Monday, September 03, 2007

Monthly Review - August

My net worth decreased by 1.05% in July.

The year to date increase is 19.3%.

The return on my investments was negative with just about everything moving in the wrong direction. In some case the downward movements were due to, or made larger by, adverse currency movements.

Here are the details:

1. my unit trusts fell in value during the month;

2. my residual share portfolio was almost unchanged in local currency terms but took a beating due to adverse currency movements;

3. my investment in silver was down;

4. my tenants continued to pay the rent on time and rents continue to be higher than the expense component of the outgoings. The exception is the new flat which is being renovated. However, even though I have a small negative cash flow on the portfolio as a whole (a situation which will change once the new flat is leased) income is still higher than the expenses;

6. Expenses were moderate. The only unexpected item was being forced to pay a deposit for our Christmas holiday (!) in order to secure the booking;

7. my income during the month was at the high end of the range.

The combined effect of the combined effect of the above resulted in a 1.33% decrease in net worth at month end.

The only investment activities undertaken during the month were (i) regular monthly payments into two small cap investment funds and (ii) paying the second installment for the fit out cost of the new property.

August brought to an end my lengthy run of consectutive monthly increases in net worth.

1 comment:

Deepak Malhotra, JD, BSEE, Registered Patent Attorney said...

I am an attorney and real estate investor in the United States. I have about 40 rental units, most are in the U.S. but I have 5 in Mexico and one in France. All the ones in the U.S. were positive cash flow (with 20% down) when I bought them (in the last five years) but if I were to sell them, the new owner would have negative cash flow due to prices increasing quicker than rents. Real estate has been very good to me, with double digit returns on my cash invested every year due to leverage and rental income.

I have been concerned about the fall in the U.S. currency. In the past, I have assumed that currency markets are controlled by central banks and that there is no way for a small investor to know what is going to happen. But now I am fairly convinced that the Chinese Yuan will continue to appreciate against the dollar if, for no other reason, because the U.S. government wants that to happen to reduce the trade imbalance.

Since I like real estate, I looked into real estate in various Asian countries, as a hedge against dollar depreciation. I looked in India, but rent yields are very low, laws are very pro-tenant, and it is difficult to remove your currency other than your initial down payment. I looked in Shanghai China but was told you can only lease the land. I looked in Singapore and was told that you lease the land there too. I looked in Thailand but you have to have a Thai partner and I heard that there are a lot of title problems, plus my Thai friends don't like what is happening to the government there.

I read with interest that you have positive cash flow on your real estate. I am curious to hear 1) if foreigners without any ties to Hong Kong can buy real estate there; 2) what sort of income and expenses can be expected including management expenses--your property would be a good example; 3) what sort of prices per square metre are to be expected; 4) are there any areas to be avoided or preferred; 5) what sort of risks are involved and how can they be mitigated (see www.mexicorisks.com for examples of risks of buying real estate in Mexico); 6) can you point out a graph that shows historical appreciation rates or real estate values for Hong Kong. I know there was a nasty decline in the 90s but what has happened in the last few years; and 7) would you recommend Hong Kong real estate to a foreigner in the U.S.: