June 21, 2009
me & my money
Penchant for property pays off
Astute couple aim to pay off their three mortgages in eight years and retire in their 50s on rental income
By Lorna Tan
Like many Singaporeans, Mr You Der Chin has a penchant for property and, indeed, his investment in real estate has borne fruit.
'All the properties I invested in have appreciated in value and given me and my wife good rental yields over the years,' said Mr You, 39, the vice-president, treasury and market risk, group operations and technology, at OCBC Bank.
He and his wife, Ms Winnie Tan, 38, did their sums on what properties to invest in soon after they graduated from the National University of Singapore (NUS) in 1995. They met at NUS and got married in 1998.
He favours property located near international schools and MRT stations.
The couple currently own three properties; two are residential and the third commercial. They plan to pay off all three mortgages in eight years' time.
'In 10 to 20 years, our properties will be our safety net and we can ride on the rental income,' he said. He prefers property investments as land is scarce and there is no need to monitor them as tediously as stocks and unit trusts.
Before Mr You joined OCBC in 2005, he was a senior consultant with an IT consulting firm helping banks to implement their treasury systems.
His wife runs a Kumon educational franchise in Clementi. They have a son, Wayne, 10.
Q: Are you a spender or a saver?
I consider myself a saver. My family saves 40per cent of our combined monthly income, spends 35per cent on our mortgages, 10per cent on insurance and investment, and the remaining 15per cent on miscellaneous expenses.
Q: How much do you charge to your credit cards each month?
I charge around $2,000 each month and pay off the full amount each month. I withdraw $150 a week from the ATM.
Q: What financial planning have you done for yourself?
The bulk of our family's investment, approximately 70per cent, is in properties. The average rental yields we receive from the properties amount to around 10per cent. Our other investments include 5per cent in unit trusts, 5per cent in blue-chip stocks like OCBC and SingTel, 10per cent in life insurance and another 10per cent in endowment funds.
My life cover is about $200,000. I also participated in OCBC Bank's Employee Share Purchase Plan (a savings-based share ownership plan) in 2006 and I managed to make a profit of a few thousand dollars at the end of the two-year period.
Q: Moneywise, what were your growing-up years like?
I grew up in a middle-income family comprising my parents and two younger brothers. From a young age, my mother instilled in us a sense of thrift and how we must spend within our means.
My father owned a provision shop at the void deck of an HDB block in Queenstown and we lived in a three-room flat above it. He had no workers so we kids helped out.
I started doing that when I was seven. It was a lot of work, long hours with low profit margins. My mother is a housewife and also helped my dad out in his shop.
Q: How did you get interested in investing?
My first foray was the purchase of a life insurance plan during my National Service. Having majored in economics at NUS, I developed an interest in equity markets. However, being risk-averse, I am always looking at longer-term investments that are relatively risk-free and stable.
Thus, I monitor only blue chips with long-term potential. I have since also moved on to properties, which I feel are safer investments in land-scarce Singapore.
Q: What properties do you own?
In 1998, we bought a two-bedroom, 1,200 sq ft freehold condominium unit near the Canadian International School in Toh Tuck for $500,000. Its rental yield is more than 5per cent a year. We also own a double-storey, 2,300 sq ft terrace house in Hillview, which we bought for around $1.3million in late 2007.
Q: Home is now....
The terrace house in Hillview.
Q: What's the most extravagant thing you have bought?
The house that we currently live in is by far our most expensive investment.
Q: What's your retirement plan?
We plan to be debt-free in eight to 10 years' time and to retire in our 50s. Based on our estimates, we will need to have a passive income of $6,000 a month in order to retire comfortably and be able to travel as often as we like.
Q: I drive....
A silver Toyota Altis.
BEST AND WORST BETS
Q: My worst investment to date...
In the mid-1990s, I invested in a club membership thinking it would appreciate in value. However, the price tumbled drastically during the 1997 economic crisis. I sold it at a loss of more than $10,000 in early 2001.
Q: My best investment to date...
My best investment is a 2,500sqft commercial unit in the Bukit Timah area. We bought it in 2005 for more than $300,000. Located near a potential MRT line near Ngee Ann Polytechnic, the unit is rented out to a kindergarten. It was last valued at nearly $1million in the middle of last year. The rental yield is more than 10per cent per annum. We liked the area and surveyed it for a long time, starting in 1997, so we knew it was a good price when the unit was up for sale. We were confident then that we could obtain a school licence for it. The unit is now split into four classrooms.