Can you really afford that property? ALWAYS PLAN your JOURNEY to your future property.

You have been eyeing that landed property evertime you walk down that street next to your home. You know that it is not going to be cheap. Befoer you embark on anything, ALWAYS PLAN your JOURNEY to your future property.

ASK YOOURSELF THESE QUESTIONS

1. The 1st saying is "Live within your means"
2. The 2nd saying is Live below your means.
3. The 53rd saying is "Use Leverage to buy your property."

Lets face it, except for a few self made millionaires or inherited from family wealth, the majority of property owners in Singapore own Singapore property via loans. This means using OMP - Other People's Money. Ok, that is NOT really the concept of OMP which I will talk about later.  

Most home owners leverage the loans that banks offer primarily for these reasons:

• Risk Management - Instead of taking all the risks, Share the risk of property investment with the Bank.

• 0 - Buyers only need to fork out a percentage of the amount which is commonly known as leverage.
  For example, if a property cost $1 Million, you only need to fork out 20% which translates to only $200k cash/CPF as opposed to forking out $1M cash/CPF.

*** Low Interest Rate Environment**
As you may be well aware, Singapore's bank interest rate is tagged to a basket of Currencies which is set by MAS - Monetary Authority of Singapore. Of course, which currencies are in this basket is kept a secret. No one knows unless you are part of the committee. The suspicion is one of the currency is the USD. If that is the guess, than it may be worth to study the FED's (Federal Reserve Bank) position on Interest Rate.

Hence it can be said that our interest rate "tracks" the US FED intesret rate rather closely.

Today, I played Monopoly board game with my kids. They wanted to play the Monopoly card game but I insisted that the board game is better. For those who do not know Monopoly, the intent of the game is to buy the land strip of the same category. After purchasing the strip of land, the player can build 1 house and up to maximum of 4 houses. After the building 4 houses. the player can choose to convert it to a hotel.

The point of the game is to pick up as many properties and collect rental when other players land on your property. What an ingenious method to teach children on property investment via a game and to be more specific, The Monopoly Game. As the name of the game suggests, is to dominate the game by having a monopoly of the game.

Back to the Game, Both of them tried to pick up as much land and of Course when other play land on their property, we have to pay rent. Hopefully, it translates into owning property in the future.

Now that  it is established that one of the best ways to own a property is via leverage, which means taking a loan from a bank. For that reason, we can say that the secret sauce of owning a private property is via taking a loan from a bank.