You get what you aim for

There’s a well-known adage in life that is meant to guide us towards meaningful success; there’s nothing worse that striving hard to climb the ladder of success only to find, when you reach the top, the ladder is leaning on the wrong wall. In essence, this proverb encourages us to be clear on the things we seek in life and urges us to match our activities to our aspirations. The resulting reality for us all is we get what we aim for.

I was approached by a young couple recently who asked me my thoughts about home ownership. I step cautiously into a conversation like this as I’m never sure whether someone is asking a question because they want to hear my answer or because they want to validate what they already think is the answer! My first aim is to understand which wall they are leaning their ladder against! This couple were excited as the thought of owning their own home but felt they were limited in how they could achieve this dream.

My first observation to them was simple: to climb the property ladder you must first of all get on the ladder. There are numerous ways to achieve this if you’re prepared to be creative. I’ve seen co-ownership allow young people to own property in partnership with parents so that they can build equity together as a team. I’ve seen zero deposit deals done when vendors are desperate to escape a cash flow crisis. And I’ve even seen property traders make money without ever owning a property.

My second observation was challenging: you don’t have to live in the first house you buy. If you’re trying to buy a house in Auckland using the traditional method you’ve got a massive deposit to get together. In Hamilton the numbers aren’t as high, but they still present a challenge. (A ten percent deposit on a $350,000 property requires a lot of saving!) But what if you looked further south? It’s possible to buy a tidy rental property in provincial NZ for under $150,000. The smaller deposit makes the ownership goal closer and the lower mortgage owing plus rental income makes repayment of the debt much easier.

My final observation to my burgeoning beginners was clear: the primary goal of home ownership is equity. In relation to owning your own home, the more you own the better. This means you want to create a plan that allows you to pay the debt down as fast as you can.

Getting started as soon as possible allows the plan to begin and progress to be made. My advice to aspirational homeowners is always “get on the property ladder as soon as you can.” Sometimes it makes sense to take several steps to reach the end goal.

When you make a plan that has your end goal in mind you’ll be certain you reach the top of the ladder with confidence that you’ve leaned it against the right wall.

(This article was originally published in the Waikato Times newspaper.)