CRESCENDO | Period (Yrs) | 15 | ||||
Jan-97 | Jan-12 | Change | CAGR | |||
millions | millions | |||||
Equity | 158.19 | 549.15 | 247.15% | 8.65% | ||
LT Assets | 67.05 | 45.58 | -32.02% | -2.54% | ||
Current Assets | 146.59 | 731.22 | 398.82% | 11.31% | ||
LT Liabilities | 4.84 | 83.04 | 1615.70% | 20.86% | ||
Current Liabilities | 50.41 | 129.39 | 156.68% | 6.49% | ||
Sales | 109.77 | 290.42 | 164.57% | 6.70% | ||
Earnings | 6.87 | 63.71 | 827.37% | 16.01% | ||
Interest expense | 0 | 0.79 | #DIV/0! | #DIV/0! | ||
D/E | 0.06 | 0.26 | ||||
ROE | 4.34% | 11.60% | ||||
Number of shares (m) | 108.5 | 183.48 | 69.11% | |||
Market cap | 117.18 | 345.23 | 194.62% | 7.47% | ||
P/E | 17.06 | 5.42 | ||||
Earnings Yield | 5.86% | 18.45% | ||||
P/BV | 0.74 | 0.63 | ||||
DPO ratio (historical) | 39.85% | |||||
Dividend Yield range | 7.5%-4.7% | |||||
Capital changes | ||||||
2002 | 2/5 ICULS | |||||
2008 | 1/2 Rts (ICULS) | |||||
with 1 free wrt | ||||||
Keep INVESTING Simple and Safe (KISS) ****Investment Philosophy, Strategy and various Valuation Methods**** The same forces that bring risk into investing in the stock market also make possible the large gains many investors enjoy. It’s true that the fluctuations in the market make for losses as well as gains but if you have a proven strategy and stick with it over the long term you will be a winner!****Warren Buffett: Rule No. 1 - Never lose money. Rule No. 2 - Never forget Rule No. 1.
Showing posts with label property. Show all posts
Showing posts with label property. Show all posts
Monday 24 September 2012
Crescendo
Friday 7 September 2012
Sunday 2 September 2012
Real Property Gains Tax (RPGT) & The Property Owner
By: Jennifer Chang | |
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Sunday 26 February 2012
Property investing in Malaysia
Ways to make money from property investment:
- discount from developer
- rental return- completed medium cost apartments; 7-8% pa; poor appreciation; timing not needed; tenant management
- capital appreciation - completed landed homes; poor rental return 3-5%; good appreciation 5-10%; timing important
- commercial properties (shoplots, offices) -rental 6-8% pa; good appreciation 5-10%; location important; for wealthy individuals
- raw land development
- plantation
- orchards/ecofarms
- property development
- buy basic or run-down house - refurbish
- abandoned/haunted house
- auctions
- accessibility being upgraded - OKR, Kesas, Guthrie
- area with new projects
- residential convert to commercial - main roads with conversion potential
- student accomodation - near LRT
- flipping
- bird nest farming
(Source: Milan Doshi)
http://malaysiastocks.blogspot.com/2011/12/property-investing-in-malaysia.html
Thursday 23 February 2012
Saturday 4 February 2012
Desperate homeowners and a dangerous bridge too far
By Ian Cowie Your Money Last updated: February 3rd, 2012
Homeowners who want to move but cannot sell and others stumped by banks’ and building societies’ tighter lending criteria since the credit crunch began are turning to a dangerous alternative; bridging loans.
These can enable a second property to be bought before the existing home is sold and they can beat the mortgage famine by raising finance for buy-to-let landlords to refurbish properties at loan to value (LTV) ratios far higher than high street lenders will now allow.
Duncan Kreeger, chairman of specialist mortgage provider West One Loans, claimed: “Bridging loans net lending increased by 56pc last year, which makes the mainstream market look turgid by comparison. Borrowers are finding traditional longer-term funding harder to come by, which is making bridging finance a more attractive option.
“With high street lenders retreating even further into their shells, they won’t be able to cater for the demand for mortgage finance, particularly from buy-to-let investors, who will turn to bridging to finance their projects.”
Similarly, Ray Boulger, a director of John Charcol mortgage brokers said: “It is certainly true that the amount of bridging has expanded by a large margin over the last couple of years, filling a gap left by the banks.
“Where bridging is particularly useful in the buy-to-let market is for investors who want to refurbish a property after purchase and before letting it. The value is generally increased by well in excess of the refurbishment cost.”
But, while this form of housing finance may seem like a quick and flexible solution to the mortgage famine, it can prove ruinously expensive if a short-term fix turns into a long-term commitment.
Compound interest can prove a cruel taskmaster. With bridging loans costing at least 0.75pc of the sum advanced per month – or as much as double that rate – it can be a struggle to feed the interest meter for more than a few weeks.
David Hollingworth of London & Country Mortgages commented: “We are not a player in the bridging sector but this form of finance is useful as a short term funding option that can be arranged quickly to plug the gap between the purchase of property and later restructure to a longer term, traditional financing.
“While bridging can be used to secure the purchase of a new home before completing the sale of an old one, it will often be used by landlords looking for quick access to funds.
“In any event it is vital to understand the limitations and cost of bridging in the longer term and important to have a viable exit route. Borrowers must have a strategy for refinancing in the longer run.”
But, as the poet Robert Burns pointed out, the best-laid schemes gang aft agley. Plans for profits can be overtaken by events and borrowing to invest is always risky because gearing not only increases gains but also boosts losses.
If that sounds somewhat theoretical, then consider the experience of a senior colleague more than 20 years ago whose wife fell in love with a property they couldn’t quite afford. Rather than waiting until they sold their existing home, they allowed her heart to rule his head and took out a bridging loan.
You can guess the rest. After several months of paying two mortgages, my former colleague put both properties up for sale in a desperate bid to bring the financial misery to an end. It nearly ruined them before they got rid of one. The resurgence of bridging loans now shows how little we have learned from the credit crunch and how quickly people forget the dangers of excessive debt.
http://blogs.telegraph.co.uk/finance/ianmcowie/100014604/desperate-homeowners-and-a-dangerous-bridge-too-far/
Tuesday 17 January 2012
Negative gearing: time to rethink your approach
Bina Brown
December 4, 2011In a rising property market, negative gearing can be a good strategy to build wealth - but watch out when values fall.
There are plenty of reasons why Australians love to borrow money to invest in bricks and mortar.
Some people think the value of property never goes down; others like the fact you can see and touch it.
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Getting ahead ... Aaron Donaldson and Sarah Pike will use their investment property to offset their taxable income.
But, mostly, it is the ability to offset the cost of owning the property - including the interest paid on a loan - against assessable income that makes it particularly attractive.
As long as the loan costs are greater than the rental income, then the Australian Taxation Office allows investors to offset the loss against their income.
This strategy, known as negative gearing, is often considered more a tax strategy than an investment one.
Since the aim of most investment strategies is to make a profit, investors with negatively geared property either hope that one day the rent covers the loan costs or the capital growth in the property is such that they make a profit when it comes time to sell.
As soon as the rent covers the cost of borrowing, it becomes a positively geared property and the income might be subject to tax. Many, however, would say it is better to pay tax on a profit than make a loss.
For most of the 30-or-so years negative gearing has been around, it has been a reasonable strategy based on the capital growth rates of property across the country, says the founder of Smart Property Adviser, Kevin Lee.
However, at a time of global economic uncertainty, betting on capital gains from property is a risky and outdated strategy for most people, he says.
Lee would rather see people save more for a deposit on a property that can then be rented for more than the weekly outlay. If it generates a capital gain, then that is a bonus.
''If you are investing for income, and the income is paying for the property, then you are a savvy investor,'' he says. ''But there are no guarantees for capital growth.''
An accountant and the founder of Mr Taxman, Adrian Raftery, also warns against anyone investing in property simply for a tax deduction.
''The only upside is that you are reliant on the property increasing in capital growth by an amount greater than your outlay - but remember to factor in capital gains tax and what you could have received if you simply had your money in the bank on term deposit,'' he says.
''If a property market is stagnant - like we are experiencing in Australia - then you will be falling behind. If the property market falls like it has around the world, then you are in a dire situation.''
The chief executive of Resi Mortgage Corporation, Lisa Montgomery, agrees too much emphasis is on the tax advantages of negatively geared real estate and not enough is on creating real equity in the property.
Ideally, the property investment strategy of borrowers should focus on creating equity by accelerating payments to reduce their loan.
That equity can then be used to buy additional properties - for which the rent covers the costs of holding the property - if that is part of the financial plan.
The right way
Negative gearing property has supporters and opponents. The tax benefits are an incentive for people to borrow to buy property with a view to making themselves more financially independent in retirement.
For someone with little in the way of a deposit, the tax deductions make it possible to borrow most of the cost of a property, then rent it to pay most of the interest and other costs (see the case study, above right).
But the strategy's success or failure ultimately comes down to the property and the rent it brings in. A mortgage broker with Loan Market and a property investment consultant with NPA Property Group, Adam Zahra, says negative gearing is beneficial only when the total return on the investment - the capital growth and the yield - is greater than the total cost.
''It is pointless to purchase an investment for tax savings if it doesn't provide you with a return,'' he says.
Yet this is exactly what thousands of investors are doing, Lee says.
''Lots of people have done well out of capital growth but lots of other people have not,'' he says. ''In most cases, negative gearing a property is supporting the lifestyle of the tenants.
''If the rent paid by a tenant is not enough to support the cost of owning the property, then people are doing it in the hope that capital gains will come as a right.''
A neutral or positively geared property means the tenant is paying the true cost of living in that property.
Zahra says good research makes it possible to buy property that can be reasonably expected to increase in value and bring in sufficient rent, coupled with depreciation, to almost cover costs.
Depending on the deposit paid and whether there are sufficient capital works allowances and fixtures and fittings in the property that can be depreciated, it is possible to go from having a net rental loss to being cash-flow positive.
Zahra says the best position is to be negatively geared but cash-flow positive. The way to do this is to take full advantage of the tax-deductible depreciation allowances laid out by the Tax Office.
The newer a property, the greater the depreciation levels. Construction costs can be depreciated at 2.5 per cent over 40 years.
The rate of depreciation varies for fixtures and fittings.
The tax deduction from depreciation, known as a non-cash loss, and the difference between the income and expenses (the cash loss) can result in a positive cash flow from the ATO.
It is important to obtain a depreciation schedule prepared by a quantity surveyor to maximise relevant tax deductions. Zahra says the cost of holding an investment property can be very tax-effective, especially for high-income earners. It is possible to get the tax back on a regular basis rather than the end of the year by using a tax-variation authority (formerly known as a 221D). This can significantly reduce the cost of holding the investment property.
Lisa Montgomery of Resi says that even with the tax advantages of negative gearing, it won't suit all investors.
''There is always some risk associated with borrowing to fund an investment,'' she says. ''If you overextend your borrowing, rising interest rates could restrict your ability to meet the loan payments.''
Montgomery says investors should minimise the risk of gearing by choosing an investment property that is likely to increase in value throughout the investment period.
''Your pre-buying research is the key to choosing the property wisely in the first place,'' she says. ''You should also have sufficient income to cover your costs if your tenants are late with their rent, or if your property remains vacant for any period of time. You also need to be able to fund ongoing repairs and maintenance.
''As a general rule, only investors with the financial capacity to absorb the effect of potential falls in property values, as well as an increase in interest payments, should consider negative gearing.''
How it works
There are two types of costs associated with owning an investment property.
Cash costs include interest payments, bank fees, maintenance costs, insurance premiums and property management fees.
The other type is depreciation, which is a non-cash cost. If you add the amount of cash and non-cash costs and they exceed the rental income, then there is a net rental loss which may be able to be claimed against your other taxable income, such as your salary.
A typical example might result in $27,000 in cash costs and $20,000 in rental income. This would mean that the tax benefit based on the $7000 net rental loss would be as below.
We can also see that if the property was new and had approximately $8000 in depreciation (typical value) then this can alter the cash flow, as below.
What the table shows is that negative gearing is more beneficial to people in the higher income brackets who pay tax at the top marginal rate.
In the above example, the taxpayer on the highest tax bracket gets a tax refund of $3255 and would be out of pocket $3745. But if they were in the lowest tax bracket they would only get $1155 back and be out of pocket by $5845.
If depreciation is accounted for, then the cash outlay for a person in the highest tax bracket could be $25 a year. For a person paying 16.5 per cent tax, the cash outlay would be $4525 a year.
The ATO publishes a rental property guide, which includes how to treat rental income and expenses, including how to treat more than 230 residential property items. It also provides a guide to what can be depreciated at what rate.
Investment makes sense
WITH a high taxable income and a home almost paid off, it made sense for Victorian-based insurance agent Aaron Donaldson and his wife Sarah Pike to negatively gear an investment property.
With the help of NPA Property Group and having done their research they settled on taking out an investment loan to buy land and build a four-bedroom house in Toowoomba, Queensland, which they would rent out.
Aaron maximised his negative gearing by borrowing the entire purchase price and transaction costs. ''It made more sense to leave any deposit in our offset account and use this to reduce our interest on loans which we couldn't claim the negative gearing benefit on,'' Aaron says. ''Being a new property, we saved on the stamp duty and the depreciation value is much higher than an existing property.''
They had the added bonus of being able to do a tax variation and claim a tax deduction from the ATO immediately, without waiting until they filed their end-of-year tax return.
The property cost $370,000 all up for the land and construction and it was recently valued at $420,000. The tenants moved in on December 2 and are paying $380 a week rent.
''With the right advice we got some capital growth before we even started renting it and the tax deduction we got up front will almost cover the gap between the rent and the mortgage payments,'' Aaron says.
The couple can now use the costs of the property, including loan interest, depreciation, repairs and maintenance, to offset their taxable incomes.
Tax treatment of negative gearing
Interest on an investment loan for an income-producing purpose is fully deductible. Any shortfall is offset in an individual's taxable income, which includes the rent they receive from the property as well as any salary.
Ongoing repairs and maintenance and small expenses are fully deductible.
Ongoing repairs and maintenance and small expenses are fully deductible.
Property fixtures and fittings are treated as plant and a deduction for depreciation is allowed, based on effective life.
Capital works (buildings or major additions constructed after 1987 or certain other dates) receive a 2.5 per cent-a-year capital works deduction (or 4 per cent in certain circumstances). The percentage is on the initial cost (or an estimate) until exhausted. The investor's cost base for capital gains tax purposes is reduced by the amount claimed.
On sale, capital gains tax is payable on the proceeds, less some costs. A net capital gain is taxed as income but if the asset was held for one year or more, the gain is first discounted by 50 per cent for an individual.
Read more: http://www.smh.com.au/money/investing/negative-gearing-time-to-rethink-your-approach-20111203-1oc58.html#ixzz1jizutgaC
Monday 26 December 2011
The Five Year Rule for Buying a House
by THURSDAY BRAM
When I first considered buying a house, my entire family got involved. I have the luck of being related to real estate agents, investors and other experts that are more than happy to give advice about buying a property — even before you ask.
The first thing they asked me was exactly how long I expected to stay in the house. Most people don’t know these sorts of things for sure, but we wanted to make sure that I’d own the house for at least five years.
The Upgrade Cycle
It definitely varies by geographic area — if not by specific neighborhood — but a lot of folks in my area will buy a townhouse or condo as their starter home. After about three years, they’ll start looking for a bigger place to upgrade to, either a bigger townhouse or a standalone home. Depending on the family, that upgrade cycle can go through a couple of times as people work their way up to a house that they are happy with and is big enough for their family.
The thought seems to be that if you’re making a little more money every year, by three years out you’ll be in a position to afford a bigger house. And everyoneknows assumes that buying is more cost-effective than renting — as long as you’re paying down the principal on your mortgage, you’re going to come out ahead.
The thought seems to be that if you’re making a little more money every year, by three years out you’ll be in a position to afford a bigger house. And everyone
But with an upgrade cycle of about three years, you’re actually losing money.
The Five Year Rule
When you purchase a house, the general rule is that you want to be sure to be in the same location for at least five years. Otherwise, financially, you’re probably going to take a hit.
The first hit is your closing costs. Every time you go through closing — buying and selling — money hits the table. Depending on where your house happens to be, the buyers and sellers pay different amounts, but everyone pays something. We can easily be talking about thousands of dollars and limiting how often you have to pay out that kind of money is always a good idea.
But you take a second hit when you look at your mortgage statement to see exactly where those monthly checks you send in are going. The way mortgages are structured, you pay much more interest in the first few years that you own a house. Usually, it isn’t until you’re about five years into paying down that mortgage that you’ve made enough progress on the principal that the math actually works out that you’ve gotten a better deal than paying that monthly check to a landlord.
David’s Note: When you take out a mortgage, you are paying an interest rate on what you owe. So, in the first year, when the principal is highest, the interests you need to pay is the highest as well. However, since the monthly payment is the same through the loan (at least with a fixed rate mortgage anyway), more of the payment will be used to cover the interests payments, and therefore less goes towards the principal. As your principle goes down, your interests payments will go down, leaving more of your check to go towards the principal.
If you can wait at least five years to move, you’re in a better position to be ahead of the game.
Defeating the Five Year Rule
Five years is a generality. If you add in a couple of other factors, you can make buying a house that you don’t plan to stay in long-term a better choice.
The biggest factor is how much you’re going to pay on your mortgage. A lot of people buy as much house as they can afford, according to what lenders offer them. That’s usually the upper end of what you can financially manage. If, however, you buy at the lower end of what you can afford and make extra payments, you can pay off a bigger chunk of the principal. You need to run the numbers for the specific house you’ve got your eye on, but you can often come out ahead.
You may also consider buying a house that you won’t stay in for five years — but that you also won’t turn around and sell. It’s not out of question to purchase a home, start paying it down and fixing it up so that you can turn around and rent it out. You do need to be careful that you’re choosing a house that you can afford even if you don’t have a renter, on top of a mortgage for your next home. There are plenty of other arrangements that can work out similarly, but you need to study up on real estate before making such a choice.
But if you’re buying just on the basis of what the bank says that you can afford and you don’t want to think about it, stay in the rentals until you’re ready to spend at least five years in the same home.
David’s Note: Here is a quick and dirty formula that you can use to help you figure out whether it’s better to buy or sell that works with any duration of ownership. Try to determine the answer to: Seller and Buyer Agent Fees When You Sell + Purchase Price + Maintenance Cost for the Time of Occupancy + Interest Paid on Mortgage + Investment Gains from Your Down Payment + Taxes Paid Such as Property Tax + Closing Costs – Selling Price. This number could come out negative or positive, but if it’s lower than the rents you would have paid during the same time frame, then you would be better off buying. If the number is higher, meaning that the selling price wasn’t high enough to cover all those costs, then renting would be the more cost effective choice.
Of course, the big question mark is your selling price, which you sort of have to estimate. Also, note the obvious that the higher the selling price, the more buying makes sense. The five year rule is actually pretty arbitrary, but if you assume that the long term trend of real estate is up, do you see why buying makes sense the longer you stay in the home?
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