Welcome. Welcome, welcome, everybody.
Welcome to this webinar.
How to Become a Homeowner Five Times Faster Using the three
financial strategies of the wealthy people.
I'm very confident you'll find some valuable lessons
that we're going to share today.
I'm going to introduce you to Ali.
And Ali is my co-founder with WealthHQ and his mission, you know, like what,
what got me when when I sat down with this guy was his passion.
His his passion to try and educate these
first time buyers and just help them have a smoother, happier journey.
And that's what it's all about.
This WealthHQ is all about.
So I'm going to jump in.
Savers are losers in today's economy.
So what do wealthy people do instead?
We just talked about the income, location and saving as much as you can
so that you can have your deposit for a first home.
But there's actually a massive difference between savings and investing.
Savings is basically putting your money in a jar.
And, you know, you already heard the news like inflation is historically high.
Your your basically just might as well put it under your mattress
is the same thing like if you put in the bank, right?
Versus where you're
investing, you're
growing your money, you're actually getting ahead.
So that is the biggest difference between savings and investing.
And I'm going to tell you a little bit more about this so that you can actually
get a really good grasp on this because inflation right now
is quite high and savings rate in the bank,
if you put it for a term deposit it's 1.75%.
Inflation rate is already at 5.90%
and it's going to be forecasted to be higher.
What that basically means is if you got money in your savings account,
you're never going to get ahead because your - the money
is actually devaluing so fast that you'll never get ahead.
So Blandon I just have to say with my clients, I used to say, hey, the money's
sitting in your bank account watching you working hard and laughing at you.
That before inflation.
Now the money is
the villain is actually working but against you and laughing at you.
That's that's too good.
You guys remember that.
Remember that metaphor. Okay?
So if you guys want to get ahead, you have to put your money in assets
that are above the 5.90%, which are properties.
You know, at the moment, cryptocurrency is a huge one because,
you know, when we lose confidence
in the monetary system, the cryptocurrency goes up.
And also got funds and shares.
Obviously, they all are a risk.
They have their own risk and they can be volatile.
But on a longer term, you'll see that those assets will beat inflation.
And so which one would you prioritize?
Well, you've guessed it because we're on the first home buyer webinar.
It's properties right?
So why do we prioritize property?
There's one reason, and that is because of leverage.
And what leverage is, is basically borrowing money
to invest, borrowing the money to invest.
Okay.
So you actually taking someone else's money
to put it in an asset that gives you return.
Okay.
So I'm going to give you an example
like the math behind us so you can see for yourself slowly line by line.
Okay.
So let's just pretend you've gone up to a position
where you've got $120,000 of deposit.
Okay.
What you're going to be able
to do at the moment
because the bank has loosened up a little bit, some people can get 90%,
but it's more likely that you can get 85%,
so maybe you can get $680K loan.
And what that's going to allow you to do is do a purchase price of $800,000.
So if you bought a place, right, and you had it for ten years,
the average on the market return on
properties has been around the 7% mark.
Okay.
But just for argument's sake here, I'm going to show you something
more conservative.
Let's say you bought this for property for $800,000
and it just grew at 5% a year.
Okay.
In ten years time, this property is actually worth $1.241 million.
Right?
This is not you having to do more work.
It's just literally inflation, right?
Inflation.
The property goes up and is at $1.24 million.
Okay. So what does that mean?
The first year in capital gains is actually $40,000.
Okay.
Okay you're like wow Blandon that's cool $800,000 and I only get $40,000.
That's very exciting.
But what you need to look at when it comes to investing
is you want to measure your return on the money that you have put in.
The return on investment.
$40,000 in capital gains on your $120,000 deposit
is 33% return on your money.
Who is getting 33% return on the money at the moment.
But you know, for a normal person 33% is very high.
So that's why property and leverage is a very good first asset to prioritize.
So I want to also show you just zoom out right
we want to go on a high level and just show you what exactly happening
on the overall with central banks and how they erode debt.
And I'm going to explain to you what this actually means.
Okay.
So you guys have heard about this, you know,
QE like quantitative easing, it means its money printing.
It means injecting more money in the economy.
Like let's say the economy has $1 trillion,
you're basically going to go and print another.
You know, $500 billion.
So what the basically central bank is doing is going,
okay, we're going to go print some money.
And the next thing that happens is what happens is they go
buy financial assets.
I'm oversimplifying this.
If you guys are in finances, you guys might want to, you know, like,
don't, don't, don't, don't put me on the cross
but they buy financial assets and what happens after they print money?
What happens if there's more money in the market?
They're buying more assets.
It's going to inflate the prices right?
Like on paper, you know, you go on QV you go on homes.co.nz
and they're going to see
that your property price is going up like every single day.
And that's what's happening in the economy.
So after they do this you know, like, okay,
they might buy some productive assets like businesses.
But you know what what governments intends to do after they borrow this money?
You might think, yeah, okay, maybe after they make more money, they'll repay this.
Right?
But this is not the trend in the last 30 years.
Okay.
What happens is that after the asset
values have gone up, they go back to refinance.
They got asset prices to go up.
They can now borrow more debt from the bank.
And it's a cycle where they print more money and buy more assets.
Asset prices go up, inflated,
and then they refinance to, you know, run the economy on debt.
And that is the monetary system, unfortunately.
And this is on a high level, right?
If the government on a high level is doing this, like what
what hope does it leave for us as an individual
retail customer?
Okay, so you got to look at the bigger picture, right?
Look, you look at the US debt level has risen in the last 25 years
and it's kind of you can just see for yourself
and you can see on the right side is the New Zealand
net debt is slightly different from the first graph.
This is total debt.
This is net debt so minus all assets on a balance sheet.
But what basically you can see here on the dip is 2008
that was the financial crisis.
That was when our monetary system had a massive shock right?
What happened in 2008 our New Zealand system
was still more self reliant.
But as soon as 2008 happened, we became a price taker
for a lot of our own debts in New Zealand it means that
whatever is happening in America or all over the world, we have price taker.
We have to join in the party, you know, like if the prices of interest
rate go up then we are we going to suffer as well.
So just to give you an example, OCR went up, it doesn't really influence
the bank rate by that much because only a small portion
of our funding actually come from our own Reserve Bank.
So you can see when the,
when the world prints money now like we're sort of on the same trend, right?
You know, we started paying off a little bit of debt in 2017 and 18,
but you can see in 2020 and 2021
because of COVID, we started increasing our debt levels.
And this is the Consumer Price Index, this is like the price of your milk,
right?
Like let's say if the price of milk 25 years ago
was say $0.70, it was around $0.70 like let's say it was in 1999.
Today for the same bowl of milk is costing you a dollar
ten, that is the inflation that we're talking about
and this is higher than what you can save in the bank right now.
So in summary, right, debt in effect becomes up asset
and now like in our to today economy where it's heavily reliant on debt.
Cash in effect becomes a liability.
The more cash you have sitting in a bank is probably not doing you very well.
Okay.
And properties in effect becomes a hedge.
And if you guys don't know what that term means, head just means
you hedge your bets.
Like let's say if someone is to if you're scared of losing money,
you hedge you might pay a bit of insurance and you're not going to lose as much
just when the hedge is.
So the big secret is, if I summed it up to just one line,
is that if you want to get ahead financially is actually
get yourself really into a position where you get into debt.
No, not the car debt not not to get a holiday not to do renovations.
That's not the debt we're talking about.
We're talking about investing in an asset that has a much higher return
than the cost of the debt that you're borrowing.
And that's a very important takeaway that I hope you can remember,
is that the monetary system, this is how it works.
And if you don't get in a position where you're using utilizing
leverage to grow assets, you're going to fall behind.
Okay.
So the example again is that if you have $120,000,
you can get 33% by investing in a property that's got 5% return.
Now, making this kind of decision by yourself can be daunting,
and if you just need a bit of guidance, you want to understand
a different implication if you make those decisions,
do not hesitate to reach out to us at support@mhq.co.nz.
Someone will be in touch.
Alternatively, you can find our calendar on mhq.co.nz.
You can just book call.
Someone will just get in touch and talk to you and guide you through
and perhaps find you the right adviser that's going to be able to advise you.
And until next time, I'll see you guys again.