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AK71: 'My total passive income from REITS this year is nearly $105K"

AK71 is single and has just turned 40. He is a business executive in a local SME. After selling his properties a few months ago, he moved back to stay with his parents. He started investing in the stock market as an undergrad although he had no knowledge of TA or FA. "Totally ignorant, I shouldn't call myself an investor back then. I am a little less ignorant now, I  hope," he says.

The following content is reproduced with permission from AK71's blog http://singaporeanstocksinvestor.blogspot.com

 

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ON 7 DEC, I received income distribution from AIMS AMP Capital Industrial REIT. It was the final distribution for my portfolio of S-REITs this year.

Total income distribution received in 4Q 2011: S$ 29,040.65.

Add this to S$ 75,785.49 received in the first three quarters of 2011, the grand total for the year is S$ 104,826.14.

I received more income this quarter because I made use of the weakness in the stock market to accumulate more units in selected S-REITs.

I have imperfect knowledge definitely and I can only try to do the best with what I know. I don't spend time asking questions which I cannot reasonably find answers for.

As many may already know, it was after much deliberation that I decided to share in dollar terms the passive income I receive from my investments in S-REITs. From the flood of comments I received in my last blog post on the subject, I guess readers do appreciate this candid sharing.

However, I doubt such a blog post serves any other purpose than to show what is achievable if we put our minds to it. The message is really simple and it is meant to inspire.



Blog post on Sept 18: With the end of 2011 more or less in sight, I decided to take a look at how my aim to generate at least $50K in annual passive income from the stock market has fared this year. Of course, compared to the end of 2010, many things have changed. Don't they say that the only constant in life is change?

Saizen REIT was my largest investment up till early this year. The massive earthquake that struck Japan on 11 March 2011 left huge areas of the country devastated, areas which are economically important. I reduced my investment in Saizen REIT even though its buildings were largely unaffected with only a handful requiring repair work.

It was a decision premised upon possibly more difficult times that would hit the country and from a technical standpoint, further upside in its unit price could be capped. So, reading the charts back then, I waited for a rebound in the REIT's unit price and partially divested my investment in the REIT at gap resistance.

Next, I tweaked my portfolio with funds freed from the partial divestment of Saizen REIT. I further increased my investment in First REIT and initiated long positions in Sabana REIT and Cache Logistics Trust after doing the necessary due diligence.

Plaza_Medan_Fair-1
Plaza Medan is part of the Lippo Malls REIT. The plaza's tenants include Carrefour, KFC, A&W, Electronic City and Timezone. The plaza's Net Property Income yield is 8.5%. Photo: LippoMall REIT

Not long after, I reduced my investment in AIMS AMP Capital Industrial REIT, shifting the funds from that partial divestment to Sabana REIT, in the process balancing the two REITs' weight in my portfolio.

In 2011, thus far, I have received income from the following S-REITs:

1. AIMS AMP Capital Industrial REIT
2. Saizen REIT
3. First REIT
4. LMIR
5. Cache Logistics Trust
6. Sabana REIT
7. Suntec REIT
8. Cambridge Industrial Trust
9. FCOT

Total: $75,785.49



The following are comments by some readers and AK71's replies. For the full works, visit AK71's blog
 

>> Hwang said... AK, the number is IMPRESSIVE! Sure you can retire without headache anytime now :)

AK71 said...Hi Hwang,Generating an amount of passive income that is as much or more than our earned income is just the first step to a possible retirement, I have discovered.There are other obstacles to retirement from active employment besides not having enough money as no man is an island and decisions made will affect others around us.I must admit also to wondering whether my passive income is really enough to retire on. I have to care for my parents too.Recently, I wonder what would I do after retirement. I know people who retired rather young in life before they turned 40. Boredom is one thing they had to deal with. I have an idea what I might want to do but how sure am I? So, headaches don't go away but take on other forms. This could be something for another blog post when I do retire. ;)

>> Temperament
said...Hi AK71,To me you are indeed a brave soul. My portfolio invested in Equity only amount to 30-33%. i presume you have a larger portfolio in equity. If not you are already a multi-millionaire. Now , don't be modest. Ha! Ha! Cheers & Shalom!

AK71 said...Hi Temperament, With the recent LMIR rights issue, I am more than 50% invested, for sure. I am probably closer to 70% invested now.I look forward to LMIR being a major contributor to my passive income stream in 2012.LMIR now joins AIMS AMP Capital Industrial REIT and Sabana REIT as my biggest investments.I am not likely to make any big moves in equities in the near future unless I see compelling value to add to my long positions.With the latest property cooling measures by the government, I am also looking to possibly buying a private residential real estate within the next 2 or 3 years at a much lower price. I will need to have cash on standby. :)

>> Serendib
said... Hi AK, congratulations are in order. Earning a passive income of six figures -and free of tax / CPF too! Would you care to give some idea of what % yield this is? just curious as I figure that a dividend stock portfolio would yield about 6-7% pa on average.

AK71 said...Hi Serendib, Thank you. :)The distribution yields on cost vary from 7% to 17% per annum for the different REITs in my portfolio, depending on my entry prices and the DPU of the REITs.Please excuse me if I would not reveal how much in average is the distribution yield for the entire portfolio. ;)Yes, having tax free passive income is rather pleasing. :)

Recent story: CAPITARETAIL CHINA TRUST – Overlooked High Performance Retail REIT
 

Comments  

 
0 #18 wassup 2012-01-07 04:48
Also, is leverage employed in any of the investments and do you draw equity loan from your portfolio of properties to invest in more properties?
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0 #17 wassup 2012-01-07 04:47
MacGyver,
Thanks for telling us about your cliche.
Maybe you could share about your way of generating passive income and how that of your friend(the one who is generating usd3-4mil).
And in your opinion, which is a better form of asset to hold for passive income for the regular folks?

From what I've seen thus far:-
1) 1st pot of gold usually from properties
2) passive income for most people are the properties
3) STOCKS are only used for short-term punts or buy and sell.
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0 #16 MacGyver 2011-12-31 05:05
We have a group of retiree friends from Singapore, Hong Kong, Malaysia and Taiwan. We get together regularly to discuss ideas and hobbies. Among us, there is a Singapore friend who owns 16 shophouses and 9 apartments in the east side of Singapore. He also owns 7 cafes in Hong Kong.

His passive income annually is around USD 3-4 million. Which is more than the annual profit of some listed companies. Conclusion --- There are big time investors around. It can be done. Dare to dream big.
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0 #15 MacGyver 2011-12-31 04:58
Dear Forummers,

While having passive income is comforting, it does not tell the whole story.

REITs do require their unit holders to cough out cash every now and then. It is misleading to just look at their distribution income.

Unit holders in REITs must remember one thing -- There is capital risk (alpha risk) in holding REITs. BUT the REIT manager has zero risk. This is something I cannot tolerate in the equity market.

The REIT manager just want to increase the AUM of his REIT so that he can collect more fees from the REIT. So he goes out to buy assets at supposedly "good values" with "good yields"

My advice to ALL -- Please check these valuation reports by the valuers carefully. I have seen and criticised many valuation reports by these "experts". I called it "Financial Engineering". Some assumptions do not make common sense at all yet the "Expects" approved it.

There is NO free lunch in this world. Do your homework and make your decisions carefully.
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0 #14 admin@nextinsight.net 2011-12-20 08:38
Dear dodobird and all, we have asked Cheong Wee but he prefers to stay away from publicity. We can only congratulate him on his fortunate circumstances and his efforts at charity.
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+1 #13 dodobird 2011-12-18 15:23
NextInsight! What are you waiting for! Please grabbed Cheong Wee and Interview him for your next article due out TODAY! ASk him how he amassed his fortune, i mean the fortune of the charity trust and how he generates $3mil annually for the trust! That's what we are here for man! Not some puny $100k passive income!
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0 #12 Joan 2011-12-18 05:48
CheongWee, u said: "I am retire and have a comfortable passive income of 3m". Is there a typo? U have $3 m in passive income? Then your capital must be ....roughly $30 m assuming a 10% yield. Or do you mean you have $3m in capital? Whichever one, it's a massive amount and I wonder if you can share how you did it? Your own or inheritance?
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0 #11 Temperament 2011-12-18 05:32
Quote from you:-
"Unfortunately, as a buddhist, i do not believe in a creator."
It's O. K. We are all unique in a way. We have our own beliefs. As long as you are happy and find peace within yourself, that's you and nobody else.
As i have said if you believe(or even don't believe)there is a GOD, GOD chooses you and never, never you or anyone else chooses GOD.
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0 #10 Tan CW 2011-12-17 21:26
Temperament

Please don't lose your temper. I am definitely not boasting.

Unfortunately, as a buddhist, i do not believe in a creator.

You can e-mail me and i can definitely proof to you of my vestment. But if i can proof to you, will you give just 2 weeks of your life by helping me do some good social work, side by side with me, or are you too busy looking at your stock, and got no time. No worry, it is easy and happy job that i am doing as well.

Really, in this life, nothing is call our own, I was a christian before. You go read the book of Corinthians in which St.Paul sums up the teaching of Jesus..wrote to the Corinthian people. I am telling the truth, and truth will prevail, i am too small compare to many out there. But maybe i have got good karma, i don't believe in luck, and am straight forward.

." if you have wealth, think as if you have no wealth. If you have a wife think as if you have no wife. If you have suffering, think of it you have no suffering. .......if you go to buy goods at the market, bring nothing home."

Even, the bible share the same doctrine as Buddhism....... .truely, this world is not our home. Nothing belong to us, or can bring them home one day.

Time to go home? AK 71

Everyone will have to go home truthly. So far, i dont not know of anyone 40 or 04 , retire or not who need not go home one day.

May all be well and happy.

cheongwee

p.s AK 71 and all, if you win, think you win nothing, because someone got to lose to let you win. So it is good to give back,and i know you did, good,aferall, you cannot go home with your reits and blue chips.

I have at most 10000 days if karma is good , if not than 10 sec. I am always really and truthly to go home.
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0 #9 AK71 2011-12-17 13:41
Hi Peter,

Of those whom I know retired before the age of 40, I know one quite well. He was really, really bored after he retired. He says that he would wake up in the mornings and stare at the ceiling, wondering what he would do that day. Hahaha.. Anyway, he is now self-employed. I guess some people are just workaholics. :-)

Personally, I agree with you. Life is too short. I really want to spend more time with the people I care about as well as to pursue some personal interests. I am definitely not a workaholic. ;p
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