This is the interview Moolah.asia conducted with me and here's the interview to share with you:
The Power of Leverage in Property Investment - An Interview with Mr Dennis Ng
By Eileen Ng, (not a relative of Dennis Ng) founder of Moolah.Asia on 01 Nov 2010
Investing in property has become an increasingly popular investment vehicle over the years and it is no longer just a rich man’s game. However, one fact that remained unchanged is that property investment is, and always has been, one of the most powerful types of investment for building wealth.
Mr Dennis Ng, founder of Singapore’s leading Mortgage Consultancy Portal HousingLoanSg.com explains that the key to building wealth through property investment is based on one important concept: Leverage. The basic idea of property investing is that the lesser your money you can put into buying a property, the greater your chances of making a higher return on your investment. He cannot think of any other investment that allows one to purchase with other peoples’ money (the bank’s) and pay this back with other peoples’ money (the rental income from tenants).
In this interview, Dennis will share with us how we can make good use of housing loans to invest in multiple properties and why he started HousingLoanSg to provide unbiased advice on loan packages to the public.
Can you share with us how HousingLoanSG works and what is your involvement in the company?
We are a Loan Consultancy company that helps to compare all the housing loan and commercial property loan packages and provide unbiased advice. So instead of having to contact each individual bank, you just need to give us a call and we will filter through the available packages from all the banks and recommend the most suitable option for you.
What inspired you to set up HousingLoanSG?
I worked 7 years in the corporate banking sector before leaving the bank to be a Financial Planner in year 2000. Because of my background, many clients and friends came to ask for my opinion regarding their housing loan agreement. I found out that many of them did not receive proper advice catered to their specific needs and the reason they came to me was that they trusted me more than the banks.
Also, my passion is to help people achieve financial freedom. But I realized that most of the things I do as a financial planner take a long time to see the effect. For example if I apply for insurance for a client, he’ll only know I did a good job until something really happen and that ‘something’ may occur 10 years from now. Even for unit trust investment, it’ll probably take about 3-5 years before a client witness the results of the portfolio I’m managing for him. But for housing loan, the result is instant. I can show the clients that Package A can save them $10,000 and immediately they will be $10,000 richer.
So setting up HousingLoanSg is in a way killing two birds with one stone. I am offering a service that many people needed but nobody was providing at that point of time, and this is the one of the fastest ways I can help to improve their financial situation.
What do you hope to achieve by setting up HousingLoanSG?
Making money is not my main motivation, I aim to educate. This is why most of the time when you see an article or discussion on Housing Loans, be it on TV, radio or the newspapers, I will typically be sought for my comments . I hope to reach out to as many people as possible and educate them on financial matters.
When I first started out, nobody knows there is something called Mortgage Consultant. The most common question people ask is ‘Why should I apply a Home Loan through a Mortgage Consultant? They also do not understand what a big difference it can make to their lives by planning their Housing Loan properly. If you look at an individual, the biggest ticket item in their balance sheet is probably their house. There are people who retire at age 60 with only a house and very little cash as their asset, because most of their money was used up to pay for the house. If they know how to pick the right loan housing loan package, it can make a tremendous difference because of the big amount involved, even a 0.25% difference can be $5000 or $10000 in interest savings.
Some people avoid taking loans as they do not want to end up as a slave to debt. What is your view on this?
Many people don’t realize that there is a difference between good debt and bad debt. Good debt is whereby the returns you make cover the money you borrow or make even more than that, some examples of good debt are housing loan and business loan. However, business loan is only available for business people so if you are an individual, the only good debt applicable is housing loan.
Some may say that there is no big deal if you buy a 1 million property and sell it at 1.2 million, since the return is just a mere 20%. However this is not true if you know how to leverage on your borrowed money. If I buy a 1 million property, I will only need to use 200k and borrow the remaining 80%. When I sell the property at 1.2 million, my return is actually 100% because I made a profit of 200k with a capital of 200k! With the 200k profit, can you take up another loan to buy a second property? The answer is yes.
Let me give you a real life example. I know of a Singaporean who started out with nothing 30 years ago and now owns 3 buildings each worth 30 to 40 million. He did exactly what I mentioned just now, took up a loan to buy his first property, made a profit and took up another loan to buy his second property, and then his third property. Today, his total asset is well over 100 million. So if you know how to make use of good debt, you need not be a slave at all. In fact, one reason why the rich becomes richer is because they know how to borrow Good Debt to become Richer.
Will you advise a person to take up a housing loan even if he can afford to pay in full?
Of course he should still take the loan. Firstly, by taking a loan you can actually reduce your risk in investment. Let’s say you have 10 million and you buy a 10 million property, all your money will be in danger if anything goes wrong. On the other hand, if you take up a loan, you can actually buy up to 50 million with your 10 million. That means you can buy more properties and don’t have to put all your eggs in one basket. In fact, if you have 1 million, you don’t even have to invest all of it in property, you can choose to allocate 400k for property investment, take a loan to buy up to 2 million worth and invest in other instruments for the remaining 600k.
The really rich people all understand how to apply what I have just said. It is only the middle class people who struggle to save that 1 million and then think that they don’t need to borrow. Instead of taking up a loan to buy up to 5 million, they buy on only 1 million and lost 4 million without them realizing. This is what I call opportunity cost, if your money is stuck in one place and not being leveraged, you are losing out without realizing.
What are the advantages of applying loans through HousingLoanSG?
When you speak to a bank staff about applying for loan, the staff is “tied” to the bank and can only sell that bank’s products. Their objective is to close as many sales as possible rather than taking care of your interest. For HousingLoanSG, we have access to all the banks in Singapore so we are not afraid that we’ll lose the sale, unless you choose not to borrow at all. Because we cannot lose the sale, we can offer unbiased advice catered to your specific needs.
Also, our clients don’t have to pay for our services, it is free. We can offer free service because the bank will pay us for replacing their bank staff. Instead of the bank having 200 sales staff, we are now acting as their sales force. The only difference is the banks don’t have to pay us a salary or put up any marketing cost, all these expenses are borne by us and they only pay us on a case by case basis.
So by going through us, the client doesn’t have to endure any sales pitch, they are receiving proper advice through an independent party. Instead of calling up 15 banks to enquire 15 different loan packages, the only party they need to call is us and we can help them save both time and money.
Where do you see HousingLoanSG five years from now?
Currently we have 10 staff and 5 years from now I hope to have a team of 100. My main reason for this aggressive expansion is because only by having more staff, then I can reach out to more people and offer them unbiased advice. Many companies claim to offer professional and unbiased advice but this is easier said than done, because it is hard to resist the temptation to push certain packages that earn them a higher commission. I see myself as a financial bodyguard and frown upon these unethical practices, my staff are trained to put the clients’ interest above their own, even if it means a 50% cut in their commission. I always motivate my team by saying that the more they do, the more people they can help.
My dream is also for the company to become the biggest loan consultation firm in South East Asia. This industry is still in its early days and from what I know of, there is nobody offering such services in Indonesia and Thailand. Though it is not my immediate plan, there is definitely room to explore for future overseas expansion.
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