$$$ KPO and CZM $$$: The "Poor" Pilot With Multiple Properties

Tuesday, November 10, 2020

The "Poor" Pilot With Multiple Properties

Being a pilot is definitely one of the coolest jobs in the world. 

You get to fly a plane, travel to different places, and get paid highly (5 digits salary monthly). What could go wrong? Today published an interesting article on how the various pilots are coping with their lives during this pandemic after SIA announced/implemented the retrenchments or pay cuts  - One sees his flying dream cut short, other SIA pilots become delivery drivers, retire early.

The above pilot probably got the most attention when he is still earning $13k a month (after the pay cut) but claims that it is not enough because his monthly expenses add up to $19k a month. Many (including myself) would think that $13k is more than enough but I guessed lifestyle inflation happened to him. If you are wondering how can his/one's expenses be so high, the answer is the properties "investment".

Let's just make some simple assumptions and calculations. He invested in various properties at the age of 40. Given that we know a pilot earns $14k at 28 years old and $23k at 50 years old, the salary grew at a rate of 2.28% per annum.

Hence, his salary at age 40 will probably be around $18k. Next, we head to DBS Marketplace for property to see what's the maximum loan he can take based on his $18k salary.

My guess is he probably max out his home loan to invest in various properties and has to make a $9k mortgage payment monthly. Not to mention, there will be many other costs involved such as rental income tax (~19-20% tax at his income level) and property tax which all adds up to his expenses. 

We can assume the remaining $10k are used to service his car loan, daily expenses, groceries, and his children's overseas education. Anyway, he can probably offset some of his expenses with the rental income which was not mentioned in the article but the focus is more on his expenses. $9k out of $23k seems very manageable but when his salary got cut to $13k = GG.

That's the thing with property investment. It is a long and massive commitment with the assumption that everything goes according to plan - you keep your job and got to continue to work as long as your mortgage tenure. So when you see advertisements/property agents telling you/your family to sell your HDB and buy/invest in 2 private properties, my advice is to think twice. The stress/pressure is on you. We prefer to invest in REITs because there's no tax and no commitment. Take a look at this old article - Book Review - Building Wealth through REITS.

Regardless, I do not think he is poor at all as he still has multiple properties, shares, and bonds but he definitely has to deleverage by selling his properties/car even if he has to make a loss ASAP. Unless he is thinking of stopping his children overseas university. lol.

On the other hand, we have Terence who is not affected by the pay cut and no lifestyle inflation. There would be a day when things just don't go according to plan. Moral of the story - be like Terence, how many things could you possibly need? Multiple properties?

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