Introduction

[Erin]

Hello All,

I have been reading this forum for a month or so and thought it was about time i signed up. My name is Erin, I will be 21 in June and am from Sydney. I have decided that i will be taking control of my financial future by property investment. I have started to read and educate myself and I am well on the way to acquiring a deposit for my first PPOR which i aim to purchase within the next 3 -4 years. Once i gather a bit of equity in the PPOR i will purchase my first investment property. I am currently a full time student studying a Bachelor of Commerce majoring in Finance and living out of home (have been for 3 years) but i have managed to gather a bit over 20K in savings over the past few years. I know it's not a large amount but it's a start. My motivation for investing is I don't want to end up in the same predicament my parent's and many others are in. They have a 400K mortgage on their PPOR with minimal additional assets, they both work over 100 hours a week between them at age 44 and 48. I moved out just before i turned 18 (first year out of high school) to give my parents some space so they could spend the time together they deserved after my mother was very ill, as well as deciding it was time i supported myself but unfortunately they haven't had much time and they often struggle to make ends meet. I have decided to start sooner rather than later as no matter what age you are the only person responsible for your financial freedom is yourself, it has been hard at times to save money when all my mates have been spending rediculous amounts on alcohol, clubbing, clothes, travelling and just wasting money as most young people tend to do.

I have just finished reading Michael Yardney's "How to grow a multi million dollar property portfolio in your spare time" which i enjoyed so much i read the whole book in one go from start to finish and signed up for his e-magazine. I have also bought the richest man in babylon, Jan Somers "Building wealth through invesment property", Steve Mcknight's "0 - 130 properties in 3.5 years" and Margaret Lomas' "Positive Cashflow Property" which i think will give me a solid introduction to investing.

I have lots and lots to learn, I have already learnt a bit from this gem of a forum alone, the knowledge some of the people have on here is astounding and what is even better is that they are willing to share that knowledge with others. Are there any other young investers on the forum? Would be great to talk to other like minded young people rather than most who tell me i should move back home and live my life when i am young and not to worry about property yet

One of my primary goals from acquiring investment property is not only my own financial freedom but to aid my parents in developing their own financial freedom so they can enjoy their retirement. The only regrets i have about this is not starting sooner!

Cheers

Erin

 

[MarkB]

Hello and welcome to the best property investment forum in Australia.

Are there any other young investers on the forum?

There are, including one member who bought his first IP at age 19.

Would be great to talk to other like minded young people rather than most who tell me i should move back home and live my life when i am young and not to worry about property yet.

I doubt you'll find many (any?) one here who will tell you to forget about property, but at the same time you are only young once.

There's no right or wrong answer on this one. I know some people who stick to very tight budgets and funnel every spare $ into their IPs. Personally I am not so frugal. I work damn hard on my investments (it is a f/t job on top of my other f/t job) and while there is an ultimate goal in mind, I won't kill myself in the process of reaching it and I do make sure there are rewards along the way.

Each to their own, of course, but don't believe that being a landlord means you have to have no fun in life.

The only regrets i have about this is not starting sooner!

It's a very common regret.

Though I have to say at 21 you've nothing to worry about. Last I heard (a couple of years back) the average age of property investors in Australia was 43.

M

 

[alexlee]

Erin, one important thing you'll find on this forum are ideas that you just won't hear from 'ordinary' people. As property investors we think a little differently from most people.

For example, just an idea for you to think about. Why buy the PPOR first? You're 21. Realistically, even if you buy a PPOR now, how long are you going to stay in it? You're not going to want the same type of accomodation in your late 20s (if not earlier) as when you're 21.

Why not buy an IP first? While buying a PPOR means you save on rent, you also lose all the tax deductibility and non-cash deductions such as depreciation. Renting allows you full flexibility to, for example, go overseas and work for a few years (I've been doing this) while still having property grow for you.

Ask yourself why you want to buy the PPOR first. Is it for a financial reason? Or for emotional reasons because everyone you've known so far tell you buying your own place is the best thing? Your goal is to become financially free earlier. To achieve that with a standard buy and hold strategy, the key is to have as much property growing for you as you can comfortably hold. You may find that buying IPs and renting allows you to hold more and therefore increase your assets faster.

As a bit of background, I bought my first 2 IPs at age 22 and 23, then went overseas for 6 years. For me, at least, buying IPs first (and I still haven't bought a PPOR yet) has been much better than buying a PPOR first.

You can, by the way, still use the First Home Owners Grant later if you buy an IP first.
Alex

 

[888abundance]

The Important Things

Hi Erin

It's great to hear about young people thinking ahead for their future, and you've made a great start.

For your parents, while they might be working hard, they don't seem to be doing too badly in other things which are equally important, i.e. to have supported & raised children to think like you do. That's an achievement too.
I remember my own parents working very hard & making sacrifices to support me in university.

Your thoguhts and hopes to help them in return will be much appreciated by them, I'm sure.

Regards

 

[Mr. Fabulous]

Hi Erin,

I was thinking the same thing as Alex. You've got enough for a deposit and costs for an I.P. right now. Not in Sydney (probably) but you could pick something halfway decent up in Brisbane.

I would suggest not waiting another 3 - 4 years to get a PPOR then waiting even longer to get your first I.P. That's time and (potentially) huge amounts of money wasted (in both rising costs and lost capital growth) simply because you waited.

Mark

P.S. congratulations on having been able to save so much at such a young age, particularly since you've been living out of home for four years - in Sydney no less!

 

[FrankGrimes]

Hi and welcome to the forum!

There are a few young people about, its the best time to start! I bought my first at 19, second at 21 and 3rd and 4th at 24.

AlexLee is on the money - buy an IP first, there really isn't much point buying a PPOR at such a young age as you will no doubt change your mind alot before you settle down. 20k is more than enough to get started so get cracking! Its also alot cheaper to rent, especially if you're sharing or boarding with parents.

Ask anything you don't understand on the forums and have no doubt you will get all the answers you need. Welcome and good luck.

 

[steveadl]

Erin,

You've already done very well to have saved $20k and have the attitude to property that you've summarised.

I'd also say that it may be better for you to buy an IP first instead of a PPOR, for the hundred different reasons mentioned throughout this forum. Since you've been living out of home for 3yrs already, I assume you can maybe stay where you are now, or rent somewhere else?

You'll find you will be able to buy an IP a lot sooner than you would be able to buy a PPOR. Then let the IP sit there for a year or 2 building equity, and then buy yourself the PPOR. Or at that point you may decide you still can handle renting and buy another IP.

You should be proud of yourself that you've come to this realisation this young in your life!

Cheers
Steve

PS For the record, I was also 20 when I finally saved up for my first house, although I only had $10k because property is a bit cheaper over here in Adelaide. And I would suggest, unless you have like minded friends, I would'nt put too much weight in their opinions of your plans.

 

[Crystalleez]

Hey Erin!

Great to hear you've adopted the mind set of looking after yourself financially. It's a great feeling once you decide to take control isn’t it? At least that's the way I feel right now.

Very honorable goal you have too. Aiming to help out your parents, as 888abundane mentioned, means they must have done something right. Congratulations on acquiring that kind of deposit, while living out of home no less. Shows you have the willpower to stick to a budget a resist temptation. Great feat already.

I'm 21 also (22 in Sept) and will be buying my first IP within the next 3 months max. As Alex and Mark have queried, why wait 3-4 years to buy a PPOR? In the mean time if you invest in a rising market such as (I believe) almost anything on the East coast is about now (do your research), chances are you'll be better off. Not to mention the experience and familiarity it will give you in regards to how it all works. Perhaps it’s something to consider. If you choose not too, well 3-4 years is still better then waiting 20. Maybe run some “what if” scenarios? See what you’re comfortable with.

 

[Erin]

Thankyou for all the replies so far!

I still have to wait until i finish uni to buy an IP or a PPOR as I am not earning enough at present (15K to be exact). My course is 5 years full time and I am in my third year. I have been living with my boyfriend for the whole 3 years, he does not share my interests in investment and although it sounds harsh, i am not making any of my investment plans to include him so my income will be the only income. Unfortunately he is the type that wants to spend 400K on a townhouse as a first PPOR in the Sutherland Shire (where he grew up) instead of moving elsewhere cheaper. When we originally discussed buying together, he said the bank would easily lend us 600K (for an OK house in sutherland shire) on a combined income of 80K, he did not believe me when I told him that repayments on a 400K loan are $750 a week. I told him that I am prepared to start at the bottom instead of having a rediculous mortgage to pay for a first PPOR.

I would like to buy my first PPOR or IP on the central coast (woongarrah area seems affordable for me with predicted CG - thoughts?). I thought buying the PPOR first would be the best option as I would not have to pay rent (although I can stay where i am which costs $310 a week - $155 each). I have never had any advice from any investors, no one in my family invests and I have always been told to buy a PPOR as soon as i possibly can. If people think I would be better off buying an IP first and continuing to rent I am all ears

SE QLD is definately somewhere I would invest in the future but I am not confident in buying my first IP so far away.

The more i browse this forum the more I realise how amazing it is. There is just an abundance of priceless information.

 

[FelixL]

welcome to the forums Erin!

Its a fantastic thing to get started thinking about investment at this early stage, I so regret wasting my younger years not thinking about this.

like all others have said before, buying a PPOR is much harder than an IP, you won't get rental income and the interest payment is not tax deductible.

If you buy your first property in NSW, there is no stamp duty and still claim the First Home Owner grant. Then 6 mths later move out and turn it into an IP.

 

[Mr. Fabulous]

Hi Erin,

So let me get this straight. You live out of home, you earn 15K a year, pay $155 a week rent and you've saved 20 grand? Holy sh.t!

Awesome.

Mark

 

[Erin]

I have been paying $155 a week for 2 years, it was only $70 the first year out of home as i was sharing a rented unit with my boyfriend and his brother. The first year i earnt a bit more than 15K as well but the past 2 years have been quite tough and i have really had to stick to my outlined weekly budget. The amount of times i have been tempted to buy that new jacket, or buy food from the cafe at uni. I look back and think if i had of given into those temptations i wouldn't have what i have now, and i wouldn't be on the way to buying my first IP. Now i see that figure, it motivates me to save even more.

 

[Rickardo]

Hi Erin,

Welcome to the forum, i have sent you a PM. One thing you'll find here is great knowledge and a support network from many whom are pretty well educated and experienced in property and wealth creation.

There are a lot of younger investors on the forum, who will always be happy to offer advice, sound out ideas and learn together. I am one of the younger members and recently purchased my first IP at age 22.

 

[MishMash]

Hi Erin,

Welcome to the forum...I find the people on here to be really helpful, even when i ask inane questions.

I am 20 (turning 21 in June) and i purchased my first IP when i was 19. I am trying to buy my second IP at the moment.

You sound like you have a really good attitude towards your finances

 

[kissfan]

I thought buying the PPOR first would be the best option as I would not have to pay rent

Hi Erin and welcome.

Whilst paying the loan on a PPOR would save you rent, it would also mean that you are missing out on someone else helping to pay the loan on an I/P.

Also, with an I/P, you get a few tax benefits (not that I personally believe in buying for tax breaks) and depreciation which you do not get with a PPOR.

In the end, it will probably come down to working out which is more affordable to you in your current situation. Might be a good idea to run some figures past a good mortgage broker and possibly an accountant.

Regards
Marty

 

[rossv]

or another option.....

form an IP company,
company buys an investment property,
you rent the property off your company.

while you are still paying rent, you are paying it back to yourself via the company and of course costs are deductible.

And for all intensive purposes its your PPOR

the best of both worlds



rossv

 

[alexlee]

And lose the CG discount? Is that a good idea? Using a trust probably wouldn't get you past the ATO, though.
Alex

 

[Luckyrooster]

Welcome to the forum Erin. I just turned 26, so not that much older than you. I think its a good time to buy now, before I see a big boom on it's way. Plus, its better for an IP, just because of the freedom to rent and live overseas and stuff, while growing capital in your IP at home. The hardest single part is finding a loan that suits your deposit (we have similar savings) and getting a place with good enough yields and a mix of CF to ensure the mortgage repayments don't get in the way of enjoying your early 20's, which are a fantastic time in life, and when you look back, you can't have those years back. I've travelled twice around the world, and of course that money could of been the deposit of 2 cheap IP's..but I wouldn't give up the experience of travelling and growing as a person for any money. Now I would like to have the balance of equity and IP growth with that freedom to live my youth. Thats why I'm looking to buy something soon, probably in the brissy area.


- Lucky

 

[jojorich]

Hi all

Erin I'm new to the forum too after my Dad emailed me your thread.

I'm in the middle of a book at the moment called "Secrets of Property Millionaires Exposed" by Dale Beaumont. In it Dymphna Boholt talked about what you can do if you dont have cash (like me) and you dont have capital (like me).... you could find someone who wants to sell or a buyer and create a deal for them and basically sell it to them. It doesnt require cash, it doesnt require equity, all it requires is research.

Just another idea to consider.

Jo