There are just too many uncertainties in your future, and counting your residential home may mislead you into saving too little or not investing wisely.

A residential home is a lot more than something you can just trade in for another investment. After living in your residential home for many, many years, and in your old age you are likely to develop emotional ties. It has neighbours that you like or close friends nearby.

Your home may represent years of your effort in tailoring it to meet your tastes. The furniture, decorations, mementos, and even quirks are things that you have learned to enjoy. It may have a emotional or support system that helps you to calm down when you reach home to relax even though you are having troubles in your office or elsewhere.

So, are you too thinking that your residential home is part of your retirement fund. I don't. I treat it as contingency fund of the last resort when everything else fails.


Read? Home for living and not for profit Taking

Home for Living and not for profit taking

Quote from Albert Yang , Read? Buy your house!

A man is not a man; until there is a house that he may call his castle. A woman is not a woman; until she has a place she may call her home. And neither a man nor a woman can say anything about their house, until they are the masters of it, and own it outright and unencumbered.

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

Many years ago, my neighbour who was staying one floor below me told me he was selling his 4 rm HDB flat and bought another resale 4 rm HDB flat in another part of Hougang. I was quite puzzled that he was not upgrading, but in fact he was worse off as his "new" flat was quite far off from Hougang MRT, and Hougang Mall. Our flat is just five minutes walk to Hougang MRT, Hougang Mall and Punggol Park.

He told me about his handsome profit from by selling his flat, and how nice is to slowly paying off his "new" flat with another 20 year loan. He proudly told me why are we so stupid not to cash out handsome profit. He advised me to do so as the resale price of our flats near MRT was really very good. (We bought these HDB 4 rm unit at $55K many years ago when this area was near an old cemetery)

I never took his advice as I was "stupid". But, I strongly believe that "An ideal Home is for Living, and NOT for profit taking". Unless, one is currently not living in one's ideal home, then one should consider selling and keep looking for one's ideal home.

I have built my castle, and became a Man; and my wife became a Woman as she has a place she call her home.

Honestly, I do love money and create wealth; but that does not mean that I have to sell my Soul, and do whatever it takes to make more money and build more wealth. In Life, there are certain THINGS that no amount of money can be placed in front of us to exchange them. You have to determine yourself what are these THINGS in your own Life, and you haven't find anything yet. It could well mean that you are still living in your own materialistic world, nothing else except money, money, money and money will NEVER BE ENOUGH.

Never put off till tomorrow something that one can and should do today. There may be no tomorrow. (by wei ling)