We are at that time of the year when people set new year resolutions.
True, patience can be a virtue. However, this advice should not be confused with just waiting for something good to happen. We need to be patient but we also need goals and a plan.
One of the great unexpected benefits of being a mortgage broker is that we get to participate in the goals of hundreds of people.
Most goals are short term, “I want to buy a house”. A few goals are long term “I want 5 investment properties by the time I retire in 25 years”. The short term goals are mostly transactional, they really only serve an immediate need. Long term goals are visionary but cannot possibly take into account the twists and turns that life throws in our way.
We have noticed that 5 year goals seem to have the greatest chance of success.
5 years goals require patience but they are short enough to keep you engaged. The finish line is not that far away.
Here are a few successful “5 year” goals that we have been fortunate enough to witness:
1. A young couple were about to have their first child and wanted to buy a house with a back yard (near their family). They could not afford it. Their 5 year plan was to buy 2 small investment units and do their best to reduce the debt over the 5 years. At the end of the 5 years their units should be worth more and their debts would be lower. They could either sell the units and buy a house or use the equity in the investments to buy the house. They ended up keeping the units and used the equity to buy a house (with a big back yard) for their two kids.
2. A couple with 3 kids (aged 1,3 and 4) lived in a 2.5 bedroom timber house. They knew that in 4 or 5 years time this house would not be big enough. They got a quote to complete renovations to upgrade to a 4 brm house. The cost was well beyond their borrowing capacity so they did two things. They purchased a $300K investment property (the rent almost paid the full mortgage repayment) and they started paying down debt with every spare cent. Their eldest is now 9 and they have just started their renovation. They just sold their investment property for a handsome capital gain.
3. A client in his mid 50’s had inadequate savings for retirment after his 3rd divorce. His goal was to own 2 investment properties that would pay him $1000 per week to live on when he retires at 60. To do this he purchased 5 smallish investment properties 6 years ago. He has now sold off 3 of these properties and used the proceeds to almost clear the debt on the remaining 2 investments. He now collects $800 per week (after the small mortgage repayment). He is now 60 but loves his work too much to retire and also wants to eliminate the mortgage.
4. Another couple wanted to live in a particular suburb that had good schools in the area. A nice house in this suburb was well out of their reach. Their 5 year plan was to buy a “run down” house for close to land value, pay down the debt for 5 years and then rebuild a nice new house on the block. They have successfully knocked down their mortgage and have just had their construction loan approved. They will be moving in to their new house at the 5.5 year mark.
I could go on and on with more examples but we think you get the message.
These people were forced to be patient but they had mid term goals that helped to keep them engaged. Each of these people used our advice to formulate their action plans.
This is an enormously satisfying part of our role and we encourage you to talk with us about your goals.
Our advice is that you set yourself a 5 year goal instead.
What can you achieve by 2018?