Hello,
My name is Matt and I am a 20 y.o student studying Mechanical Engineering and Commerce and I am looking to start investing in property. At the moment I only have around 25k saved up, and still have my first home buyers grant available to me. My only source of income at the moment is my part time job at coles (only working 3-4 shifts a week dues to uni, but generally pick up the hours to 30+ a week over the long holidays) which I intend to stay at until I have graduated of gained a professional job in my chosen field of study. I am probably the most senior of all the workers at the store (obviosly not including the department managers) and I have recently become a duty manager (basically the same as what I have been doing for an extra dollar an hour, but there are more shifts on offer if i wanted to take them).
Although I have always had a slight interest in investing in property, it has only been this last month or so where I have decided thats I should get into the game sooner rather than later, however, having a limited budget I am not exactly sure on where or how i should start.
My parents have a couple of rental properties at the moment, and my grandparents have a plethora of them, so as far as family support goes, they are fans of the idea and are always willing to help me out financially if ever i need the assistance.
In my recent searches, I have found a number of properties in NZ which range from 50-150k (asking price in NZ dollars), which on the surface seem like sound positive cash flow properties.
On the other hand, I have a family member who is a builder (who builds rather good quality homes and im not saying that becausse he is my cousin, you should see his own house) that has offered to build me my first house in Caroline Springs/Taylors Hill/Hillside/Melton/Tarniet area as that is where he is currently builing. Although I am not sure on the exact price, it would be discounted (although it may be a minimal discount) and most of my younger cousins have recently purchased property through him. However, I am not like these cousins who jumped at the chance to own a house the moment their parents mentioned the idea, I would rather wait a while to asses all my options and then make what is the right decission in my mind, not anyone elses.
In saying this, I am not too sure on how I should start my investing. Should I look to get a positive cash flow propety or two, or should I try to focus on property that will appreciate in value in the short term in and sell it in order to raise my available funds? Or, on the other hand, should I try and suss out the possibility of buying a property and selling it under vendors finanace terms?
As it will be my first property, should I start of with houses in Melbourne/Victoria, or is it reasonable enough for look elsewhere i.e. NZ (I am going there for a week or two later in the year which would be a good opportunity to properly investigate the areas where I may intend on buying property)
Finally, how do you think I will go in trying to get approved for a loan with my limited income and lack of savings?
Thanks for any advice and sorry for any poor spelling, I am using my new 10.1 inch notebook and its a paint to type on compared to my 19 inch laptop.
Matt
sorry, just to add some further information. May father, uncle and granfather are sub-contracted truct drivers (grandfather is retired now) so they have their own company. Is it possible for me to use it as a way to borrow more money, maybe set up my own company and have their company own mine (not sure if i want to be part of their company)?
Wow, Matt, you've obviously got a lot of thinking going on … and some great support in family who are already investors.
My first thought is that with only a part-time job your possibility of getting a loan may be limited. I would talk to a broker who can assess your suitability right there and then. You could always run it through one of the banks' or brokers' online calculators. There's not much point going any further for now if you don't know the answer to that.
If you can't borrow now, then get your head down, finish your studies and save all your dollars. Look at it again when you can afford it. You can always ask the broker for some info on what income you'd need. I'm all for getting younger people investing but only if its affordable and not at the risk of everything else … you need to focus on study! One step at a time maybe!
Have you asked your grandparents and parents for some tips on how to get started? Great that you have their financial support too btw.
If it were me, I'd start closer to home … but that's a personal preference. I like Australian investment because the tax and legal implications are easy to get assistance with, the properties are local (or at least within Australia) and my tenants easy to control. Reading another post here regarding the troubles of an investor with a property located in the UK and using a property manager, it definitely seems less stressful to have your property located closer to home.
Start reading. There are plenty of very good books out there which will help with a plan regarding what sort of property to buy and the best way to invest. Research the internet, other investors and books.
Regarding your company query, perhaps a visit or call to the accountant your family use might be a good start for some answers as to whether this is a good theory or not!
Good luck!
Hi Matt,
I would like to commend you for thinking about investing so early on in your life, and am glad to hear you have so much support available in your family – you are already off to a very good start, and the fact that you have already saved up $25,000 despite only being 20 years old, shows something about your character. Most people your age only care about 'instant gratification' and having fun now, without thinking about the impact their lavish lifestyle will have on their financial future. Once, again I commend you for being different from the crowd…
From what you have said above, I understand you would like to invest but don't know where to start and how to go abouts it. My advice is the same as ouchiemama – 'take it one step at a time'. Before you start investing in properties you need to invest in yourself first (E.g. reading books, watching DVDs, attending seminars) and do some serious/honest thinking (ask yourself what you want to achieve out of investing, have strong 'whys' and set yourself a time frame – but be realistic). By having clarity in what you want, you can then be more specific on what strategy to use, who to target etc… and then you can just go for it!
Hope that helps!
Kong
kong71286 wrote:Hi Matt,I would like to commend you for thinking about investing so early on in your life, and am glad to hear you have so much support available in your family – you are already off to a very good start, and the fact that you have already saved up $25,000 despite only being 20 years old, shows something about your character. Most people your age only care about 'instant gratification' and having fun now, without thinking about the impact their lavish lifestyle will have on their financial future. Once, again I commend you for being different from the crowd…
Thanks for your words of wisdom there guys.
Kong, while I am flattered with what you have said about my ability to save, I must admitt, I do tend to also splurge a lot on various things. I recently bought myself a jet ski, have spent way too much on my cars stereo and i have a girlfriend who i tend to shout a lot of things for, and every chance I have to go away i jump on. However I think its my dicipline that allows me to do such things as when i set out to buy something I make sure that i save up for it eg. If i have 20k in the bank and i wanted to buy my jetski worth 8k I make sure I dont buy it until I have 28k in the bank. Also once uni starts I cut back as i begin to earn less, thus i only spend within what i can afford (unless its necessary like text books).
anyhow, enough about saving! ouchiemama, my greatest hesitation about buying property overseas was exactly that, not being close enough to be able to properly be in control of the property.
At the moment I most of my money in a term deposit which expires in november and I am hoping to have a total savings of around 30k at years end (although i may fall short of this target). Lets say this is the case, if i happen to find a cheaper house that is CF+ around the 100k mark, would it be a good idea to possibly purchase it, or am i best to hold off to a later date (ie. once graduated).
one final question for the night, if i were to hold off till after i graduate, should i look to buy shares so that my money could potentially rise, or should i just let it sit in a high interest bank account/term deposit. I personally think shares are the way to go, but I am hesitant due to my limited knowledge of the market, and becasue at the moment no family members have taken the plunge to invest in shares so they are try to push me away from going down that path.
regards
Matt
Hey Matt,
Getting into the game sooner rather than later is a good idea. People who wait until “they can afford it” find that they never can afford it. Getting into the game when you are only 20 means you can take full advantage of capital growth over the long term AND rental growth over the long term. Hopefully making you a rich man if you keep investing.
If it was me and it was my first property I wouldn’t buy overseas. You are still new and haven’t done a deal yet, there is enough legal stuff to understand in Australia before you start investing in NZ.
Asking whether to invest in CF+ properties or growth properties is kind of like asking “how long is a piece of string?”. It all depends.
It mainly depends on what you want to achieve and what you can afford. Do you want to achieve passive income that you can live off? Or do you want to get large sums of equity for major investments/feeling of security? Work out exactly what you want to achieve first (goal income/goal net worth) and work backwards from there.
Personally, I want to achieve passive income from investing to support my lifestyle. So when I look at investments I want cash flow. But I also want to build up equity to fast track my investing. So I look for properties I can ADD value to. What you look for will be determined on what you can afford and what you want to achieve.
You have $25,000 which is awesome!!! That is a 20% deposit on a $125,000 house or a 5% deposit on a $500,000 house. But being a uni student and only working part time you might have to go for the smaller place just because you might find it difficult to get lending. Are you casual or part time? Banks look more favourably on part time workers than casual workers (from my experience) .
If I was you, I wouldn’t want to just keep saving. Saving is slow. At least if you can invest your $25,000 into a property (if it was CF+) you could get interest on your cash (cash on cash return from rent) AND get some capital growth, which will build up your equity and make it easier to invest the 2nd time around.
Good luck with everything
Ryan McLean | On Property
http://onproperty.com.au
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