Advice to 23yo wanting to build an investment portfolio

Hi SS,

I have read a lot of take home messages on this forum and now browse daily, I was hoping to get some advice/tips for my situation from any body that is willing to assist.

I am a 23yo, still living at home, expecting to get full time employment in the coming weeks (50k per annum) and bought a 2 bedroom townhouse 12 months ago for 500k in bayside melbourne (18km from CBD) with a 400k loan. I have a 100% offset account and have an interest only loan.

As I'm sure many of you can appreciate, I am continually learning about property investment. The property is rented out for $380 p/w (I know this isn't a great yield), this is party because I bought this property as not only an investment, but a property I would like to move into it in a couple of years as I am not to keen on renting myself.

My question for all of you still reading is what advice would you give to someone in my situation, If my gold was to create wealth through property investment? Keep in mind at this stage I am not interested in renting myself when I move out, I do not want to be in a position where I am asset rich but living off bake beans, I do not particularly want to live with my parents forever haha, I have thought about doing up my property as it is unrenovated and is in a good location (Beach Rd), I am not sure if I could claim FHBG if i bought a second property before ever moving into my first property and I would like to buy a second property before 26yo or whenever I was in a position to do so.

Alot to absorb there, I would highly appreciate any responses in relation to the above or even just any tips/advice to a 23yo happy to listen. Keep up the good work all you active posters.

Regards, Cmack
 
How'd you get the loan for the townhouse before you had a full time job?

In any case, best thing I would say is to keep saving. Look for opportunities. Lots of people are doing things in NSW (granny flats, mining towns etc) which may not be present in Victoria.
 
How'd you get the loan for the townhouse before you had a full time job?

In any case, best thing I would say is to keep saving. Look for opportunities. Lots of people are doing things in NSW (granny flats, mining towns etc) which may not be present in Victoria.
Hey Aaron!

You have actually commented on my threads before, tennants in common with my mum just to get the loan although she isn't paying any of it/deposit was all my savings and quite large. Now I have got the loan to 400k I am applying to remove her from the loan/title as per our original plan.
 
Hey Aaron!

You have actually commented on my threads before, tennants in common with my mum just to get the loan although she isn't paying any of it/deposit was all my savings and quite large. Now I have got the loan to 400k I am applying to remove her from the loan/title as per our original plan.
By getting it to 400k, I assume you mean that's the original outstanding amount still on the loan (with a 20% deposit on a 500k property)... unless you put down a smaller deposit?

Good to see there's other 23 y.o's interested in property about the place! :) My parents absolutely refuse to go guarantor or tenants in common with me. Nor do I have the luxury of living with parents because my job took me to the other side of the country!

Renting isn't as bad as you might think, it gives you perspective as to what a tenant is looking for when choosing a rental property and also helps you decide what's really important to you as an occupant, plus it may work out cheaper in the short term. Is your property currently occupied by tenants, or has it been left vacant?
 
Hey Aaron!

You have actually commented on my threads before, tennants in common with my mum just to get the loan although she isn't paying any of it/deposit was all my savings and quite large. Now I have got the loan to 400k I am applying to remove her from the loan/title as per our original plan.
gulp ............

looks and feels pretty scary


ta
rolf
 
By getting it to 400k, I assume you mean that's the original outstanding amount still on the loan (with a 20% deposit on a 500k property)... unless you put down a smaller deposit?

Good to see there's other 23 y.o's interested in property about the place! :) My parents absolutely refuse to go guarantor or tenants in common with me. Nor do I have the luxury of living with parents because my job took me to the other side of the country!

Renting isn't as bad as you might think, it gives you perspective as to what a tenant is looking for when choosing a rental property and also helps you decide what's really important to you as an occupant, plus it may work out cheaper in the short term. Is your property currently occupied by tenants, or has it been left vacant?
Hi Norwoodman,

It's at 400k now, I had 100k deposit but borrowed 428k to cover stamp duty and settlement expenses. Did you get a good job offer? Yes I have tenants signed on until Oct 2013 :) I just think I would perfer to have my own place to live in so I'm not having to move around unless I want to!
 
I think you're too caught up in the 'I don't like renting' thing, and you're not seeing the bigger picture.

For one thing, renting isn't a bad thing. It gives you flexibility. Renting is generally cheaper than buying the equivalent place, and saving the excess is financially beneficial.

Fact is, your townhouse is very expensive to own but a relative bargain to rent at 4% yield. Then again, you bought in Melbourne around the peak of this cycle. This early on, it'll be a big negative on your serviceability.

Say you're now looking for your second property. Do you still need it to be somewhere you 'want to move into after a few years'? Probably not. Why? Because you can't live in two places, and the first place was something you can live in, so your second one doesn't have to be. But you're not moving for a couple of years, and who knows what the situation will be then? You might move to another city, another area, another country? You've really limited your options for the first property for something (ability to live in it) that, more likely than not, isn't worth much to you.

If you have money, you'll be able to buy a place to live. On the other hand, having that townhouse doesn't mean you can afford to live in it.

The good thing is, at your age, mistakes aren't fatal. You have the time to get through the consequences.
 
428 k lend on a 50 k salary..........

that wont be easy

ta
rolf
“No one said this would be easy, just know that nothing beats the feeling of accomplishment.”

I like to bite off more than I can chew and then chew like hell! Its already down to 400k and I am still at home currently... nothing like a challenge right?
 
“No one said this would be easy, just know that nothing beats the feeling of accomplishment.”

I like to bite off more than I can chew and then chew like hell! Its already down to 400k and I am still at home currently... nothing like a challenge right?
Saving is one thing (well done, by the way). Though isn't being at home one of the reasons why you can save so much? If you moved into that townhouse, your savings will drop like a stone.

Convincing a bank to lend you 400k solely on your income of 50k is about some very impersonal bank systems that care nothing for you accomplishments.
 
I think you're too caught up in the 'I don't like renting' thing, and you're not seeing the bigger picture.

For one thing, renting isn't a bad thing. It gives you flexibility. Renting is generally cheaper than buying the equivalent place, and saving the excess is financially beneficial.

Fact is, your townhouse is very expensive to own but a relative bargain to rent at 4% yield. Then again, you bought in Melbourne around the peak of this cycle. This early on, it'll be a big negative on your serviceability.

Say you're now looking for your second property. Do you still need it to be somewhere you 'want to move into after a few years'? Probably not. Why? Because you can't live in two places, and the first place was something you can live in, so your second one doesn't have to be. But you're not moving for a couple of years, and who knows what the situation will be then? You might move to another city, another area, another country? You've really limited your options for the first property for something (ability to live in it) that, more likely than not, isn't worth much to you.

If you have money, you'll be able to buy a place to live. On the other hand, having that townhouse doesn't mean you can afford to live in it.

The good thing is, at your age, mistakes aren't fatal. You have the time to get through the consequences.
Hi Alexee,

Thanks for the response! I think your right sometimes i need to broaden my thinking and not be so closed minded.

Was 2011 the peak of the Melbourne Cycle?
You make some very good points, I don't see my townhouse purchase as a mistake though as I think it will only increase in value and I am not forced to live there after all (even though I'm in love with it and want too haha). I am sure further purchases will be much easier as investment only and no emotional attachment.

I think part of me thought, get in now whilst I will still have a few years at home incase of any consequences... but smooth sailing so far.... touch wood!
 
Was 2011 the peak of the Melbourne Cycle?
My guess is yes, we've past the peak of the current Melbourne cycle. If you don't agree, that's fine. There'll be others, and you're young enough to experience quite a few more.

You make some very good points, I don't see my townhouse purchase as a mistake though as I think it will only increase in value
Yes, it probably will go up, especially in the long run. But relative to your salary, something with that low a yield will hurt you. It's better than not buying, but it's not a great buy. In this lending environment, yield is something that factors strongly into the bank's calculations. That will slow you down in terms of refinancing and buying more.

and I am not forced to live there after all (even though I'm in love with it and want too haha). I am sure further purchases will be much easier as investment only and no emotional attachment.
You can't afford to live there right now anyway. My point is that you should have avoided the emotional attachment in the first place, which would have opened up a lot more possibilities, ones with higher rental yield. For your PPOR, go ahead an be emotional. But if you're buying for investment, buy for investment.

I think part of me thought, get in now whilst I will still have a few years at home incase of any consequences... but smooth sailing so far.... touch wood!
While it's not the best buy, your greatest advantage is your age. 12 months isn't much of a track record, but starting is a great achievement.
 
Saving is one thing (well done, by the way). Though isn't being at home one of the reasons why you can save so much? If you moved into that townhouse, your savings will drop like a stone.

Convincing a bank to lend you 400k solely on your income of 50k is about some very impersonal bank systems that care nothing for you accomplishments.
Yes it is 100% and yes it would 100%!! I have met with a mortage broker who said it can be done, but time will tell.
 
My guess is yes, we've past the peak of the current Melbourne cycle. If you don't agree, that's fine. There'll be others, and you're young enough to experience quite a few more.



Yes, it probably will go up, especially in the long run. But relative to your salary, something with that low a yield will hurt you. It's better than not buying, but it's not a great buy. In this lending environment, yield is something that factors strongly into the bank's calculations. That will slow you down in terms of refinancing and buying more.



You can't afford to live there right now anyway. My point is that you should have avoided the emotional attachment in the first place, which would have opened up a lot more possibilities, ones with higher rental yield. For your PPOR, go ahead an be emotional. But if you're buying for investment, buy for investment.



While it's not the best buy, your greatest advantage is your age. 12 months isn't much of a track record, but starting is a great achievement.
I'm not one to argue in regard to Property cycles with people with much more knowledge then myself!

I have thought about the low yield hurting me, now you have me concerned... I guess initially I thought buying purely for investment might lock me out of the market for a while but now what I am realising is what I decided to do may have done that anyway!

At this stage I would like to hold on this property as long as possible treating it as my future PPOR, so with that in mind I guess my best options are save save save.

Welcoming any more responses opinions? Maybe stories of people that started similar ways..
 
Hi Norwoodman,

It's at 400k now, I had 100k deposit but borrowed 428k to cover stamp duty and settlement expenses. Did you get a good job offer? Yes I have tenants signed on until Oct 2013 :) I just think I would perfer to have my own place to live in so I'm not having to move around unless I want to!
Yeah, offer was pretty good - currently earning 80k (decent hours too) and somehow managing to build up savings at a phenomenal pace amongst the expensive rent in Gladstone.

Yes, as the others have mentioned, renting is a far more flexible arrangement... it works for me considering there's a 99% chance I won't live in Gladstone in 2 years due to the nature of my job (and I wouldn't really choose to stay here long term anyway!). Being up here has opened my eyes up to what everyone else seems to hear about Central Queensland, the Bowen Basin and Mackay but not actually see.
 
I have thought about the low yield hurting me, now you have me concerned...
It's a bit late now, but learn for next time. You have time time to get over it, anyway.

I guess initially I thought buying purely for investment might lock me out of the market for a while
I don't understand that. Can you explain your thinking? That suggests you think the property buy will kill your ability to buy more? Put it this way, if you'd bought solely for investment, would you be willing to accept something that had a 4% yield? If you'd bought something with a 6% yield, it would help your serviceability.

At this stage I would like to hold on this property as long as possible treating it as my future PPOR, so with that in mind I guess my best options are save save save.
Your best option is save and buy more when you can. If you can afford to hold it for the next couple of years, rental increases will make it easier and easier to hold.

Get over that PPOR thing. Look at the big picture. What if you need to move somewhere else for work? Want to go overseas? Your future partner doesn't like the area? It's too small or big for you by that time? Who knows? Don't limit your choices. Forget 'at this stage'. Think 10 years, 20 years, 30 years into the future.

Welcoming any more responses opinions? Maybe stories of people that started similar ways..[/QUOTE]
 
Yes it is 100% and yes it would 100%!! I have met with a mortage broker who said it can be done, but time will tell.
IO repayment 24 000 per year...........after taxes.

Pay council rates, body corp and odds and sodds, and Maggi 2 minute Noodles arent an option.

i dont need to do any sums, that wont fly on owner occ :(

as an investment that may be a diff outcome

ta
rolf
 
It's a bit late now, but learn for next time. You have time time to get over it, anyway.



I don't understand that. Can you explain your thinking? That suggests you think the property buy will kill your ability to buy more? Put it this way, if you'd bought solely for investment, would you be willing to accept something that had a 4% yield? If you'd bought something with a 6% yield, it would help your serviceability.



Your best option is save and buy more when you can. If you can afford to hold it for the next couple of years, rental increases will make it easier and easier to hold.

Get over that PPOR thing. Look at the big picture. What if you need to move somewhere else for work? Want to go overseas? Your future partner doesn't like the area? It's too small or big for you by that time? Who knows? Don't limit your choices. Forget 'at this stage'. Think 10 years, 20 years, 30 years into the future.

Welcoming any more responses opinions? Maybe stories of people that started similar ways..
[/QUOTE]

Yes indeed, lesson learnt :)

Well I was set on not renting ever at the time I purchased and so I thought that the kind of place I would by for purely investment purposes would probably not be the type of property I want to live in when I move out of home in a couple of years. No i probably wouldn't accept a 4% yeild if I wasn't planning on living there at some point.

I can afford to hold it! The difference between repayments and rental income is 600 per month so whilst at home im doing it on my ear. I am thinking ahead... would be a great place to retire ;)
 
IO repayment 24 000 per year...........after taxes.

Pay council rates, body corp and odds and sodds, and Maggi 2 minute Noodles arent an option.

i dont need to do any sums, that wont fly on owner occ :(

as an investment that may be a diff outcome

ta
rolf
No body corp (just 25% of annual insurance on driveway). But maybe I will have to be nogitiable on the 2 minuite noodles and renting. I dont plan to sell
 
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