Raising Rockstar

1) Kings’ recent CNBC Squawk Box feature about investing in student accommodation…

It’s a thought process we’re having re The Rockstars’ college educations someday as well:

We can’t afford to buy anything we really want in terms of a family home at these prices (story of HK life <roll eyes>). So what about a property trade idea related to the kids’ education?

Rockstar is almost 7 now. This student accommodation (in Canterbury, 56 minutes from London) is to be completed in 2 years, and for ease of analogy let’s say we have a 10 year plan upon getting the keys. Rockstar would be close to 19 – college-going age – by then.

Now, let’s say we look at a student apartment of GBP 110k notional. The terms of this trade are: pay 30% upfront, another 20% in 6 months, then remaining 50% in 1.5 yrs upon completion.

Upon completion of this development in 2 years when you need to pay the other 50%, this UK property developer will provide funding (i.e. let you borrow said 50% from them or effectively pay them the other 50% over 5 years, at a lending rate of 5% p.a..)

Add to this, they guarantee a rental yield in those 5 years of 10% p.a. (by definition that means if you can’t rent the apartment out in those 5 years with a yield of 10% p.a., the developer tops this up. If you manage to get more than 10% p.a. rent, you keep the difference.)

For the next 5 years from completion date then, you’re paying roughly a total of 5% p.a. x 5 years = 25% financing or interest + the remaining 50% of the property price spread over 5 years.

For a GBP 110k unit, that works out to a P+I of GBP 68,750.

You repay this total amount over 20 quarters (4 quarters in a year X 5).

=> each quarter/ every 3 months, you’re paying GBP 68,750/ 20 = GBP 3,438 before taking into account rental income guarantee from developer.

Your cash-flow on the unit for the first 5 years (after 2 year completion date) will therefore look like this:

Per Quarter:

Quarterly repayment to developer: GBP 3,438

Guaranteed rental of 10% p.a.: GBP 2,750

less estimated expenses of 1.5% (property maintenance, etc): GBP 413

Net Rental Guaranteed 8.5%: GBP 2,338

Shortfall per quarter (i.e. net amount you pay every 3 months) = GBP (3438 – 2338) = GBP 1,100

(or per month what you pay, net, is): GBP 366.67 (this goes up if your maintenance expenses go up)

5 years after completion, your entire property is paid up.

But Rockstar reaches college age roughly 10 years after completion, not 5:

Rockstar would be ~14 when the student accommodation is all paid up. By the time he reaches college age of around 19, the dorm property would’ve been fully paid up for the last 5 years.

What happens in those last 5 years?

Worst case: ZERO rental after developer’s 10% p.a. rental yield guarantee for 5 years expires. You’re holding a fully paid up dorm property that costs you estimated GBP 413 a month to maintain.

Even Worse Than Worst Case: Crime goes up, people break your windows, etc etc  and so maintenance cost goes up and you’re out even more than GBP 413 quarterly.

Say however you score a rental similar to what the developer was guaranteeing, i.e. net 8.5% p.a. after maintenance expense, or GBP 2,338 quarterly, for the remaining 5 years in  that 10 year plan.

When Rockstar’s 19, we’d have a paid-up dorm room and GBP 46,800 positive cash flow/ towards his college fund.

(Obviously this thought process works for anything with similar terms – just insert corresponding maintenance fees, rental income, financing numbers…. Can have a simple spreadsheet to compare projects…. if there were other projects offering this that is…)

Where’s the risk? 

The person or entity making the guarantee (and for a property development, your risk is the developer.) This holds true for any investment product that has a guarantee – whether of principal or yield. A guarantee is as good as its guarantor (BUT bear in mind a super blue-blooded developer, AAA rated bonds issuer or whatever may not bother to try and guarantee anything to begin with…)

No investment exists that furnishes a return without a corresponding risk, that is like Newton’s Law Of Investment Products. What you can change is the form that risk takes – you can choose a form of risk more comfortable to you. You also need to decide if the corresponding risk is worth the return offered. 

(For eg, take a simple Dual Currency Deposit which enhances your yield via you selling a currency option to the bank, the worst thing that can happen is the option you sold is exercised against you, thereby converting your say, HKD to GBP at option strike rate (which only happens if HKDGBP trades to where it is favorable to the bank and not to you for the option to get exercised – which is the risk you take for the extra return). But if your kid is going to college in the UK and you have to convert your HKD at some point to GBP anyway…………. And then said enhanced yield from option premium goes to offsetting the less favorable exchange rate.

In other words, the same product can look quite different based on whether your kid is going to college and you had to buy GBP anyway…………………… or a dorm room…… Or a college. Or a football team………. :D)

So anyway. The thing we liked just from the whole biased parent (:D) perspective was: Going to college? Here’s a place for you to stay. Oh, Mum and Dad might drop by just to check your plumbing is ok. We are nothing if not good landlords! 😀 

I’m kidding, but it is a partially emotional purchase, in an investment notional much more palatable than the crazy HK property prices, if you want a taste of property investments. So yeah, if your kid doesn’t end up going to college where you own a place (I could accept Harvard 😀) then you’re back to simply whether there is cash flow that helps with paying tuition.

–

–

2) Speaking of Harvard…... A few years ago this course attracted 100 students. Today that’s closer to 800 and only about 10% of those have a background in computer science. Why CS50 (Introductory Computer Science) Is The Most Popular Course At Harvard.

Professor David Malan lecturing at Harvard

Useful to know what is “basic” in tech nowadays <sweat>

–

–

3) And if it wasn’t covered by “basic” tech……. Fake Facebook Pages And Promos May Steal Your Identity. Enter your personal information to be in the running to win an iPhone or Samsung Galaxy, that kind of thing.

At the bottom of the article was a parting “…be cautious about the pages you like on Facebook and the things your friends share….”  that struck a little too close to home. One day I’m on this and I see a Forex trading site an old friend has liked. This is particularly damning because said friend just happens to be a Forex structurer, formerly a really bright auditor (YES, people. THEY EXIST). I went on the site, thought it looked ok – but most importantly, this friend whose opinion I respected very much about this stuff had liked the site. Now, I don’t trade forex, but I wanted market news updates, and so I inputted my information.

So I’ve been getting umpteen phone calls asking me to “get started trading”. (Uh… what?) They sound like very nice people and most of the time I don’t pick up my phone <sheepish> and all my good friends know not to leave voice messages so technically, not difficult to ignore.

BUT. 

I went to ask this old friend whom I hadn’t spoken with in awhile about his experience with this site because it was his “like” that had heavily influenced me and he said HE DOESN’T KNOW HOW HE CAME TO “LIKE” THE PAGE. HE HAD NEVER HEARD OF THEM. 

Y-eah. So even more not picking up my phone now. Or Facebook-ing much. I’ll go like something if you’re my friend and you ask me to but otherwise………. Oh, remember to check with old friends about pages they apparently think are awesome. 

–

–

4) And I seem to be on a version of the Kevin Bacon Game here, because Apple And Facebook Pay Employees To Freeze Their Eggs.

In.SPIRED.

From someone who was once so career focussed she really had the thought: That is just so nice of them. (And yes, in another life I really was that person. I could say no to sex before marriage, but I was aware I had a biological clock and I hadn’t wanted to “settle” because of it. Please don’t scream at me, I wasn’t even Christian until about 6 months before meeting Kings. My first prayer as a new Christian btw, had been “Please Lord let me meet the right person, or else please don’t let me meet anyone.)

–

–

5) OK PICTURES. And some irony in  This Dog Has No Idea What She’s Doing.

Bailey drinking something that is not Bailey’s (sorry!).

Her Instagram claims she doesn’t know what she’s doing. I claim this isn’t a bad idea. Because JD thinks beer is disgusting.

And well dis is just art.

–

–

6) Photographer says goodbye to her pet.

Chubby and Maria, who got her when she was 7.

I wasn’t intending to click on this Bored Panda link but I’m glad I’m did. There were quite a few coincidences – firstly, one of my good friends will be getting a dog for her daughter (also 7) in the near term and has been putting a lot of thought into it.

Secondly, Chubby looks quite a bit like Vickey, my first dog. Similar markings and coloring, similar size (Chubby’s well, a bit chubbier but that’s about it). I was 13. Vickey was put down peacefully after multiple organ failure when she was about 13. I was going through my mail on the MTR, headed back to my rented bedroom after staying late as usual at my first banking job, when I opened a small card with a red rose on the front, informing me of the fact as gently as it could. I got off at City Hall and walked over to sit at Boat Quay where I proceeded to cry my eyes out.

And then some creepy guy tried to pick me up and I took his head off. (Seriously. I yelled something like “You idiot. Does it look like this is a good time to pick someone up?!”)

Not much changed.

R.I.P. Chubby. And Vickey. And all the countless much-loved animals who amaze us with their capacity to love unconditionally and with total abandon.

For real though, better get a dog you like as well, because when your kid goes off to college that dog’ll be yours. That’s actually not so bad. My former pre-natal instructor had a 20 year old son who kept some carnivorous fish in a tank in his room – the thing ate live goldfish. She did not enjoy caring for that when he went off to college.

–

–

7) Rockstars skit is When Lofty Readings Of Science Fail To Inspire, Instead Producing Altitude Sickness, One Must Repair To The Literary Equivalent Of The Chip Shop At Base Camp And Read Mr Men To One’s Sister. While She Partakes Of “Gwapes”. 

Hello dere.

(Yeah I know my title is longer than my skit 😛 Rockstar’s been revisiting his Mr Men (which are now the Miss’). And I don’t photograph them playing in here vm because the Miss is currently seriously accident prone due to a basic lack of respect for heights, hard objects and well, pain and I have gone through three different foam toddler-safe edge guards and nothing sticks to those race car bed edges for long.)

Good weekend dears…

1) The Samsung Solve For Tomorrow competition for Poly and Uni students, currently going on in Singapore (my alma mater Nanyang Technological University is one of the contest partners :).

Friend of a friend has a submission with the catchphrase “Correcting lazy eye by playing video games,” in the Samsung Eyenovation App:

They aim to create eye exercises on-screen packaged as video games which, when played while wearing special goggles, help correct lazy eye. (Quite interesting, right? Think what you can do with this! Subliminal messages about not eating candy or loving math….. Lazy eye is just the beginning! :D)

–

–

2) He’s Not Scary, He’s A Little Boy. It’s here because Mental Note To Self to start thinking of proper responses if we ever find ourselves in a situation like this..

Jameson’s mum writes “as the mother of a child who looks different” that correcting your child’s curious (but innocently insensitive) remarks and scurrying off embarrassed still isolates her child and she would prefer you come up and meet them. (Of course in HK possibly more people don’t want you to do that and are going to snap at well-meaning, fumbling you, so maybe Response A if they look like they want you to come meet them, Response B if they look like they just want you to correct your child and run away, Zero Response if they look like they are going to take your head off if you engage………)

Jameson has craniosynostosis

No, I didn’t know what cranio was until this story too. Off Wiki it says this happens when the joints between the baby’s skull fuse too early and so the brain has difficulty growing normally (it appears fixable via surgery at least to some extent, depending on each individual case).

–

–

3) My Year with Malala.

pic from telegraph.co.uk

She was shot on the way to her father’s 800-student school where she was also a student, and in his school bus.

“…..One of her classmates says to me: “We could all have been Malala, but our parents wouldn’t have let us speak out publicly as hers did.”…”

–

–

–

4) This Is What Common Core Looks Like – blog post by parent of third grader re math in…… looks like the States and possibly Canada? (As in, standardized tests). I found this when another parent (who lives in Toronto) was bemoaning the same problem… I think Dooce (y’know, Queen mummy blogger in the States) also complained about it…

Dunno what “common core” is, I can understand this counting up one but then remember that the parent I know who is complaining about this was a top engineering student in college and (then) first Asian valedictorian speaker to boot. (That guy didn’t just score As, he scored 100%s in college. And 3rd grade math is already irritating him.) So I mention because Tuition Classes For Parents Is Where This Is Going……….

–

–

5) This one’s a slightly dated report newly circulating again about discrimination against males, after airlines like Virgin Australia set rules like no male passengers sitting next to minors.

https://www.youtube.com/watch?v=3fL9RmVtMP0

Male passenger is asked to change seats because he is seated next to two unaccompanied minors. The channel goes one step further when they stage a male and female adult taking pictures of kids – the female is allowed to do so, while the male gets stopped and his camera checked by the lifeguard.

I’m going to put my foot in it and say:

1) Re male passenger having to move seats – I wouldn’t feel discriminated against (unless they give me a rotten seat), I’d actually rather just move because I don’t know the minors/ kids. What if some strange kid says, “Give me 100 bucks or I’m going to say you’re bothering me, and I just feel weird“?

Actually I’d rather ask to move. Anyway this is one situation that can easily be moot – just put a flag in the ticketing system that when a male passenger checks in they don’t give him a seat next to any unaccompanied minors. Then no one has to be made to move. All the frequent flier flags, airline staff always greeting frequent fliers, they pre-order vegetarian etc flight meals…… should be quite doable right, to just never give ’em seats together….

2) As a parent, especially a doting dad, what would be your knee-jerk reaction if your precious little girl flings her arms around you and says “Daddy! That strange man is bothering me!” Exactly. I would too.

3) So if some other rowdy kid at Funzone throws one of those plastic baskets for holding foam balls at your child’s head and you step in only to have the little girl who threw it run to her parent, fling her arms around them and say “That strange man is bothering me!” (inspired by a true story – I saw a little girl throw a basket at an older boy’s head and when his dad said something she turned around and yelled at his dad that the dad “messed with her first” (“lei gau ngor” in Canton), what would you do?

I’m just saying. Because often when I stepped in at playgrounds in cases when there were some seriously naughty kids bothering my kids (I’m talking things like when they say, “You’re not pretty enough to play with us,” or “You’re too little to be our friend”), at the back of my mind has been that boy’s dad and that little girl I saw at Funzone, and thinking, however unfairly as I stand up for my kid, fortunately I am female. (I know, sounds horrible.)

–

–

6) Ok, change subject. Best Easter Eggs In Movies. No idea why they call ’em that, but I grew up with Indiana Jones and Star Wars and this e.g. of George Lucas and Steven Spielberg flirting with each other through the years is cute (get a room, guys 🙂 :

Hieroglyphic of R2D2 and C3PO circled

I remember as a child actually seeing this and thinking “Ohh the people here know about Star Wars too!”

Years later their love remains true… (That’s ET sitting in a galactic senate scene of Phantom Menace)

–

–

7) Rockstar Skit this weekend is therefore Umm, Not Lucas And Spielberg:

Can just see Rockstar all dripping with disapproval…

Rockstar barely scratches the surface of her composure by posing with her Walking Llama (the things this blog has me typing)

Give it up, Rockstar. Sigh. Poor Rockstar.

(Miss is uh, posing with Rockstar Trying To Get Some Peace. You know, like when you are at the Eiffel Tower or find a pink elephant and Pink Elephant! Take A Picture Of Me With Pink Elephant!)

Good Weekend, Dears…