Life is not a straight line. It has its ups and downs, twist and turns and should always be filled with hope.
Arithmetic, on the other hand, is more straightforward. One plus one has to be two, no matter how you spin it.
Using arithmetic to guide your life is useful but allowing it to dictate it can lead to unintended consequences.
One of life’s biggest decision is buying a property because it involves not only a large sum of money but would likely shape your lifestyle in the next 20-30 years !
Hence, it becomes imperative that we weigh thoroughly its pros and cons before making that major decision.
There isn’t really a perfect formula. If someone claim there is, he is taking you for a ride.
Putting aside its investment potential, let’s just view owning a property strictly on the basis of having a roof over your head.
Many people lamented that the prices of property has sky rocketed beyond their reach.
But affordability is relative and a matter of interpretation, depending on a person’s income level.
Recently, this topic was widely debated in social media about a person earning a net monthly income of RM 5,500 and taking out a 30-year term loan with a monthly repayment amount of RM 2,600 to buy a property.
Some well-intentioned readers commented and worked out that with other expenses such as maintenance fee, sinking fund, utilities, insurance, quit rent, assessment , car loan and repayment of education loan, the buyer would probably end up with just RM 1,500 every month for his other expenses.
Hence, many concluded that the buyer was not thinking right and that he was wearing a hat too big for his head.
I am not about to go into an endless argument on this matter.
However, there was one glaring flaw in their calculation - they assumed that this buyer’s monthly income remained stagnant at RM 5,500 for the rest of his life.
And therefore, it was concluded that he was wearing a hat too big for his head for taking out a loan to buy that property.
I don’t encourage speculation when buying a property. The moment you think of investment as the primary reason for buying one, you are treading on dangerous grounds that will come with inherent risks.
However when deciding your first property to stay in, you should not only base it on your current affordability level. Rather you should also take into consideration your future potential income.
Estimating your future potential income is neither mathematics nor science. It is an art - one that you need to balance well with proper analysis and gut feel.
Ultimately, you know best your own worth and future potential.
A point to note is to know your self worth. How much you are valued in your workplace will determine your future potential income.
If you are able to stay in the same company for three years, have a continuous annual increment that is consistently higher than many of your peers and recognised with bonuses and awards, you have a good indication that your future potential is good.
On the other hand, if you are among a majority of your mediocre workmates, getting an annual increment that barely meets inflation rate, hardly mentioned by your bosses, then it’s time to rethink.
Meanwhile, there is no need to worry if you erred in over rating your potential income because there is already a mechanism in place before the bank is willing to offer you the loan to take up that property.
Therefore, the next time you want to invest in a property for your own stay, be a little more bold.
But don’t confuse courage with recklessness. No one’s saying throw caution to the wind. Yet, don’t allow today’s limitations hold you from tomorrow’s potential.
If you know your worth, if your track record speaks louder than your paycheck, then buying a home isn’t you wearing a hat that is too big - rather it’s you growing into it.
Don’t let your current affordability level be a set back. Yes, you may have to tighten your belt to live a frugal lifestyle for a year or two after committing to a loan but very quickly it will be a thing of the past when your potential income catches up.
When that happens, you will soon realise that the home that you have bought will feel less like a stretch, and more like a smart, forward-looking choice.
Property is more than just bricks and mortar - it’s a commitment to your own future. Know your worth, plan wisely, and dare to dream a little bigger.
(PS: The writer has been in the property development industry for 20 years and has helmed several companies as their COO and CEO before his retirement )
Vincent Lim (limhockmian@gmail.com) is a content creator under the Newswav Creator programme, where you get to express yourself, be a citizen journalist, and at the same time monetize your content & reach millions of users on Newswav. Log in to creator.newswav.com and become a Newswav Creator now!
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