High Gearing; I Don’t Dare

This is the 3rd and last of my series of blogs inspired by last Sunday Invest Section .. it is timely too as weekend is just one hour away. This blog was inspired by my missus’ question to me when we were reading a specific article. And she asked,  How come people can buy so many and such expensive properties while we struggle so hard???”

Good question … how to answer???

Some background first, this particular article was about the story of a successful director of a real estate company in his late 30s. He owns 3 properties currently and is thinking of (quoted) “buying another one or two properties under (his) children’s names in the coming 3 to 5 years“. (unquoted)

When wifey read this, she asked that question above.

man in santa claus costume
Photo by bruce mars on Pexels.com

For the moment, I was stunned … indeed, how was he able to do it?

The first thought that came to my mind was since he is in the real estate market all the time and has all the latest information/statistics in his hands, he probably knows all the “lobangs” and “bargains” in the market before everyone else does. So he seized that advantage 🙂

Or maybe he is well connected … as he put it, being in the real estate business, is like being in the “network business, and every day, I am out there to know more people and build trust and confidence with them“.

But as I read further, I finally concluded that it is because he dares to take high risks.

Do you know how much debts he has?

He has 2 loans taken for his properties, one for $1.936 Mil and the other for $1.68 Mil. It is a total of $ 3.616 Mil of debt that he is shouldering … OMG!!!! He is one brave guy.

Both are long term debt of 25/28 years, probably stretching the loan tenure to the maximum and minimising the monthly repayment. Thankfully for him, the interest rate are relatively low at 1.68% and 2.45% respectively.

Punching the numbers into the excel, say $1.68 Mln, 1.68% interest rate and 28 years, I got the corresponding monthly loan repayment of $6200. And this is probably the lowest in the range of the estimates as I have used the lower loan, the lower interest rate and the longer tenure. And this is only for one loan.

Wow wow !! I don’t think I will be able to sleep peacefully if I have so much debts hovering above my head and have a monthly repayment obligation of such a large amount of money.

So wifey, that explains the difference. I shared my thoughts with her and we both just shrugged our shoulders after that. We know we cannot stomach this kind of risk level. So, cannot compare and cannot replicate.

He is rewarded for the risks he takes.

But for most of us – A peaceful sleep is priceless and let’s be contended and treasure what we have.

Hope you find this a useful read.

Have a great weekend folks.

Hope this Sunday’s Invest Section will give me many new inspiration too.

Regards,

Warriortan

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14 thoughts on “High Gearing; I Don’t Dare

  1. Thanks for sharing . But how about the 4th one he is planning for?

    I guess he wants to avoid absd so he will use his children’s names.
    It means it will need to be in cash.

    Liked by 1 person

    1. He is probably quite cash rich I guess … he is paying a lot of taxes whenever he buys a new unit. He said he will buy in his children’s name but I don’t think it is possible as his children are so young …

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  2. I did my analysis on my investment property. To be honest, I concluded the returns was quite low, on a % basis after accounting for interest, fees and taxes… Owning a cheap HDB and investing the rest in say reits, I figured I could be even be using the reits dividend to help pay off the loan and sleep even better.

    Sometimes that property dream seems so much like a nightmare in disguise…

    Liked by 1 person

  3. I take such articles published by Sunday Times with a huge pinch of salt. The interviewees usually have an agenda either for publicity sake or promotion their service/company. Straits Times should do a post review ten years down the road for these interviewees and see how successful they were. Anyways the original reporter would have left SPH by then.

    The really wealthy avoid such shows of wealth for fear of tax man or relatives coming to them for loans. Good luck to this property guy. He is on borrowed time and borrowed money.

    Liked by 1 person

  4. He’s counting on the properties being popular with highly paid tenants or large MNCs, and rents being stable or increasing. He’s also counting on the overriding of those agents under him. Pity them coz they will be whacked & squeezed to produce LOL!! 😃

    Liked by 1 person

    1. Yes, he probably got the better “rental” deal being the insider. What do you mean by “overriding of those agents under him”? Is it some sort of Real estate agent practice?

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      1. Of course lar! Same same like insurance. That’s why cheque / commissions payable to company / agency, and not to the individual agent.

        No agency manager will be “friend friend” to agents under him/her. Either you hit sales targets or you get lost! 😲🤣

        Liked by 1 person

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