Choosing A Rental Property

Choosing a Rental Property

Where I totally spend my summer playing Cricket and Croquet.
Where I totally spend my summer playing Cricket and Croquet.

When comparing two or rental properties, it is key to look at what you can charge reliably for rent and it’s listed price. If it is 200,000$, you want at least 1% of it’s price as rent each month, so 2,000 a month. If another 200,000$ property rents for 1,500$/mo it is a worse deal. If it is 100,000$ and rents for 1,500$/mo it is a better deal than the 200,000$ property renting for 2,000$/mo.

I did some digging around on real estate listings in my city to show the things to look at making this decision. Keep in mind, in my city of Edmonton, Alberta rental prices have been hit by oil crashing so much. In turn, it is difficult to find a profitable rental property out there.

House A is 1268 sq. ft, 3 bed 3 bath and costs 299,900. This equates to a monthly mortgage payment (for a fixed five year term @2.22% and 25 yr amortization) of 1247$. Rent for a place like this ranges from around 1350 – 1400/month. Also, 1350/mo is a far cry from the ideal 1% rent to price ratio. Plus, with property tax of around 1200 a year you’ll be losing money. Not so good.

House B is much much cheaper. It’s a one bed condo on 118 ave, AKA the ghetto. However it is in Beverly which is not the worst neighborhood you could go with in Edmonton. Yes you’ll see sketchy people stealing steaks in your grocery store, but that makes for a fun story. At 58,000$ and made in 1969 it is far from nice. The best part however, is the fact you can get at least 600/month rent (basically right on the dot for 1% rent to price ratio) on 241$/month mortgage payments. Take away property tax and there’s 330$/month of buffer to absorb all the damage from your shitty tenants. And there’s just about only shit tenants that are willing to live on 118 ave. I’m sure you could find a diamond in the rough by doing some proper screening. After hours of looking at real estate listings, this is the only property out of dozens of potential ones that could possibly turn a worthwhile profit. I’m not saying do it. But on paper and not really taking the risks all that seriously, something like this is about the best bet to turn a profit. Which makes me feel sad about owning real estate here.

Thanks For Reading!



Emerging Markets – Vietnam

I figured I would do another one of these emerging economies posts. Countries are just so interesting! Let’s go with Vietnam this time.

Another beautiful country
Another beautiful country


Vietnam has already had a few years with good amounts of foreign investment to develop, as opposed to Myanmar which is only just now really opening up investment in it’s country. However, like Myanmar it’s corruption is holding itself back in a number of ways. Luckily, the workforce  is pretty educated, with 93% literacy.

Vietnam has engaged in trade liberalization since the early 2000’s. It became a member of the World Trade Organization in 2007. It has shifted from a highly centralized and planned economy to a socialist-oriented market economy. Currently. Deep poverty, defined as the percent of people living on 1$ a day, has greatly decreased due in part to the equitable economic policies of the government.

Interestingly, Information Technology and High-Tech industry now forms a large and quickly growing part of Vietnam’s economy.

The government of Vietnam has recently shown support for its own start-up ecosystem. Vietnam aims to develop as a country into middle-income status by 2020. The “socialist republic” structure of government seems happy to meddle directly with countries which can cause problems with it’s stock market.

There is some good news. Vietnam is still classified as a frontier market by index constructors and it creates a huge difference in investors perceptions when viewing how a market is classified. The amount of institutional money invested in these frontier markets is tiny compared with emerging markets.

An emerging market sounds like an exciting proposition and suggests a growing economy, whereas a frontier market seems more risky to investors. If this is your mindset, you should be happy to learn that Vietnam is widely expected to be bumped up from frontier to emerging market status at some point in the near future. This upgrade should open up a lot of investment and therefore you might want to consider increasing your exposure to the Vietnamese market.

The best ways to increase exposure to Vietnam would be the emerging market indexes that of course, include some Vietnamese equity. One that has direct exposure and focuses solely on Vietnam is “The Market Vectors Vietnam ETF” (VNM). While the ETF hasn’t done well since its inception, some of the holdings have done very well. I plan on further analyzing some of their more promising holdings.

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Emerging Markets – Myanmar

Myanmar has many great things going for it and is the best positioned Asian country (being between India and China has it’s culinary benefits) to have great economic growth in the years to come. It is the fastest growing economy in the world. Despite widespread flooding and landslides its economic growth was 7.2% with 8.4% projected for this fiscal year. Here are some reasons:

Ain't she a beaut?
Ain’t she a beaut?

It’s government. 

I think a lot of westerners (myself included) take the great government structures we have for granted. We spend so much time complaining the x government isn’t doing enough to fix its economy. Well I’d argue that the very structure the government has and it’s legal and political environment is doing most of the economic heavy-lifting. Anyways, Myanmar elected it’s first democratically elected leader in March 2016 after decades of military rule, though the military retains some of it’s previous control. the past 5 years have seen easing of strict controls on media freedom as well. The state still controls the main broadcasters and publications. I can see that changing though.

It's a Hunch
It’s a Hunch

Its resource rich, and its citizens are well educated given it’s lack of development.

Myanmar is a country rich in jade and gems, oil, natural gas. It has a wide income gap from military corruption, and is still very undeveloped, ranking 148 out of 187 countries according to the HDI. Its GDP is equivalent to around 1,000 USD per year per person in Myanmar. So much great potential. It has an 89.5% literacy rate among its people (2014 Burma Census). English is taught as a second language from kindergarten.

Myanmar, this is paradise, I’m telling you. It’s like a big chicken waiting to get plucked!

Right now, Myanmar is among the poorest nations in Southeast Asia. Foreign direct investment will help tons with this problem. In March 2012, a draft foreign investment law emerged, the first in more than 2 decades. Foreigners will no longer require a local partner to start a business in the country, and will be able to legally lease but not own property. 2 In March 2016 It’s stock exchange started.

Myanmar is the last true frontier for Capitalism. However, it will definitely have it’s challenges in the future. “Though economic reforms implemented since 2011 have had positive outcomes, Myanmar’s new government will face the challenges of advancing economic reform, addressing infrastructure and labor shortages, and making progress towards peace and social cohesion,” said Winfried Wicklein, ADB Country Director in Myanmar. “Moreover, intensified efforts are needed to connect and develop rural areas to improve access to markets and services, and to generate opportunities and jobs.” 3

Inflation is very high in Myanmar at 15%, which is a concern for anyone invested in its stock exchange. Another concern is its deep-rooted corruption, which won’t go away anytime soon.

How do I make money from this?

For proper investing in Myanmar, it is perhaps a little early. This is where the less conventional methods reign. If you have the drive and interest you can look into real estate there, as the laws have eased up on foreign condo ownership. Real estate prices are already skyrocketing!

Also, keep an eye on it’s stock exchange. And be wary of military owned firms, I have another hunch that the military isn’t really that popular there. Yes I know AT&T and Comcast are a thing. If you are going to invest in military owners, be sure to find the AT&T’s of their economy, not the Blockbusters.

Thank you for reading!

Taking on Debt as a Student.

With tuition and school fees at an all-time high, students are taking on more and more debt to pay off their education. But what is the best choice for a student, a student line of credit or a government backed school loan.

Many people have an idea that government loans help the average person more, I mean, why would the government have it out for anyone? However, for people who do a good job of managing expenses the right choice leans more towards a student line of credit. This is because of the lower interest rate (Prime + 1%: Currently 2.70% + 1% = 3.70%) versus the Federal Government loan which is Prime + 2.5% or 5.2% with the floating rate and Prime + 5% = 7.7% with fixed) The extra 1.5% – 4% adds up quite a bit especially when you take more than 2 or 3 years to pay it off.

The reason why skills in managing expenses is recommended for students looking at a student line of credit is because of the higher loan amount available to students (up to 15,000$ per year for undergraduate where Government student loan is closer to 5,000 to 10,000 per year). A higher loan amount can end up equaling lots of unnecessary costs throughout the degree program with someone who spends like an idiot. This is why the spending discipline is recommended. The only real downside with the line of credit is the exempt status of bursaries and the like.

Some thoughts on Renting and Owning

Yes, owning some very tangible assets that are no doubt needed in the future is great (who doesn’t need shelter?). However, in today’s market renting and investing the difference will usually net you greater returns. Dividends on your holdings are also taxed much more favorably than rental income. If you want to own “pieces” of real estate assets without worrying about a property manager or sketchy tenants than REIT’s are a great option. REIT’s also usually offer higher yields than current rental yields (8-10% vs 4-6% after expenses).

Being a landlord is hard work, and until it offers better yields than owning REIT’s, it’s very hard to find a reason to own and rent a property out instead. Buying and selling real estate also costs a lot as I’m sure you all know. A ~10$ commission getting in and out of your REIT investment is miles better than the ~6 percent of the house value you lose on realtor commissions.

The whole REIT vs actual real estate problem comes in when you look at your ability to leverage your money. It’s much easier and incurs lower interest to take out a mortgage on a first house than going and trading REIT’s on margin. My takeaway is to re-evaluate the market every time you plan to take on an investment. Once you own a house and build some equity, you now have better options to put other people’s money at work through HELOC.

Although a little unrelated to REIT’s and Real Estate, I wanted to share my favorite book on investing, which has taught me just about all I know about value investing. The Intelligent Investor from Benjamin Graham. You can pick it up here: The Intelligent Investor: The Definitive Book on Value Investing

4 Habits for Building Wealth.

1. Define Your Goals.

Poda Island Beach
Poda Island Beach

Maintain goals to keep an idea of where you are headed. At the end of the day, review your goals in order to keep them in mind and keep you on track. Why do you want these things? Have a clear answer in your head to this question.

2. Don’t get distracted.

In this world of instant gratification and advertising, it is crucial to stay on task towards your goals and not be swayed to buy the “latest toy”. If you can fit it in your budget without changing the budget for that month, that is totally fine. After all, the pursuit of wealth shouldn’t be the only motivation in your life unless it is your ultimate goal.

3. Acquire knowledge


Read books, watch Ted talks, hell, read blogs! No matter where you are in life, you can learn more. Being interested in what you do and putting in the effort to learn about it is one of the most important habits out there. It just helps life in so many ways!


4. Make the most of each day.

The successful people I’ve known don’t just end their day when their job was done, they made sure to fit in exercise and reading. If you get done what you wanted to get done in the day, that’s good, but going to the next level will go a long way to help reinforce the other habits mentioned here.



Quick look at REIT’s.

442805746_6d0b948a04_oFor older people searching for good safe yields, it is hard to beat certain REIT’s. Many even pay dividends monthly for income investors, great for using DRIP.

Real estate investment trusts (REIT’s) own and usually operate income producing real estate. This isn’t just commercial and residential real estate. There are REIT’s that specialize in healthcare and data centers. Ratios you want to consider especially with REIT’s are Debt/Equity ratio and Payout ratio (% of earnings paid out as dividends). Payout ratios of over 100% mean the company is paying out more in dividends than it’s earnings. The main point to get out of this post is to know that, for the coming years, it would be smart to avoid just about all the mall and retail REIT’s, as Amazon is increasingly winning the fight for shoppers income. Healthcare, Office and Data Centers are definitely here to stay, compared to the mall/retail REIT’s.

Disclaimer: I own shares in NWH.UN. You are taking a risk buying stocks no matter how informed you feel that you are. I am not responsible for your decisions.


Biotechnology Stocks to Look at.

There is no doubt that Biotech’s importance in the future is massive, but that doesn’t mean betting the farm on a couple securities. Nevertheless, having some exposure to promising small cap and blue chip Biotech companies is definitely meanwhile for any risk-taking value investor.

1 year chart of NASDAQ Biotechnology Index
1 year chart of NASDAQ Biotechnology Index – Yahoo Finance

As we can see the Biotech sector has had a rough past year, with a 52 week high and low of 4165 and 2552, as shown by the yellow dots. Last year, lots of hype had pushed many biotech securities to very high and usually unjustified P/E values. A sell-off starting ~10 months ago makes sense.


In the aftermath however, there are great deals to find at very low valuations. Take Gilead for example. Trading with a market cap of 119.27B at a very low 7.4 P/E, the value is there.

Gilead Science 3 month chat
Gilead Science 3 month chat

Look deeper, and you will see the reason is the slow pipeline Gilead has going for it. There is good news though. The stock is undervalued with great potential, given the size of the company and all the great acquisition targets a blue chip Biotech firm has out there. That would be my “less risky” biotech  value play. A much riskier play with higher upside is Palatin Technologies. It’s primary drug it is working on is Bremelanotide (Phase 3 Preliminary Results coming on Q3 2016). You may have heard of it as the “female viagra”.  A recent study in part funded by Palatin Technologies cleared concerns that Bremelanotide interacted severely enough with ethanol, which news outlets reported that people taking this drug wouldn’t be allowed any alcohol. What many people don’t know is that this new study showed no clinically significant relationship. It is indeed safe to ingest ethanol while on this drug. This study I believe will definitely help Bremelanotide get its thumbs up from the FDA (Deadline for Phase 3 top-line data is 9/30/2016). Palatin Technologies has 23 million in investments and cash, and is burning 11 million per year, giving them enough time to get this drug to market. Definitely a stock to keep on your radar.

Thank you for reading my blog, don’t hesitate to leave feedback :). Tomorrow I will talk about REIT’s, the cheap way to own a piece of “liquid” real estate.

Cheers fellas!

2016 And Beyond, Your Guide to Get Started Investing

Welcome to my investment analysis and advice blog. I’m not going to offer all of the same advice you hear everywhere, because a lot of that advice is boring (while pragmatic and not to be ignored).

Let us begin briefly with essentials you need to know reading this blog. You will only have to go through this once, and then we can get to interesting stuff.

P/E – Price/Earnings, A measure of a company’s current share price relative to its per share earnings.

EPS – Earnings per share. Net income earned on each share of a company’s common stock. Additionally it is calculated as (Net Profit – Dividends on Preferred Stock)/ Average Outstanding Shares. EPS going up more than expected = good, EPS lower than expected = VERY bad.

Debt/Equity Ratio. What if the stock you are looking at is borrowing too much? Debt/Equity Ratio gives you an easy way of looking at that. Calculated as (Long Term Debt + Short Term Debt)/ Book Value of Shareholders Equity. Usually its between 0.1 and 3.0, 0.1 means it has a large safety margin when it comes to interest rates rising, and 3.0 meaning the opposite.

Market Capitalization – Market Cap. Market Cap is the size of the company. How big the waves it splashes are in its market and the global market. It is calculated as following: Current Share price * Shares outstanding. Terms like Small-cap and Blue chip are referring to Market Cap.

Today I won’t really point to any stocks I consider worth owning in anyone’s portfolio. That will come in my next post. Instead what is best is that you understand what each investing strategy brings to the table, and infer the one you think will work best for you.


Investing Strategies.


Style Investing

Style Investing, put simply is looking at underlying characteristics in common to certain types of investments. For example, choosing securities from broad categories of securities like Small-cap or Tech. This is useful to anyone who lacks the money to diversify by buying a ton of individual stocks, as you can give your portfolio exposure to a broad range of markets. Value Investing, a very sane approach to investing belongs as a sub-style within Style Investing.

Index Investing

Don’t be persuaded to believe Index Investing is a “be all and end all” approach, or that it’s de-facto the safer way to invest in the stock market. This isn’t accurate as some index fund are leveraged, like UWTI, and easily and very commonly swing 5-15% one day then shoot down 5-15% the next day. You can also play it safe (relatively) with something like the SPDR S&P 500 ETF Trust, which seeks to replicate the S&P 500 index. Adjusted for inflation, the S&P 500 has returned ~7% yearly on average since it’s inception. You could definitely do worse. You would be performing on-par with the market. Consistently (5+ years) beating the market is very difficult and is not done by many. But it’s definitely possible.

I made this blog not to teach people how to perform on par with the market, but how to, as an active investor, see greater returns. If you read this entire post start to finish, congratulations, you probably have the dedication to do quite well at anything.

In my next post right here I go more into depth in the first sector I wanted to talk about, Biotechnology.

I strongly recommend Benjamin Graham’s (Warren Buffet’s Mentor) book Intelligent Investor. You can order it on Amazon here