I am 21 years old and live in Adelaide.
I bought my first property in December last year, made use of the First home owners grant. Renovated the unit over the next 6 months. Used the $80k equity in that and bought another single story unit in the same suburb.
I don’t want to buy another unit in the same suburb as i believe it’s too risky. I currently have low equity and am going to start saving again. However i am unsure what my next goal should be. Any advice? To save hard i really need to have a goal and i am unsure what the best approach will be.
Would love to hear if there has been other investors in similar situations.
Great work to begin with. What’s your end goal? Retire by the age of 40? Have 10 properties by the time you’re 30? What prompted you to buy the units where they are now? Cash flow, capital growth, close to home, know the market?
I too am a goal oriented person and need goals to work towards. What I found works best for me is to have the end goal but also trackable and achievable goals along the way to help keep me motivated. As corny as it is I find the SMART goals the way to go. So, Specific, Measurable, Achievable, Realistic and Time bound so I set my goals to that.
So you say you want to start saving again for the next property but not sure where? So, let’s say for arguments sake you want to save $20k and that will take you 12 months to do it so set the aim of $20k in savings by August 2015 and as a side task during that time identify what and where your next investment will be so by the time you reach your savings target you will be ready to go and hopefully in the mean time you’ve had some capital growth too.
But also during that time, figure out your strategy too so seeing as though you reno’d your current unit I take it you’re handy so do you want to keep doing reno’s to generate equity or buy ready to go properties? What do you enjoy doing to keep you motivated?
You have done a great job of getting two properties by the age of 21, and now you have exposure to market growth in that area. I’m guessing since you’ve renovated them and are holding them, you’re looking to keep holding them for the long term? If so, you’ve got many years ahead to see a few cycles of growth in Adelaide that will increase their value. I wouldn’t over-complicate things, decide what your goal is. It may only take three or four properties, when fully paid off, to bring in enough income for you to live off. But if you want 50, who’s to say that’s not a great goal? Just know why you chose that goal, rather than some random number or retirement sum plucked from thin air. If you’d like to buy another property, perhaps consider where you may get some capital growth in the future. Renovating from a distance can be very time and money intensive, a different experience than renovating in the immediate area where you can do much of the labour and monitor the progress daily. If you do decide to look further, make sure you get to know the area well. There’s no rush, take your time and look for characteristics that will drive up future values and consistently get tenants through both good and bad times.
Of course, you could always buy another local reno unit project and keep going with what you’re doing there. Perhaps you might like to sell it after the reno, if the cashflow is tight. You could put the profit against your existing investment loan to make the cashflow more positive. Over time, you’ll pay off those loans and can get the rent coming in each month with no loans to repay, build some passive income for you there. If the cashflow is fine, why not hold the third one too? There’s no rule against only investing in the same area! But do be aware of things like the land tax threshold, check out the SA limit if you’re not sure of it already and see the impact on your wallet if you go over it at the relevant date (30 June from memory).
Being so young, you can afford to take some risks if you want to. Other investors who begin in their 50s or 60s often don’t feel as comfortable with taking a risk as they need a ‘sure thing’ for their retirement. There are so many options to choose with property it can feel a bit overwhelming. You need to feel comfortable with your choices, but if there is something you’d love to try then give it a red hot go. Life is short, time is on your side.
Great question to ask, and I hope you have some fun with the next purchase. Enjoy the journey :)
Thanks everyone for your input. I enjoy doing renos while I love there and then probably move again. It means I’m getting rent from all my properties rather than paying the mortgage on one and then paying the mortgage on the Reno. I don’t know anything about commercial property or subdividing so might keep researching these forums and look into that in the future. Both my units at the moment are paying for themselves including strata fees, council rates, water and emergency services levy and management fees so for now I believe I should hold onto them as the capital value will most likely only go up over time.
Wow, nice one! Two properties under your belt at such a young age and covering their own costs. Good work – you have the best of both worlds. You are investing AND it’s not compromising your personal budget and us such your lifestyle. You are young and should be enjoying life somewhat along the way, after all :)
If you were to “save for your next deposit”, can you give an indication of what size deposit you are talking, and the timeframe it would take to save it?
Honestly I would like to buy a property in atleast the next 12months. However I only earn 40k a year and that’s probably all I will earn in my job for the next 5 years which is why I need property to work the best for me that it can.
Hi Johnny, Congrats on the purchases I started when I was your age and on a low wage I’m getting a bit old now my 26th birthday was the other day :(. The best advice I can give you is to change with the markets a lot of people set goals with how many properties they want but with the different economic cycles its best to try and know the markets and time them to your advantage. Also as others have stated we have so much time to correct our mistakes and stuff ups. Hopefully you don’t have any but my mentality was at the end of the day I will have an asset that worse case scenario I will have to live in, not too bad of a worst case scenario if you compare it to shares. Enjoy the ride of been a property investor :D
The dark knights: it’s a good point that I could live in it if something goes wrong. Thanks everyone for your input gives me some ideas for smaller goals and hopefully one day I’ll have a lot more investments and work from their with equity. I do know the start is probably the hardest.
You can generally brings these back up to 90% and use the funds to purchase again, between the two you may be able to squeeze out another cheap reno purchase. There is a lot of decent deals which come up in the 200-240k price range around the Christies, Hackham regions, but also the usual <200k CF+ cheapies up north.
Unfortunately I’ve yet to meet a person with a 100% accurate crystal ball. :)
I’ve had a lot of clients buying in those areas recently, and I can understand why. Some of these properties are selling for discounted prices to what they had sold 4-5 years earlier, whilst rents have tracked upwards. Prices have been rising back up to make up for the low bases prices are coming off.
I’m still a huge fan of the outer northern suburbs however, where you can buy large developable, cash flow positive properties – many of these have renovation potential.
But horses for courses, there are a lot of options in sleepy old Adelaide.
at 84% LVR you should be near at a point of being able to access more funds in no time.
The 2properties I have are in mitchell park. However, not in the contaminated area. Gets a bad name makes prices cheap… I purchased and in 10years no one will even remember there was a contamination scare. I understand where you are coming from with the southern suburbs and I do like renovations. Personally I look for areas where rental potential will be high. At mitchell park they have the new tafe opening. I’m still on the lookout for where the next thing will occur. But with the closure of holden factory soon I think I will steer clear of the northern areas at the moment. I do love some of the prices though eg. 149k for 2br unit. Rental of 230.
This reply was modified 10 years, 2 months ago by JohnnyP.