Why I Don’t Live in the House That I Own

My Dad used to tell me stories of how his father was a building contractor but the house in which they lived had walls that were half finished.  Meanwhile my Mom, whose mother was a dressmaker, rarely got any new clothes as a teenager because her mother was too busy sewing other girls’ dresses for a living.

I guess I’m kind of like that.

You see, I invest in real property.  I own the titles to a couple of houses and bought a few others which are currently self-liquidating.  But the irony here is I have always moved from one place to another, staying in other people’s houses – renting – for the past eight years.

Let me explain why I choose to do this.  My goal is to generate an income from the real property I own.  As long as I can keep my rent expense lower than the rent income I earn, then I will continue to rent.

Almost everybody wants to own a sprawling house with lush gardens and maybe even a pool.  I do.  But living in such a house is a big expense and can be a drain on the budget.  The more sprawling the property, the higher the real property tax – which is computed based on lot and floor area.  The posher the neighborhood, the higher the association dues.  When you live in a big house, you also need to spend big in order to maintain it in its original state.  You also spend more on heat, water and lighting utilities.  You pay higher fire and earthquake insurance. The list goes on.  And if you bought that on a loan, you also have to factor in the interest expense.

But take note – this only applies if you LIVE in that house.  However, if you can rent it out at a price higher than the costs related to it, then that house can actually be considered a business.  If it gives you a net cash inflow each month or each year after you pay off the amortization and all other incidental expenses, then you are making money.  And if you can realistically expect real property prices to increase in your area, then that house can also be considered an investment.  In summary, that house you would consider as an expense if you live in it, can actually turn into an investment that will generate both rental income and a gain on sale if you choose to rent it out.

Of course I want to eventually settle down in my own home in the future.  Not too sprawling, not too cramped.  Just right for sensible tastes.  I could actually do it now, at a quite reasonable cost.  But apart from cost, I have this one tiny problem. I still don’t know where I would actually like to settle down.  The homes I own are scattered over four localities and then I live in another town.  At the same time, for the past ten years, I have been trying to live as close as I can to my place of work in order to avoid traffic.  I’ve gotten used to taking my time in the morning, having a nice, leisurely breakfast before I walk to the office.  I’m not sure if I can give that up so soon. If only offices stayed put, I would buy a nearby condo unit to live in.  But my work has changed three times for the past eight years so I can’t be so sure of a location. I’m thinking once I have my own business or eventually retired to become a farmer, maybe then I can finally be sure of where I want to live.  For now, I have all these houses, but home is where the heart is.  And it keeps moving around all the time for me.

Last year, I met a newly married couple.  They had a tragedy a few years back when the house of the young woman’s mother was burned in a fire.  The young woman almost died in that fire.  Her health soon recovered but she continued to suffer severe emotional trauma.  The newly wed decided to sell their real property and travel instead. They would rent a house for a month or two, moving like Bedouins from one place to another, anywhere close to nature. One time they would live in the highlands, another time on a secluded island, then in a farm living off their organic produce, so on and so forth.  For this young couple, it was a way to heal their psyches.  Not being attached to a particular house or location was a liberating and soothing experience.

In contrast, I see how some of my grade school classmates, now with children of their own, still living in the same town we spent our childhood in.  I guess there’s a different kind of peace and stability in staying put as well, in establishing your roots.

Well, each to his own.  As for me, this is my gig for now.  I dream of settling down on my own home in the future.  To be able to afford that, I just need to invest and stay mobile for now.

 

 

Jim Rogers: Investment Insights and 2016 Outlook

There are but a few brilliant investment gurus today who actually prove their expertise with actual solid gains on their investment portfolios.  However, Jim Rogers is a class of his own.  He not only produced stellar gains by putting his money where his mouth is.  He has actually gone as far as relocating his home and his family from a western location to an Asian one because he believes that the US economy is inevitably bound to collapse and he sees the best growth prospects to be in China.  Rogers sold his New York Mansion for 16 million USD and transferred to Singapore in 2007, particularly so that his two daughters could learn to speak Mandarin. He believes that if it was a smart move to relocate to New York in 1907, it was also a smart move to relocate to Asia in 2007.Now if that’s not proof of conviction, I don’t know what is.

In 1970, Jim Rogers, then aged 28, worked in an investment bank together with George Soros.  Then in 1973, the two left the investment bank and co-founded their own hedge fund called Quantum Fund.  Quantum Fund put its money in international investments and was able to generate an astounding 4200% over ten years from 1970 to 1980. In contrast, the S&P gained only 47% for the same time period.  With his gains, Jim Rogers decided to retire and focused on managing his personal investments.  Now with more time in his hands, Jim Rogers motorcycled around the world, doing investment studies on each country he visited.

Jim Rogers has provided many investors a rich wellspring of investment insights, drawing from his many successes and experiences.  Unlike George Soros who finds it difficult to verbalize his investment processes, Jim Rogers is a wonderful communicator and has written a lot about his investment ideas.  More than just ideas, he actually acts on what he is convinced of and immerses himself in cultures and localities across the globe in his search for the best international investments.

Some of his famous investment insights include the following:

“Most successful investors…do nothing most of the time.”Rogers once mentioned that brokers don’t like him that much because he rarely trades and holds on to his investments for years.  Brokers only earn a commission when you buy or sell.  The individual investor can do well to take heed of this.  At times, some investors will be monitoring the markets on a day-to-day basis and actually be overtrading.  Overtrading leads to higher brokers’ fees and commission expenses which eat up investment capital. Focusing too much on the short term fluctuations can also cause unnecessary panic or stress and lead to an investor getting caught in whipsaws and bull traps.

“On Wall Street… there’s no truer adage than ‘markets can stay irrational longer than you can stay solvent’” Rogers shorted a few companies in the 1970s and went broke because of his trades.  The prices of those companies did eventually crash in two to three years, but not after Rogers had to cover his shorts.  It was then that Rogers realized that you could be smart and still end up broke.  Investors must realize that the markets don’t always follow a rational path.  Fundamentally, market prices depend on how much people are willing to pay for something – and this in turn is affected by human psychology and perception – emotions of greed and fear – which more often than not are irrational.  Just relying on fundamentals, numbers and charts, an investor can predict a likely outcome.  But the market will not go on a straight path towards that outcome.  Without staying power, even Jim Rogers couldn’t wait for the markets to gain rationality.

As for his investment outlook, Jim Rogers still believes that the world economy as a whole is bound to get into bigger trouble this time. He says he is laying low in his investment activities for now as he foresees another global crisis to happen (instigated by the US’ unbridled spending and soaring debt).   He shorted junk bonds in 2015 and is still bullish on agriculture.  Despite his pessimistic outlook on the US economy, he is actually betting on the US dollar to increase in value in view of a global currency crisis he sees forthcoming.   According to Rogers, the world still currently views the US Dollar as safe haven and thus he holds a lot of US dollar investments. Rogers isn’t buying gold yet but believes there will be a buying opportunity in the next two years or so.