The mantra in my head… SAVING through paying your MORTGAGE may just be one of the best expenses ever.

With permission from my client, I share this excerpt from her… “I am the same age as you, and unlike you, I do not own any property, and I only have so little savings in my bank ☹ Am I going to retire comfortably / How do I grow my wealth?”

This is indeed an important reflection or process one must go through… So, I shared with her, to put it simply – If you have $20,000 as savings, and have no property in hand/or any investments that will help you yield more money, then in 5 years down the road, you will still have $20,000 as savings and nothing more. You may be comfortable, but can the $20,000 be better utilised?

So, there are many scenarios will pop in your head, for example:

• I can put my savings in insurance packages that have guaranteed pay out
• I can put my savings in fixed deposit accounts that are low risk
• But actually, in this day and age, I don’t really know how to save and how much is enough?

And the list goes on… but we all must start at some point. Be it slow or fast, we all need a savings plan. However, the difference between property and other wealth-creation tools lies in the advantage of leveraging.

I want to share the huge possibilities property offers to anyone. Remember, it is a myth that property is only for the wealthy. In fact, it is an attainable means to growing wealth for anyone who wants it. There are always risks involved when anyone buys and sells properties. There will always be an opportunity cost if you choose to put your money in other tools or property to grow your wealth.

The focus here is affordability. This term will determine how much you can commit to saving. Debunking some negative thoughts:

“I simply cannot afford a property!” – This is the idea most people have without even working out their sums. So, they walk away from any potential opportunity to earn money. Remember do not fall into this trap – “I cannot afford a mortgage loan because I am servicing a car loan of $1500 per month. The rest of my money could be put to better use.”

Now the question is: Is property a liability or an asset? This the same question for owning a car.

Importantly, it is never too early to commit to a savings plan.

Save as you earn theory – Is it for all?

• A lot of people know that property is the way to grow wealth. But to many people, buying a property and taking a mortgage is unaffordable and scary. When thoughts like these take root, one will not move forward even if the risks have been calculated.
• But saving through paying your mortgage may just be one of the best expenses ever!
• Once you treat properties as a form of savings, the fears associated its speculative nature disappears.

Start on something small, don’t let greed get the better of you.

How much do you really need for a $800K property? This can probably get you a 1-2 bedder Freehold Condo. I shall state an example using a Freehold 2-bed Condo in the East.

Does this scare you? $588 per month? This is the beauty when you leverage on Other People’s Money.

• When we collect rent from our properties, we are leveraging the total asset value of the property; the rent that is calculated for the property is based on the total asset value of the property and not the down payment we paid for the property.
• On top of that, you can use the rental income to pay for the mortgage on the property loan!
• In other words, when you collect rent for your property, you are making your money work for you. That is leveraging!

Say after 5 years, you decide to sell your property, even at the same price of $800K, you would be cashing out at least, $70K. That is still a good 2.7% yield from your initial down payment of $212,900. If you feel, this is too little, then increasing your budget, for a better district, will deliver you a better result. But as a start, this is a fantastic way to grow your wealth.

Do not let unnecessary fears make decisions for you. You need to decide based on facts and figures, and past trending. Importantly, find a good agent that can give you a good breakdown of the financial figures required.

Cindy + Geri

What is important to you, is important to us too.