The Importance of Leveraging Young

In the last article, we talked about the options and recommendations for singles over 35, with the focus on asset progression, capital appreciation and eventually early retirement in mind. This article will teach you how you can do it through the Asset Elevation Model, and how starting from young helps you leverage more in the future! 

What is the Asset Elevation Model? 

The Asset Elevation Model allows you to leverage your loan to maximum quantum based on your age so that you can purchase property, sell it off for a profit, and proceed to use this sizeable proceeds to your next property.  

Taking the case study below, you purchase a $1.3m property at age 35, with a maximum 75% loan-to-value at a 3.5% interest rate, and a loan tenure of 30 years. If you sell it after 5 years when you are 40 years old, the amortization table will show a balance of $874,546.46. Assuming a conservative sale price of $1.38m, the proceeds will be ~$505k.  

Now at age 40, you have a new capital of $505k. You purchase a $1.7m property, with an LTV of 75%, loan tenure of 25 years and interest rate of 3.5%, loan amount will be $1,275,000. If you decide to hold onto this property for a longer period of 10 years this time round, the balance loan to pay off would be $892,867. Let’s say you sell your property at $1.9m, you’ll be able to enjoy proceeds of ~$1m.  

You’re now aged 50 with an elevated capital of $1m! Due to age, your LTV is now 55% instead of the past 75%, but no fret cos you now actually have $1m of proceeds, thanks to the accumulation of wealth from the previous 2 properties. You purchase a $2m property, with a loan amount of $1m, 25 years loan tenure at an interest rate of 3.5%. If you decide to enjoy this property for 15 years and sell it off at 65 years old for $2.5m, the remaining loan to be paid off would be $556,890. This gives you net proceeds of $1.94m!

Your next question would probably be... now where do I stay? With proceeds of $1.94m excluding your savings, CPF and salary (if you are still employed), you can choose to purchase a condo or right-size to an HDB and retire. You have the luxury to choose. The choice is yours!

From the example above, you can see that a starting age of 35, with 3 careful property selections yields $1.94m at the age of 65. Can you imagine if you were to start at the age of 30, or even 25? What’s not to say that your net proceeds would definitely amass to over $2m by the age of 65? Do you see the power of leveraging young now? Will need to couple with a few other factors like careful property selections, timing the market and acquiring + selling properties at the right price of course.

With a big dream and end goal of a comfortable retirement in mind, you can actually make use of the asset elevation model method shared above, with EXIT being the key to building and growing your net worth.

We understand that buying and selling properties is a huge decision that can get stressful if not planned and executed properly. That is why there is a need for thorough research and market understanding to catch a good time, good property and prices. Remember to engage professional help if you need it as the entire process should be positive and excitement working towards your elevation and not stressful and painful!