How Kamikaze Moves During the Global Financial Crisis Enabled My Early Retirement
Would you invest in real estate during an economic downturn? Does the thought of it scare you? A little kamikaze perhaps?
Well, I did just that during the Global Financial Crisis….and live to tell about it.
I remember the year 2009 well as that was when I relocated to Netherlands and took on a role with 1 of the biggest Dutch financial institutions in its asset management division. Imagine working in a sector that was right in the eye of the storm, where regulations were being tightened and massive changes mandated as a condition of receiving state bail-out.
Within my immediate and extended work environment, an invisible pall hung over our heads, everyday praying that the pin will not drop. The incessant media coverage on redundancy, bankruptcy, indebtedness, company liquidation and unemployment added to the neck-deep doom and gloom.
Where I lived in Amsterdam, it was impossible to miss the countless “For Sale” and ‘Auction Sale” signages splashed across the city. Like most Asians who have property DNA in our genetic make-up, and having bought and sold a couple of apartments in Singapore, the situation was not lost on me.
Despite sensing the opportunities, apprehensive thoughts kept swirling in my head:
“Be prudent, conserve cash now”
“What if the pin really drops on you?”
“And if you cannot find a tenant?”
“This is not the time to buy big-ticket items”
When I asked 10 friends what they think, I got 12 emphatic ‘No’s”!!
After my first year and having established a stronger foothold at work, the sense of foreboding started to give in to cautious adventure and optimism. Both my husband and I held well-paid jobs, we had built up sufficient cash reserve and I could enjoy 30% staff discount on all financial products, including mortgage rates from my employer.
I started to warm up to the idea of an investment property to take advantage of the low housing prices and mortgage rates. No matter how bad the market gets, people will always need a roof over their head, especially affordable bread-and-butter units catering to regular Joe’s, right?
Rental rules in Holland are highly protective of tenants so I did lots of research to avoid being caught on the wrong side. Evenings at home were spent scoring online property platforms and running cashflow projections on my laptop. At one point, my husband started joking to friends that in our bedroom, instead of a bedsheet we were lying on spreadsheets 🙂
I did not want emotion to rule the purchase so the best way was to work through the numbers, calculating and comparing ROIs. Weekends were spent dashing around for viewing appointments. While it was tiring, I was also fired up at the same time. It felt like being on a covert dangerous mission…eat your heart out James Bond. You get a sense of my adrenaline!
We eventually decided on a 65 square meter apartment that was 8 minutes’ bike ride to Amsterdam Central Station. If you have not been to Amsterdam, everyone – and I mean E.V.E.R.Y.O.N.E – gets around on a bicycle, even royalties! So an 8-minute ride is a jiffy.
Front of Amsterdam Central Station
Left of Amsterdam Central Station
The apartment was within mass market range, located in a charming neighbourhood with youthful vibes. Within weeks of listing, it was rented to a pair of young friends who had just graduated and found jobs in Amsterdam.
The 3.5% rental yield was further boosted by a mortgage rebate scheme based on my income tax level, nudging it closer to 4.2%. Besides rental income, the unit had good upside given its location and proximity to restaurants, unblocked water view and being in an up-and-coming district. That apartment represented my first baby step in owning property in a foreign land.
Except for repairs and upgrades requiring experienced contractors, like electrical works and rebuilding of bathroom, we did everything else ourselves to keep costs low and to maximise income. From drafting tenancy renewal (using samples from real estate agents…shhhhh), paintwork touch-ups in-between tenancy, attending to faulty switches, the works! All these while holding down a full-time job, adapting to Dutch culture and learning the language. My Dutch vocabulary on apartment related terms became spectacularly impressive to a point that a new acquaintance thought I was an interior designer instead of a boring banker lol.
Approximately a year after that success, we found and bought our 2nd investment apartment that was just 5 minutes’ walk from Amsterdam Central Station. Did I mention that in Amsterdam, when one is not on a bicycle (or avoiding one), they are walking. So this unit has potential dripping from all walls – a beautiful turn-of-the-century 70 square meter unit with a cute small balcony and high ceiling, reminiscent of a chic Parisian apartment.
Being right next to a big law firm, we were able to sign a multi-year corporate lease for their visiting employees, providing a rental yield of 4.1%. The apartment, a designated national monument, is entitled to grants for specified maintenance and upgrades, which helped us in lightening its expense.
With each rental collection, cashflow improved and with it, my confidence and belief in real estate as a good investment tool, even during depressed times. A 3rd unit was added in 2014, right before the Dutch market started recovering a year later.
Market sentiment took a turn for the better and property prices started to rise and rise. The situation quickly turned from oversupply to shortage, driven by recovery of the economy, improved consumer confidence, pent-up demand and the low mortgage rates. In line with that, rental prices also increased which boosted the yields.
Within central Amsterdam, per square meter price almost doubled from a low of €3,500 to astonishing range of €6,000 – €8,000, even upwards of €10,000 along the highly sought-after canal districts by 2018. The emergence of AirBnB also contributed to the rapid raise in property prices as investors and residents alike took to the potential of this viable income.
Having tasted success from our buying spree in Holland, we were very enthusiastic when a family friend visiting from Florida started sharing his property investment stories. So guess what? We dived right in to the other end of the Atlantic Ocean.
We have since started divesting part of our portfolio in line with our strategy to capture some equity gain, reaping handsome profits and adding a huge boost to our investment and retirement war chest.
The rental from the remaining units continue to give us stable monthly income. Looking back, it was by no means easy or without worries and concern. There were moments when doubts crept up amidst all the redundancy, economic uncertainty and jittery market. Every time a tenant quit lease, we gulped and went through a whole gamut of emotions and insecurities. It took strong guts, conviction and nerves to buy when everyone was selling, or against it. A little kamikaze helps, of course.
There is a Chinese saying: a rising tide lifts all ships (水涨船高). While this is absolutely true, the pre-requisite is that one has to have ships in the first place to benefit from such occurrence.
Watching the economic ripples arising from the Covid-19 pandemic, I expect these to fan out on a bigger and broader scale. So I am sharpening my knives and preparing to gather my fleet of ships to take advantage of the eventual rising tide.
Are you?
“Luck is when preparedness meets opportunity” ~ Earl Nightingale
May luck be with us all,
Savvy Maverick
Disclaimer: The views expressed here are drawn from my own experience and do not constitute financial advise in any way whatsoever. Nothing published here constitutes an investment recommendation, nor should any data or content be relied upon for any investment activities. It is strongly recommended that independent and thorough research is undertaken before making any financial decisions, including consulting a qualified professional
