New lease signed - 12.8% increase

One of my tenants has decided to vacate at the end of May. The agent was instructed to advertise the property for rent on Thursday and a new tenant signed a provisional agreement last night.

The good news is that the new rent is 12.8% higher than the old rent.

The bad news is that I am not actually any better off because:

• there will be a five week vacancy between tenancies
• I have to pay the agent
• I have to pay the stamp duty
• I have to pay for the flat to be repainted, for the airconditioning units to be cleaned and some other minor touch up work

It will take approximately 22 months of the higher rental to absorb these costs - and that is before tax or discounting the fact that the costs are up-front while the revenues are in-arrears. In one simple lesson, this explains why I try very hard to keep existing tenants in place even if it means receiving less than full market rent.

I would have been better off keeping the existing tenant at the old rental (which was not an option).

Still, it could be worse - I could have had an extended vacancy or a smaller rent increase.

Sinopec purchased

This morning I added some more shares in Sinopec (HK:386) to the portfolio. With a single digit pe and a dividend yield above 4%, the shares represent good value in both absolute and relative terms.

I paid HK$8.62 for the additional shares.

Five paydays to go*

With retirement at the end of September now less than five months away, it's time to check off a few items. I have been taking a long hard look at our expenses and we have taken steps to reduce a few:

1. as posted, I have cancelled my term life policy - this saves HK$41,000 in annual premium;

2. we will complete the switch from my unsubsidised medical insurance to my Mrs Traineeinvestor's partly subsidised medical policy. While our current policy provides higher coverage, the premium is many times what we will be paying going forward. Based on a look at our actual medical bills for the last few years, we will be better off by several thousand dollars a year unless we have a major incident. In effect we are reducing costs by taking on a bit more risk;

3. my disability insurance will fall away at the end of September saving us HK$12,729 in annual premiums;

4. I have been shedding management responsibilities which has shortened my working hours. As a result, there is less pressure on me to get to and from work quickly and I have begun substituting bus for taxi. Depending on my overall commuting usage post retirement, by the time the process completes, I expect my annualised savings will be around HK$8,000;

5. my SCMP subscription was up for renewal this week and I have switched to the on-line version saving HK$1,239 per annum;

6. we have decided to spend Christmas in Hong Kong this year. Last year we went to Australia which cost multiples of the cost of the previous year's Christmas holiday in Thailand. This year we are going to the other extreme and cutting from three family holidays to two (Easter and summer). Holiday plans in future years will depend on the state of the finances;

7. we have decided to defer our home renovation project for one or two years.

Of course, I do have some planned and unplanned expenses in the pipeline, including my university enrolment fees, the cost of a new computer (I had originally budgeted to replace my lap top every three years but due to a HD failure will be doing it a year early and switching to a more expensive Apple product) and the cost of recovering data from my failed HD (about HK$5,000).

Among other items in my "to do" list is updating my will and cleaning out my office.

There really isn't much else to do.

* previous "X paydays to go" posts were based on a 30 June retirement date.