How young people can tap into the property market?

Hi all,
I am a long time lurker. This is my first post. Just want to gain some insight as how the young people can tap into the property market nowadays.

Recently I came across a case where a collegue wanted to buy his first home. He is a full time Uni student, but has been working casual in our office for at least 2 years. His income is probably around $20,000 pa. Just wondering:

1. If he has any chance of tapping into the current property market?
2. Even if he could get a loan, it won?t be enough to buy a decent property unless he could come up with a big deposit. Today, a 1 bedroom apartment in Melbourne metropolitan probably costs around $300,000 plus (I could be wrong).
3. Does it mean that he has to wait till he finishes his Uni and has a full time job? As the property market keeps soaring, it would be even harder for him to do it.

What is your wisdom thought or advice to these young people who has the right mind but .....

Thank you all in advance.
 
I'm not an expert when it comes to loans, but I think that your mate might be hard pressed to find a lender that will work with him if is income is $20k.
That is unless he can get someone, usually parents, to go guarantor for him on the loan. That means that they vouch for him paying back the loan, but if he defaults they have to take over.
I think they might even still do 105% loans if there is equity in a guarantor's property, so it would be possible to do this. But I personally wouldn't really advise is. I think it's better to work and save up some money first instead of completely relying on your parents.
 
A $20k income is not enough to service an owner occupied loan. It could be possible for an IP if the yield is ok and they live rent/board free.

Cheers

Jamie
 
That is unless he can get someone, usually parents, to go guarantor for him on the loan. That means that they vouch for him paying back the loan, but if he defaults they have to take over.

This sort of loan is no longer available. The owners of the property need to demonstrate that they can afford the loan with their own income.

105% loans using parental equity guarantees are still okay though.

Realistically it's unlikely that your friend will be able to qualify for a loan with a $20k income. Perhaps a very small investment loan but not owner occupied. :(
 
I like hearing about young people trying to get into the property market (all of my children are saving for their first house and I will match whatever they put in). I am not an expert in lending. I agree with Jamie and Spludgey. I would suggest that he live at home for as long as possible (hopefully board-free) and save, save, save. I am in the ACT and not sure about Victoria's legislation. Would your friend be eligible for the first home owner's grant? That is something he could look into. My other recommendation is, when he is inspecting properties, to take someone (preferably someone who has bought a few properties in the past) to help him. When I was younger, I wasn't very good at looking past the yucky wallpaper or the colour of the walls. It's useful to have an experienced person with you who can tell you what to look for and to look past the superficial things. If he is handy, tell him to look at something that has a few superficial problems eg. something that might turn someone else off but would be easy for him to fix and therefore increase the value. I hope that makes sense.

I feel for the younger people today. It was so much easier when I was growing up to buy a property. It seems much harder in the current climate where the price of housing has risen.
 
Thanks everyone.

If he bought a small IP now, would he lose his first home owner grant when he wanted to buy his PPOR?

The only thing that comes into my mind with good rental yield and with his affordability will be a student apartment, which I know is a NO! NO! NO! Is there anything that you reckon he can put his hands on?

Or as Dave said, just have to wait till he gets his full time job.
 
Is this one of those "my friend" scenarios where it's actually you?
If not, I would suggest that he probably shouldn't buy a property anyway. If it's too hard for him to do basic research, it's too hard for him to deal with tenants.
 
Is this one of those "my friend" scenarios where it's actually you?

Hi Spludgey, I am sorry. May be I did not make it clear why I did this. But it is not for me. He is actually one of the work mate in our office. The reason I put on this forum, I know there are a lot of gurus such as you who will be able to put in ideas, expertise for the young people to learn. I have 2 young kids going into Uni soon. Once I heard his story, I thought it would be great if I could learn from this forum, to see if he has any hope in tapping into the property market but also to guide my kids in very near future.
 
Wow Corey,

Do you mind share a bit of your story as how you did it?

Really not that much to it to be honest. I started saving for my first house when I was 16, worked nights while at uni. Paid deposit, acquired house. :)

To be fair though, it's a *lot* more difficult to save for a deposit and service a loan for a FHBer in the eastern States with the large median variance compared to SA - but there's nothing stopping your friend for purchasing regional/interstate.

The flipside is that the properties he would qualify for would most likely be neutral to slightly positively geared, minimising the impact on his low income.
 
Last edited:
Hi all,
I am a long time lurker. This is my first post. Just want to gain some insight as how the young people can tap into the property market nowadays.

Recently I came across a case where a collegue wanted to buy his first home. He is a full time Uni student, but has been working casual in our office for at least 2 years. His income is probably around $20,000 pa. Just wondering:

1. If he has any chance of tapping into the current property market?
2. Even if he could get a loan, it won?t be enough to buy a decent property unless he could come up with a big deposit. Today, a 1 bedroom apartment in Melbourne metropolitan probably costs around $300,000 plus (I could be wrong).
3. Does it mean that he has to wait till he finishes his Uni and has a full time job? As the property market keeps soaring, it would be even harder for him to do it.

What is your wisdom thought or advice to these young people who has the right mind but .....

Thank you all in advance.
Here's the big secret;

Get two, or even three jobs if you have to.

Save a lot and spend little.

Put down a deposit on a very cheap property in an area that is relevant to your requirements and affordability.

This, of course; will not be Melb CBD - never was.

If it is in the boondocks; then so be it.

It's not nice news, but that's how generations before you - and I - have done/had to do it.

Not blowing my own trumpet, but my first deposit was saved from working in my own Pro Shop business on my own; day light until dark, 7 days per week for 2 years.

Bought an older cheapie in Boronia; nowhere near work or the CBD.

Tough titties for me.

So, there's something he/you can do; work 80 hours per week for 2 years, spend zippo and voila!

There is also "Vendor Finance". Not common; but basically the Vendor carries some of the loan required and gets paid interest from the Buyer.

This will allow your friend to buy a property, and not have to get much if any of a formal Bank loan for the first few years...you would need some deposit though.
 
Shoddy investment type - student accom only. LVR restrictions will be the undoing for most of it.

So with that example and he bought it for 80k...He'd have to come up with a 40k deposit + costs and max he could borrow would be 40K?
 
In Perth we have various schemes for FHB where the Government becomes your partner 70%/30%. Not saying this is good or bad??

You can also buy houses 100%, I think as little as 3% deposit. Selection of affordable homes. Not sure what schemes you have in your State. You would have to live in the property for 12 months and you would also need income to service the loan of course.
 
I mentioned this in a previous thread, I saved my money by working almost full time at Subway whilst at uni.

Then switched to full time engineering work whilst still doing full time uni. Lot of late nights, thought I was having a heart attack once, as did some friends, one of who was rushed to the hospital (panic attacks).

It was stressful, but the ones who did it, we all own porfolios past the $1M mark now and have cash in the bank.

It's life.
 
Work work work, save save save

I once lived off $35 per week after rent/utilities/basic meals etc etc

Absolutely smashed the debt I owed, house deposit is no different, especially if you are a young person
 
Last edited:
Back
Top