Upon hearing about asset optimization, many people start to laugh. What's there to optimize with just that little bit of money? That's what I initially thought. Recently, my attitude has changed because if you don't optimize your assets, others will optimize them at your expense!

A Friend's Experience

A friend who joined the company with me, like me, was born in the countryside. His family exhausted all their savings to cultivate him into a talent and brought him to Shanghai!

Recently, while having dinner together, we talked about the recent housing market. My friend said: Last month, he sold his second property on a certain short video platform for 200,000 less than the market price.

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Me: Selling in this market, holding cash is also a right move.

Friend: I won't hold cash. I've been looking at houses recently. I've found one with a great location, newer construction, and a larger area. The landlord is in a hurry to sell, so I got it for 500,000 less than the market price!

My friend ended with: It's all about asset optimization!

Hearing this, I was shocked and fell silent! Let me delve into how my friend has managed to increase the value of his assets through asset optimization.

Increasing Value Through Hustle

This friend is really good at optimization. In 2013, he bought an off-plan property in a certain community with me. At that time, the price was around 18,000. When the property was delivered in 2016, the price had directly risen to 45,000. This friend sold it the day after he got the keys, paid off a loan of over 1.2 million from the bank, and suddenly had over 2 million in cash on hand.Armed with cash, he chose a location with better transportation and relatively superior school districts, where the housing prices were only around 230,000 at the time, and purchased a three-bedroom property. With the remaining funds, he bought a small two-bedroom apartment nearby, the kind perfect for registering a household! According to the market value at that time, the total loan amount for the two new properties he bought was almost the same as the one he sold. He used the first property as his residence, repaying the mortgage with his housing provident fund. The second property was used to generate rental income to cover the loan. Around 2019, the real estate market heated up again, and the price of the property he bought rose to nearly 400,000. Seizing the opportunity, he quickly sold the second property, and with the money he had saved over two years, he had nearly 2 million at hand.

In a location close to the city center, he bought a small-sized school district property for around 3 million. At its peak, this small property could be worth around 5 million. Recently, with the housing prices falling, the average price, supported by the school district, is around 4 million, and despite selling at a reduced price, he made around 2.7 million from this round. With this money, he took advantage of the market and bought the previously mentioned three-bedroom property with a good location and decent layout.

I roughly calculated that, according to the current market value, my friend's assets are now worth around 10 million, with a net asset value of over 7 million (just in real estate). In just ten years, his assets have increased from the original 400,000 to 7 million, which is a considerable rate of appreciation.

In contrast, another friend of mine,

Without comparison, there is no harm. Another friend of mine, B, bought the same type of property in the same community at the same price as my previous friend in 2013.

Recently, in order to improve the living conditions, he sold the house. The housing market has been falling recently, and the current housing price is basically at the first wave of the rise in 2016. After selling the house, he got over 4 million.

Can you see the difference between 4 million and 7 million?

How ordinary families can optimize their assets

My friend's asset appreciation is related to the market, and several waves of the housing market rise are key factors.

However, it must be said that my friend's concept of asset optimization has played a key role here. The difference between 400 and 700 is still visible.Here is the translation of the provided text into English:

In summary of the asset appreciation process of my friend, I would like to highlight the following points:

Firstly, pay attention to your own assets. Everyone loves money; it's only the wealthy who might claim to dislike it, which is quite realistic. Since the majority of our assets as ordinary people are tied up in real estate, why wouldn't we pay attention to it?

What does this mean? It means that regardless of whether you are selling or buying a house, you should always keep an eye on the market. Do not confine your perspective to your past experiences. For instance, if the housing prices are currently falling, by the time you notice the decline, the real estate market may have been on a downward trend for a year or even longer.

If you seize the opportunity in time, even in a bearish market, you can still increase the value of your assets. Just like my first friend who reduced the price by 200,000 and managed to get a bargain of 500,000. This is also a form of appreciation.

Secondly, do not be greedy. Greed is a human nature. It is precisely because most people are greedy that a few who are not greedy can make money. When everyone sees an upward trend, it is important to be aware that there might be a bearish trend at this time.

The housing market growth in 2016 has already increased my friend's assets from the original 400,000 to 2 million, a four or even five-fold increase. And this happened in just over three years. If one anticipates the risks and sells in time to exchange for high-quality assets, like my first friend, it will mitigate the devaluation of assets when the market is bearish! In other words, during a downturn, as long as your asset depreciation is slower than others, you are making a profit!

Thirdly, a house is not just for living; it is also a commodity.

Many people are reluctant to change houses, more often than not, due to the comfort of being accustomed to their current living environment and not wanting to move. However, the reality is that the upward demand of humans is inevitable. At one point, the current living conditions may be sufficient, but at another point, they may not be.

For example, when you buy a flat on the fifth floor with a large staircase at the age of 30, climbing the stairs every day is not a big deal. But can you still climb them when you are sixty or seventy?

When you are forced to buy or sell a house, your assets may have already depreciated. When you lose control, you are at the mercy of others and can be taken advantage of!So, a better approach might be to view real estate from the perspective of assets. When the assets are of high quality, even if you are forced to sell and replace them, the initiative is still in your hands.

Fourthly, gradually reduce the debt ratio and avoid high leverage in purchasing assets. My first friend started with a 70% debt ratio and gradually reduced it to 30%, ultimately establishing a stable asset base. According to current loan policies, he could afford to buy higher-value assets, but he chose not to.

On one hand, he couldn't afford the repayments. On the other hand, assets can sometimes depreciate, especially in a down market. If the depreciation occurs while you are in a high leverage position, it could be troublesome. As I mentioned in my previous article about a colleague.

Fifthly, even in a down market, you should still consider buying assets. People tend to buy when prices are rising and not when they are falling. Recently, the real estate market has been poor, and many people think, "Well, I might as well not buy at all, it doesn't matter to me whether it falls or rises." I don't quite agree with this view. Money in hand needs to resist inflation and will depreciate over time. You can choose not to buy assets in a down market, waiting for the bottom to catch a rebound. But no one knows when the bottom will be. One is not to be greedy. The other is, if you don't get on the boat, you'll never know when the water will rise. So my thinking is that within one's bearable range and with sufficient reserves, it's still a good idea to get on board. The reason is simple: if you don't optimize your assets, you will be optimized by them!

The above is just some experience I have summarized from my own economy, for reference only!