Good Investment IV?

We should bear in mind that the example given is a real case and it is based on most optimistic assumption, meaning that the market price as well as the rental given is in the highest range. Besides, we also omit several transaction costs such as legal fee, valuation fee, management fee, broker fee, maintenance fee, insurance charge, local council assessment fee….etc. We also give the best situation where in the example given, the rental collected is uninterrupted for the whole 360 months. In the real life, we know that it’s impossible to maintain such record. If we consider all those factors, the real net gain will be lesser as shown in the example. Again, the example given is not located in the unfavorable outskirt region. It’s within 10km distance from the city centre, a well developed residential and it’s the landed property where it’s the most sought investment for the real estate investors. With such optimistic assumption and good example given, still it’s only gives mediocre investment result. So, I wonder why so many people still having faith to this type of investment.

An investment should remain to its objective, that’s to create values to the investors, that’s not only safeguard against inflation, but also giving a reasonable good return to the investors. Most often, the investment made is based on sacrifice of the investors’ immediate enjoyment to gain the future pleasure. . If, the investment does not give a reasonable good return, there is no point for the investors’ sacrifice.

Note: We are not against of buying real estate. We are just showing the fact to the people who might still in the “Fortune Dream” because of real estate investment. There are plenty of investments that could bring better return as compared to real estate investment. When talking about investment, think business. Most often, these two can’t be separated.

Real estate posses an emotional value to everyone. After all, everyone needs a home, a lovely home for their families, a place for their families to share the greatest moments. Those moments are the most precious and invaluable, that’s the monies couldn’t buy.
“A House --- $ 270,000.
A Happy Family --- Priceless.”

Is Real Estate a Good Investment? VI

Correction: Years from base date for Japan should be 1980 and not 1985.

From the graph, it showed that house price in Japan soared 100% from 1980 to 1990. After the bubble burst, Japan suffered from a massive economic depression which lasted 15 years until 2005 which we saw there is a sign of economic recovery. Still, house price in Japan does not recover from its peak. In 2005, it signifies the depression of nearly 40%, this means if you bought a house for $ 200,000 in 1990, your house is worth $ 120,000 in 2005. This is a scenario if you bought with hard core cash. How about the one who highly leverage with housing loan? The consequence is more drastic, the real estate that they invested still in a group of “Negative Equity”, meaning that even you sold off the house, you are still in debt and need to repay back the balance to the bank. That’s the impact of leverage, in contrast to the one who always persuade you for the “Power of Leverage”. They are right in one point: Leveraging could shorten your investment return IF the market is booming; when the market burst, you not only lose all your investment but you would be in debt as well.

While in Australia, Britain and US, the average house price since 1995 registered a handsome return of nearly 150%. If you laid the investment since the beginning of 1995 and bought the house which priced $ 100,000, your investment worth almost $ 250,000 in 2005. The return could be higher if you are buying with highly leverage housing loan. While the house price for the past 10 years gave the investor of that time a handsome return, do you think it will do the same for the next 10 years, or it will show the same trend as Japanese backed to 1990? The answer? Only God knows…

“Any indication for you?”

Is Real Estate a Good Investment? II

Source: The Economist publication dated 16th June 2005


Any indication for you?

Dow 36000, Oil $300, Gold $3000…..

There are too many con men out of field waiting for the innocent yet naïve people, to suck out their hard-earned money. No matter it is in the stock market, real estate, commodities market and so forth.

History always tells us something. People who deny history would eventually lose out all. In 1999, when the euphoria of the stock came to the climax, two men, James Glassman and Kevin Hassett wrote a book titled “Dow 36000”. They predicted that Dow Jones Industrial Index will reach at 36000 anytime soon and latest in year 2005. If you think this two gentlemen are an ordinary man, you are totally wrong. Glassman, an investing columnist for the Washington Post, and Hassett, a scholar at the American Enterprise Institute who used to be an economist at the Federal Reserve. Because of their background and title, many people fall into the prey that “they are intelligent people, what they say makes sense”. So, they pour their money into the stock market when the market was at its peak. The result, they lost US$8 trillion (YES! It’s US$8,000,000,000,000 !!!) With this amount, you can buy 3,200 Petronas Twin Tower in Kuala Lumpur, Malaysia. (used to be the world’s tallest building in the world)

Stepping into the beginning of 21st century, similar phenomenon will appear. From time to time, someone will come out and shout to you:” Oil will reach to $300 per barrel!”, “Gold will hit $3000 per ounce!”. When the euphoria shift to commodities market, you will notice that some magazines will announce “The Death of Equities” and someone will author the book titled “Dows 360”. When this moment arrives, grab as many as you can from the stock market. Of course, choose only “good” stock.

What is a bubble? You won't know about it until it's already happened...and then it's too late,,,