Posted by
laiging
12 yrs ago
A HK property columnist Dr Tong has suggested retirement by way of achieving 3 paid up properties for retirement: one to live in and 2 for producing income for retirement.
I am interested to know others' views on this. Or you think that this is overconcentrated and a diversified approach is more appropriate.
thanks in advance.
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It is a better plan than putting all your money into a bond portfolio at today's yields - at least you have some chance of keeping up with inflation.
While I think property is a great asset to have and to include in a retirement portfolio, two properties amounts to having all your eggs in one basket. Rental income is not guaranteed - it can fall as well as rise and vacancies will occur. There will also be outgoings - management fees, rates, government rent, repairs and, longer term, there will also be periodic redecoration costs and building levies as the building ages. If you can clear enough after all these expenses (and taxes) to meet your retirement needs, then I still have issues with the lack of diversification.
Separately, even if I did get comfortable with the idea of betting my retirement on two Hong Kong properties, I would not want to implement that strategy in today's market - the net yields are just too low.
FWIW, I intend to retire either end of this year or sometime next year and will be getting by on a combination of rental income and dividends.
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Lose your tenants, and you are in trouble
But as I have said before:
HK is a reasonably cheap place to live, provided you have sorted out your housing (ie do not have a mortgage to pay.)
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@ walkup7 - if the investor is looking at only two properties for income to support retirement, I would assume that there would be no mortgage at all and hence LTV would not be relevant? I suppose it all depends on actually numbers - rent, outgoings and the needs of the retiree.
Personally, I would think that having two leverage properties as the sole source of income on which to live would be too risky.
Location is everything - transport links, school zones, outlook, facilities and so on.
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thank you for the many useful ideas.
question for traineeinvestor, where and how do one buy a bond portfolio. i have only bought CNY bonds and recently government i-bonds. what sort of return can i expect. how safe is the capital?
Advice appreciated.
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A friend of mine retired a few years ago and is now happily living in a paid up property and living on an annual income of about 200k dividend income.
she is happy that she is not even touching her capital. she said she does not like the hassle of managing tenants.
she has not told me how much capital she has to produce this income.
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Agree - there are plenty of good stocks listed in HK with decent yields. Constructing a diversified portfolio with an average yield of 4% is quite possible.
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Remmy
12 yrs ago
traineeinvestor - yes, but its alot harder for most people to get leverage to buy stocks, vs property which they can do, so I would suggest a larger % of asses devoted to property rather than stock. Eg perhaps 25% of cash in stock (unleveraged) and 65% in property (leveraged) 10% cash for opportunities and emergencies.
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@ Remmy - I agree that a diversified mix is better - lower risk - than all in one asset class. My post was a comment on the previous posts by other on the woman who has retired and is living off her dividends. I'm going with a mix of property and shares - some in HK and some overseas for my retirement. And yes, I am keeping my mortgages - with negative real interest rates and a positive carry, it would be silly to pay them off early.
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Remmy
12 yrs ago
traineeinvestor - Makes sense. I agree!
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Your arguments make sense.
But I wonder if people are taking into account the impact of "financial repression" -
That is: Ultra-low interest rates have pushed all asset prices up to "unrealistic" levels, which will be unsustainable if rates rise.
In such a circumstance, how do you beat cash ?
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Remmy, your asset allocation makes sense to me, which is useful reference for me. thanks lots.
i would prefer to a low property leverage for property, bearing in mind that i won't want to take high risks on retirement.
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