CHAPTER 1
PROPERTY AS SAVINGS? 1.How Property Became My Savings Plan............19 A Savings Plan For Anyone.................................................. 20 2.Save As You Earn..................................................23 Start on Something Small..................................................... 25 3. Properties are Assets..........................................28 Assets..................................................................................... 28 Other People’s Money........................................................... 29 4. Singapore’s Current Property Scene.................32 Property Price Trends............................................................ 32 Cooling Measures.................................................................. 34 Good or Bad time?................................................................. 35
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“Buy assets, not liabilities”
In Chapter 1, you will… • Be introduced to how to create a savings plan using property • Understand how leverage works in property loans & mortgages and rental income • Get insights into the current trends in Singapore’s property scene
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How Property Became My Savings Plan My first encounter with buying a property for myself threw me into the world of real estate. Back in 2001, when Janet and I were newly-married, we wanted what most couples longed for: to own a place of our own. We didn’t know much about buying a property. We didn’t know much about financing. What we knew was that we did not have a lot of cash. Back then, I was studying part-time while working in the Air Force. To earn extra money to pay for our first home, I became a telemarketer for property agents. That telemarketing job provided me with many insights into how property agents worked. From that experience, I saw how my life would be like if I continued working in my salaried job. I compared it with the possibility of trying out something different to grow my wealth – something that could break me out of my situation then. It didn’t take me long to make the leap to become a property agent. Chapter 1: PROPERTY AS SAVINGS?
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I have never looked back since. In my second year in the property industry, I formed my own team of property agents. As a property agent, I saw how people became wealthy through property. So I did my due diligence: I researched and familiarised myself with everything there was to do with property – from buying and selling to financing, property development and regulations. The more I dived into the world of property, the more assured I became about the possibilities property offered as a means of savings to grow wealth. So I started putting my own money into property, together with my family. By the time I was 32, we raised our first million through property. As I started helping others to also grow their wealth, and compared property with other forms of investments, it became clearer to me how property surpassed other investment tools in terms of growing savings systematically, safely, and with ease. I know for a fact – by drawing from my own success and through helping many others achieve the same for themselves – that property is a sound and advantageous savings plan through which to grow wealth. I also know that many people have misconceptions about property. This prompted me to write this book.
A Savings Plan For Anyone Everyone should be saving, hence anyone can create a savings plan in property. I want to share the huge possibilities property offers to anyone. Property is not just for the wealthy. Property is an attainable means to growing wealth for anyone who wants it. What you are about to read in this book is not the norm.
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There are many books written about property that highlight tips and strategies to get rich quick. This isn’t one of them. I wrote this book to share with you how I have helped clients create savings for themselves in a systematic and progressive manner. I’m going to be direct here: there are always risks involved when anyone buys and sells properties. There will always be an opportunity cost when you choose to put your money into property or other tools to grow your wealth. What I will share in this book is how to maximise potential and minimise risks, such that when you put your money into property, it becomes your nest egg. You may ask, “So doesn’t this mean that I buy a property and just hold on to it?” Creating a savings plan in property isn’t about holding on to properties. That is a misconception. We take action with that sum of money – we do something with the money to grow it further. There are two actions we take: (1) buy and (2) sell. In this book, I will show you how to identify when to buy and when to sell to boost your savings plan when it is most opportune to do so. What are the entry points? What are the exit points? There are specific techniques which you can learn to help you identify these points. They are covered in Chapters 4 & 5 of this book. While anyone can create a savings plan in property, different people will need different strategies. For example, if you already own a property or two, you can boost your savings by restructuring your properties and assets. Properties that are past their peak prices can be sold, and the gains from the sale can be used to multiply assets. More of this will be covered in Chapter 2. You may be thinking, “I’m still young. I just started work,”; that you do not have a lot of money to put aside for a property; or that you have other financial Chapter 1: PROPERTY AS SAVINGS?
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commitments. The focus for you then is affordability. This is a term that I will use often throughout this book. More on affordability is covered in Chapter 6. For readers who still have objections regarding property, turn to Chapter 2 on the Three Stages of Property Ownership, where I address the common fears most people have with regards to property. I want to highlight that it is never too early to start thinking about and planning how to create a savings plan using property. The beauty of building a savings plan in property early in life is that you start to make your money work for you faster and earlier. The current moment might not be the best time for you, but who knows – in a few years’ time, your situation may change. I believe the wealth we have today is the result of the hard work we put in five years ago. Where would you like to be in five years’ time? From an agent’s point of view, there are thousands of properties and potential buyers and sellers, but it is never about pushing for a sale or purchase. It is about finding the match that will grow wealth for your clients in the least stressful way. Ultimately, it is about creating a win-win situation for both you and your client. In the subsequent chapters, you will learn, step-by-step, the strategies that I use. I will share these with you using real-life examples, so you can guide your clients in growing wealth the systematic and safe way. I believe anyone can use property to grow wealth. With the right mindset and the support of the right agent, property can be the main asset with which you grow your savings and wealth.
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Save As You Earn My approach to property is to treat it as a form of savings that I put aside as I earn, hence the term, “Save As You Earn”. A lot of people know that property is the way to grow wealth. But to many, buying a property and taking a mortgage is unaffordable and scary, filled with fear, risks and uncertainties. When my wife and I first used our hard-earned money to buy a property, we were stressed out with worry and fear. We kept worrying about whether we could afford to pay the mortgage. We were anxious about the additional expenses – loan interest payments, taxes, fees etc we had to pay. During downturns in the economic cycle (e.g. the SARS outbreak in 2003), we feared that our property value would fall and we would be forced to sell and lose our principal. It took a while for us to realise that amongst all our expenses, spending our hard-earned money on our property was consistently our best “expense” ever! You see, what buying a property did was that it forced us to save. We did not have a lot of money when we bought our first property. But we wanted to have a property – a roof over our heads, our nest egg. That gave us the drive to work hard and to be smart about how we spent our hard-earned money. Instead of spending on liabilities such as cars, expensive dinners and holidays, we used our cash to buy an asset whose value grew over time. Each time we felt
Chapter 1: PROPERTY AS SAVINGS?
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like spending more than we should, we would stop and ask ourselves what happened if we lost our nest egg. So while some of our peers were living the “good” life, going on expensive holidays and buying new cars, we chose to tighten our belts and put our savings into our nest egg. Thus, buying a property forced us to save in our prime. We were saving as we earned. Over time, our “savings” became the way we grew our wealth. Putting our hard-earned money into property also had another positive effect – it multiplied our assets as we grew our wealth. (More on what it means to multiply assets is covered in Chapter 2). As I see my assets multiplying, I know with certainty that the hard work I put in today will pay off in five years’ time. There is no other savings plan that offers the same amount of returns as property does. My property savings plan has worked for me, and I want the same for you.
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The beauty of treating properties as a form of savings is that the fears associated with speculative types of investment disappear. I create my savings plan through careful consideration of my buying and selling decisions based on fact rather than emotions. My research is founded upon known factors. So there is certainty when I make a choice to buy or sell. I do not see my mortgage loans as liabilities. I treat them as a form of savings. Having a savings mentality removes a lot of the fears associated with loans and mortgages. I am not affected emotionally when there are short-term changes in interest rates, rental income fluctuations or dips in property prices. I am freed up from such worry and anxiety so I can focus on getting the real information I need in order to make sound choices to grow my wealth further. Does it sound too good to be true? You may wish to go to Chapter 2 on the Three Stages of Property Ownership, where I address the common objections people have when it comes to buying and selling property.
Start On Something Small Many people find it hard to save. They think they need to put aside thousands of dollars in order to create impactful savings. Similarly, when it comes to buying a property, they have this idea that they need to have a lot of money. So when they see a property going for $800,000, their immediate response is to reject it. “I cannot afford it. I have no money.� And they walk away without considering how much cash-in-hand they really need to have. Before we go further, let me ask a quick question: How much cash do you need upfront for a downpayment? Chapter 1: PROPERTY AS SAVINGS?
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(Remember the immediate response that pops up in your head – there are no right or wrong answers, do not adjust the number – then continue reading.) Do you know that it is possible to start investing in property with just $50,000 as downpayment? I do. My team and I have consistently sourced affordable projects for people to invest in. We are able to do this because we understand how financing works in the real estate industry. Here’s one insight: not all developers ask for the same amount of downpayment, which is usually 20%. So from an agent’s point of view, it is a matter of sourcing for the right projects to fit the budget. For example, we found a first-mover advantage in a new, freehold launch in central Kuala Lumpur, Malaysia, along the Embassy Row in Jalan Ampang. The downpayment for a residential unit there started from as low as SGD$10,000, as the developer was offering a downpayment scheme with an upfront payment of only 2%. Besides, if you really cannot afford the full downpayment by yourself, why not consider partnering someone? The conventional way would be to partner a family member, but there are other (safe and legal) options to explore too. When you do choose to partner someone, protect your purchases. Not many property agents know this, or have the ability or resources to practise this and make it happen for their clients. More on wealth protection and choosing a property agent is covered in Chapter 8. An important point to take home: break down the numbers so you can see for yourself if something is really affordable for you.
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After you have worked out the downpayment, don’t forget to work out the monthly instalments too! So again, quick question: how much do you need to pay on a monthly basis? (Like before, remember the immediate response that pops up in your head – there are no right or wrong answers, do not adjust the number – then continue reading.) I find it ironic when someone tells me, “I cannot afford the monthly mortgage as I am servicing a $1,500 car loan.” Do you know you can own a property by putting aside just $200 per month? Most of us cannot believe that it is possible to find mortgages that start so low. Well, I do. Here’s another insight that I use to my clients’ benefit: progressive payments. Knowing exactly how progressive payments work will give you clarity as to exactly how much cash you need to have upfront, and exactly when you need to have $x amount of money on a monthly basis for a period of time. Having a competent agent who can work out those sums for you in a clear and precise manner can make a real difference to how you can make a sound choice. Throughout this book, you will read about real-life examples where people use small sums of money to start saving in an asset that grows over time. More on affordability is covered in Chapter 6 on You And Your Money.
Chapter 1: PROPERTY AS SAVINGS?