Why 35 Years Old Is The Critical Age
If you read my previous post about upgrading your HDB flat, you will notice there are usually 2 stages in life when Singaporeans purchase property.
The first property will be a HDB flat as the couple is still young and still establishing their income and careers. This happens between the ages of 25 to 33 years old.
However as they grow older, the family becomes bigger and suddenly more property choices becomes available as their careers and income become more stabilized.
The 2nd property choice becomes crucial. As this will probably be the largest purchase in their lives, there needs to be careful planning as it can determine the future retirement, wealth and assets the couple can have. Basically their future net worth can be tied up on this second property they choose to upgrade to.
So why is age 35 so crucial?
Easier to get a mortgage loan with a longer repayment period
It is an inescapable fact that getting a loan at age 35 is far easier than getting a loan at age 45. You will also be able to get longer repayment period, allowing you to have more affordable monthly installments.
Appreciation and Accumulation
Imagine your property to be like a savings bank account. As you pay monthly installments to the bank, you can actually think of it as parking money into your house. (Yes there is interest because banks HAVE to make money. That is the cost.)
However unlike actual banks with near-zero interest rates, putting money into your property is literally a hundred times better. This is because of the simple fact that a property will appreciate and increase in value. Just like your HDB flat, which can appreciate and increase in value, a private property can also do the same.
With the power of accumulation, some amazing things happen. For instance, try saving $500 per month and put it in a bank account. After 5 years, you will accumulate $500 x 12 mths x 5 years = $30,000.
Now if you have placed the $500 per month into a property that has high appreciation, after 5 years, your gain could be alot more. It is common for a property to appreciate by a $100,000 after 5 years.
Of course, you need to make sure that you get a property with a high chance of appreciation and growth. If you are unlucky enough to acquire one that does not appreciate over time, then the monthly payments will go to your home equity.
Once you can get a property that is able to appreciate in value, you already start to benefit in several ways. For instance, you can finally…
Inflation is REAL. I am sure you have noticed that the price of your groceries increase every year. Your money in the bank will not be able to buy as much the following year.
The beauty of real estate is that inflation pulls up the value of your property too. Property is one of the best ways to hedge yourself against inflation.
I know you are only 35 years old. But if you don’t plan now, you are basically planning to fail. If you consider age 55 as the “cut-off” age, then you know you only have 20 years to plan your retirement.
20 years to accumulate your retirement nest egg.
20 years to try to “SAVE” for retirement.
20 years can be a SHORT time or a LONG time – it depends on your own perspective. BUT if you don’t plan, you will basically fail.
You realize that with as you grow older, a lot of things happen.
Your kids grow older and become more independent. You might want to consider the cost of their tertiary education.
As you cross 55 years old, the CPF contribution rate from your employers will be reduced.
Taken from CPF website
As we grow older, some parts of our body might not work so well. So you need to consider potential rising healthcare costs. (My reminder is to pay your insurance premiums.)
Now with a private property, there is an option for you to downgrade to a HDB flat. This is one of the ways to unlock our funds in the event you need it for an emergency.
However if your 2nd property is also a HDB, the problem is that the appreciation and accumulation will not be as high when compared to a private property.
This is the power of TIME and COMPOUNDING GAINS. If we were to break down the appreciation of a HDB flat versus appreciation of a private property, you can see the stark difference.
(I invite you to download my ebook on the Property Investor Mindset Model to find out more)
That doesn’t mean that buying a private property makes you safe either.
What is essential is that you get your financial standing accurately assessed.
Problems arise when you don’t have enough financial knowledge. Some get advice from the wrong, inexperienced people.
It is astounding at how people can make decisions going in to the hundreds of thousands of dollars without proper calculations and numerical analysis.
They just “feel” that it’s a good deal and buy a house.
They then wonder why such a good deal is still not producing positive income years later.
Maybe because… it’s not such a good deal after all?
Your Property Exit Plan
You need to have an exit plan for your property purchase – especially when you are 35 years old. Planning an exit when you are already aged 55 is not going to be very useful and unlikely to be profitable.
Learn how to become far-sighted at age 35 and reap the rewards when you reach 55.
I can write until the cows come home, but ultimately the decision is yours. If you are aged 35 (or even older or younger), I invite you to contact me so we can arrange a financial analysis on your situation.
Discover how you are doing in terms of your own property portfolio and find whether the numbers are your potential dreams or future nightmares.
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