How property planning helps you?

Today, I am inspired to share some situations where property planning helps you to gain an unfair advantage in life. As expected, there will be naysayers but I will embrace it as part of the sharing to benefit many more people out there. So here goes:

Retirement planning

Traditionally, Singaporeans will own a HDB and then try to pay off the housing loan mortgage so it seems they are free of any existing debt. I believe many of you can relate to this because your parents could be one of them. This approach to handling your property is old thinking because back in their generation, public housing price of 3 room HDB can be in the range of merely $30,000. Compare that to today, where a similar or smaller sized unit is selling in the resale market for $400,000. Do you still pay up in full and tell yourself you are finally debt free? And after paying it off, do you live happily ever after?

What could be a better way?

You can choose between buying a private property if you earn well and are eligible to borrow or you can start with applying for the BTO and take a queue number. This depends on your family background and support.

When you buy a private property as the first property, you get to enjoy capital gains over the next 5 to 7 years. This substantial gains will allow you to upgrade to a bigger unit and the cycle continues. This allows the person to grow to a sizable property and provides him to retire comfortably later on.

If you buy a BTO, you start the cycle after the 5 year MOP.

Growing your networth

For people who already have a headstart in life due to family support or an inheritance, please do not stop there. You may consider ways to grow your networth. Buy property when you have an opportunity and grow it to be bigger; from 1 bedroom condo to landed housing.

Here's what happens. When you buy a 1 bedroom property, you will earn lesser capital gains compared to a 3 bedroom property. So with the same logic, your landed property is going to get you more returns eventually when you reach retirement.

Fact: The mortgage that you pay monthly consists of principal and interest. When you pay mortgage, you are actually doing forced savings, because you are paying off the property you bought.

Often, there is a misconception that people say regarding this. They say they don't like to pay interest to the bank. But the truth is they did not know how to leverage and grow their networth?

Do you know that it gets harder to take a loan when you are older?

Hedging against inflation

For most Singaporeans, our property is the main asset we own in this lifetime. But do you know why some people live better than others?

They know how to hedge against inflation even though they may start off with similar backgrounds like you and me.

Let's take a look at 2 individuals who worked as a senior manager in a company.

Back in the year 2019, Mr. X was worried that his company would restructure and downsize, he feels he may be retrenched as he is on a high salary scale. As a result, he tried to prove his worth to the company by working harder or creating new projects to bring in new revenue for the company. He does his best to cuddle up with his bosses. He puts himself out in a precarious mode, careful of his colleagues, diligently trying to avoid pitfalls so he could retain his job.

Mr. Y on the other hand, chose to buy a private property. Because he was gainfully employed, he was able to get a high loan and he leveraged on that advantage.

Come year 2023 - 2024, both X and Y got retrenched. They both got their retrenchment package, both are jobless, but Y has a private property that achieved significant capital gains over time.

Guess who is better off now?

Again, there is another misconception that people say regarding this. They will say what if the property didn't make money?

Demand vs Supply

Property prices are determined by Demand vs Supply. Singapore's population target creates a supply gap. When the supply is lesser, the price increases.

Some people will say a property is supposed to be for own stay, not for making money.

Some successful individuals will also say a property is for own stay and its super great that they can stay and still be able to make money from it.

But Jordan, you don't make money if you don't sell it. So after selling, wouldn't it be costly to buy another? Sell for high price, buy another property at high price right?

While that is true, you have also gained when getting a bigger property due to the sales gains you achieved. In this case, you literally increased your networth.

Property gains can also help you in many real life scenarios, for e.g. children education expenses, medical needs, elder care for your parents, living expenses. All you need to do is to start planning today.

In summary, there are many ways property can help you gain financially and have better options during your retirement as you grow older. It can also potentially help you when life takes a turn (losing a job, medical needs).

It is better to have options and to live better.

Even if you already have many properties on hand and are well to do, it is also good to relook into your legacy planning and discover how you could even consolidate and grow further. We should be contented and grateful for what we have, but we should also learn to be an excellent steward. We become a happier person when we do that, agree?

If you have any questions regarding your property planning, do reach out for more discovery. I serve HDB / Condo owners and also do Commercial Shophouse investments. JN Consulting provides different people with different solutions with innovative strategies.

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