PREH is likely to continue trading at a big discount.

My experience with Perennial Real Estate Holdings (PREH) started from its days as Perennial China Retail Trust (PCRT).

PREH has a portfolio consisting mostly properties in China in terms of asset value (75%) and the balance being properties in Singapore.

Some numbers:

NAV/share= $1.68
Gearing= 0.45x
EPS=6.88c






At 90c a share, we are looking at a PE ratio of about 13x.

I believe that PREH is a long term value creator. 

The investment thesis is somewhat similar to that for CapitaMalls Asia which I had an investment in before. Similarly, PREH's Chinese investments will take time to deliver the goods. 





PREH is definitely not for the impatient investor. 

Although not comparable in many ways, for something similar in terms of gearing and EPS, the purist income investor might be more interested in Croesus Retail Trust (which holds Japanese commercial properties) and regular readers know that I have a significant investment in Croesus Retail Trust.

...

At the moment, I have a smallish exposure to PREH and I am likely to add to my position if its stock price should decline further.

I like PREH's longer term growth story and I am quite willing to wait for it to do better.

I bought into my investments in both OUE and Wing Tai Holdings at a 50% discount to NAV or more. 

So, I will probably add to my investment in PREH using the same yardstick.






Related posts:
1. Perennial Real Estate Holdings.
2. Perennial China Retail Trust.
3. Croesus Retail Trust.
4. CapitaMalls Asia.

Pay down mortgage or beef up emergency fund?

Dear AK - 

Thank you for all your sharing, I have learnt so much from your blog.

 

I have one quick questions that I am not sure if you have touched on previously.

 

My situation is that I am expecting to receive a lump-sum payment by end of this year, an amount that while would be meaningful for me, and around 12 months my monthly expenses.

 

I currently have a separate emergency fund allocation of 4 - 6 months monthly expenses buffer.

 

I am wondering if it would make sense for me to use this lump-sum payment that I would be receiving to pre-pay my mortgage. 

 

Or shall I keep it into an emergency fund account (One UOB/ OCBC 365)

 

Thanks for your thoughts.

Best regards

 

Hi,

If the interest rate on your home loan is much higher than the interest rate you could receive from UOB ONE or OCBC 360, then, it makes sense to pay down the home loan.

I don't know how old you are but if you are older than 30 years old, you might want to beef up your emergency fund. See: http://singaporeanstocksinvestor.blogspot.sg/2015/05/how-much-should-we-have-in-our.html

Best wishes,
AK


We want to remember that there is a cost for holding liquidity but because it is important to have liquidity, bearing some cost to do so is acceptable.

We are lucky that in the current low interest rate environment, it is also less costly to do so.

When will it rain again? You tell me.

Related post:
UOB ONE or OCBC 360?

Downsizing our homes for better financial health.

Hi AK,

My husband and i are in our late thirties. 

Right now we own a 5-rm hdb flat. 

We do not have children yet, but are planning to. 





We have plans to downsize our hdb to a 3-rm flat because:

1) there's only the 2 of us. 
Even if we have children, the size of a 3-rm flat is still considered ok.





2) we can pay off a bigger portion of our mortgage loan as the loan amount will be much lesser compare to our current one. 

We do not plan to buy a 3rm which is more expensive than our current 5rm. 

(However, we may have to take up bank loan as I have already used up my 2times hdb loan quota - one with my family before i got married and the current one.)





3) i have a couple friend who downsize their hdb from 5rm to 3rm, fully renovated it nicely and was able to pay off the housing loan in full. 

Now their income are purely for living expenses and savings/investments. 

That also gave me the idea of downsizing.





Please advise if there is anything which i may have overlooked and anything to look out for.

Thank you!

Best Regards
Blue

Hi Blue,

I like the Tiny House movement. 

Very often, people over-consume when it comes to housing. 

In a country where housing is so expensive like Singapore, over consuming on housing can really set us back financially, everything else remaining equal.





1. If you feel that a 3rm flat gives you ample space, then, you don't need any flat bigger than a 3rm flat. 

You might want a bigger flat but you don't need a bigger flat. 





2. If you would like to have a smaller mortgage, downsizing and downgrading definitely makes sense. 

Keep the monthly repayment for your new home loan the same amount as what it is for your current home loan and you will pay up the mortgage faster.





Alternatively, you might want a longer term loan, taking advantage of the low interest rates now and improve your cash flow. 

However, you should have the resources to pay down the loan rapidly in case interest rates go much higher.





3. To have a home fully paid means you have both control and ownership. It is an asset. 

As long as a home is not fully paid, we do not have ownership despite claims to the contrary. It is a liability.

Related posts:
1. My home is a hut in the sky.
2. Housing and my CPF money.

52 year old lost $200K and unsure about next 30 years: Discussion continues.

Reader says...
Hi AK,

Thank you so much for responding to my email and providing your thoughts. I have been thinking over it for the past few days.

1.

I am pretty frugal and current monthly personal expenses on myself is about $1k. Another $1k spending on the maid, and $500/mth on insurance.

So roughly $2.5k/month.

2.

The sad thing is I haven't been able to build up any passive income at all, except for the $1.4k monthly rental from the 2 rooms let out.

3.

Friends ask me to move to the condo and rent out the 5-room flat for passive income, but the rental market seem weak with all the property cooling measures and tons of new hdb flats launched.




4.

I do not have any dependents, just myself to take care of.  Would it be a good idea to take up a loan (6% p.a.) from the whole life and continue to let it run vs surrendering the policy?

5.

I popped by the bank and opened a SRS account today and will transfer in the annual max $15,300.  I am at the 14% income tax bracket, so hopefully it will help to bring it down a bit (maybe a few hundreds).

Hope to go into ETFs and REITS for passive income, in your view is it ok to enter at current level or i should wait for market to go down a bit?  I am very worried because i cannot afford to lose too much at my age, and am really clueless which ones to go for..

AK says...

1. Frugality can only help in your wealth building effort. Good on you.

2. Try to build up passive income to improve cash flow but it is easier to improve cash flow by reducing expenses first. You still have room for this.





3. Rental market is expected to remain soft. My stand on the condo remains the same if you are concerned about cash flow. (Readers who are interested, please see related posts below.)

4. If you have no dependents, you don't need life insurance. (Dispense with this expense and have more savings.)





5.1 SRS makes sense for anyone who is paying quite a bit in income tax.

5.2 If you are worried about losing money at your age, obviously you are worried about volatility. If you cannot stomach volatility, staying away from the stock market is not a bad idea. Peace of mind is priceless.







Related posts:
1. 52 year old lost $200K and unsure about next 30 years (Part 1).
2. Should we buy a shoebox condo in NE Singapore?

52 year old lost $200K and unsure about next 30 years.

hi AK, need your advice.

I am a 52 years old single person, still working but hoping to quit from my stressful job and pursue own interest.  

Have come across your postings just recently - how i wish i had done that much early.  

My investment decisions over the past 10-15 years were really bad and lost $200k+ in stock and commodity markets.

Current financial situation:

- 5 room hdb flat (fully paid) with 2 rooms rented out. Got maid to take care of the flat, tenants and me

- mini condo (570 sqft - $660k) above MRT station and mall TOP later this year, w outstanding loan $400k @1.5%+ p.a. (another bad decision?  haiz)

- Cash at bank $580k, Investment $280k, CPF OA $150k, CPF SA $190k

Insurance:

1 whole life and 2 critical illness policies sum assured of $50k each running since 1980's (total annual premium $3.6k for all the 3 policies)

1 term life $250k until age 65

1 Enhanced Incomeshield (advantage)

1 Aviva MyCare (Supplement ElderShield) Premium $1.2k/yr with payout of $2k/month for live if anything happens

1 Home insurance $80k

Very unsure what i should do at this crossroad in life to at least get some stable/passive income to sustain myself for the next 30 years maybe?

- sell or rent out the mini condo? not sure what price it could fetch if sell?  If don't sell, should i try to pay up the full loan asap? 

- what type of investments i should go into, thinking of ETFs and REITS, but which ones and when to enter?

Would really appreciate if you could throw some ideas..

Many thanks. 

AK says...

I will make a few general remarks here and you see if they are helpful to you:

1. You must find out how much money you need on a monthly basis in retirement and whether your current passive income level is sufficient. 

If it is sufficient, you can basically quit your stressful job and retire now to pursue other interests.

2. If passive income level is insufficient, are there ways to reduce expenses and liabilities? 

Are there ways to improve passive income level?





3. Shoebox condominium. 

I don't know if it is a good decision or a bad one. 

If this is able to generate positive cash flow for you, keep. 

Otherwise, you might want to consider selling it.

4. Insurance.

- Since you have had the Whole Life policy for donkey years, you might want to keep it till age 65 before surrendering. Treat it like a bond. 

However, you could consider terminating it if you do not have dependents. This will improve cash flow.

- Keep the CI policies. You need these.

- Keep the Term Life unless you have no dependents.

5. Investments. 

I won't tell you which ETFs and REITs to invest in. 

Do a bit more reading and decide for yourself.






- At your age, you might want to simply max out your benefits as a CPF member. 

You are only 3 years from 55 when you will be allowed a lump sum withdrawal from your CPF account. 

Contribute to the Annual Limit allowed.

- You might also want to start a SRS account especially if you are a high income earner. 

The tax savings is very attractive and is money in the pocket. 

The SRS account money will become accessible without penalties at age 62.







The discussion continues in part 2: here.

Related posts:
1. Why plan early for retirement?
2. Buying a property: Value for money.
3. Consider terminating whole life insurance.
4. SRS: A brief analysis.
5. Retirement: Buying AAA rated bond.