Thriving on Minimum Wage

[jaycee]

I'm hoping some "guests" to SS will actually read this thread, and give them hope, and know it is possible.
Easy?..depends on who you ask

I give this same advice to the Americans (on other blogs) that they should be snatching up a cheap foreclosed home.

I know, that's great & all that stuff

But people will question the accuracy of advice when it appears to be inaccurate, you would too.

As has been said by many people and me before , we know people can do this, we see people doing this and may even know people who have done this.

It is not new and we are not denying it cannot be done.

Just not so sure about the example(s) given as to how.....

 

[natmarie73]

I think someone on minimum wage can buy a property - but it would depend on what stage of the cycle we are in and where the property is located, and how much of a deposit they have saved.

I remember way back when I was 19 and earning minimum wage - I could have afforded to buy the property in Brisbane (tarragindi) that i was house sharing in but no way would a bank lend to a single girl on minimum wage back then. If the wage/house price figures were the same ratio today it would be doable.

It sure wouldn't be in WA in today's market though unless you were buying as a group in as tenants in common.

 

[tobe]

whats wrong with just finding the cheapest rent you can, living simply and saving a 5% deposit? then getting a loan for approximatley 3 to 4 times your gross income and buying a crappy property at the back blocks of nowhere? Perhaps on the outskirts of a major city, perhaps in an area that others fear to tread, perhaps in a regional town?

Whats wrong with renting that place out and continuing to rent somewhere else cheaper and then refinancing and purchasing again and then perhaps a couple more times once a year for a couple of years?

I think the taking in boarders thing might be a cultural issue that not everyone is comfortable with, however the basic terms are the same, live simply, save money, invest wisely and repeat.

 

[joeExpat]

Rent a place with 3 bedrooms and den if possible.Take in boarders and charge them each a specific rent, and not split the bills. If they want meals included, add $50-$75 a week more.

Long long time ago, I lived in a bunch of shared houses in Australia. The "boarders" would not stand for the lease holder ripping them off like this, the whole concept of a share house being all the occupants pay a fair share each, bills and food included, with perhaps only the master bedroom holder paying a little more.

 

[Corey Batt]

I am not a socialist at all.
In 2008 we stayed at a place in Glen Huntley,Victoria, where they offered this same exact type of accommodation.Except they charged us $300 week, make our own breakfast with kitchen priveleges.We were very happy to pay this. We shared a room. There were 7 other people staying there. (they also had a converted granny flat)Some students, backpackers, workers etc. They paid someone to come in each day to prepare the meals.

Socialist was tongue in cheek

Now that's moving the goal posts again! So not only is the landlord going to accept a person who is renting for more than they make a week, AND accept three other boarders whilst not receiving the premium the first tenant is receiving, but they ALSO will let anyone stay there (backpackers, short term boarders). Pretty sure the risk factor will be ringing at this time, and risk requires BIG returns. I'm pretty sure PI insurance would not cover people who are not on the lease agreement. Likewise if they cannot maintain three people at a time the numbers are going backwards.

The point I'm trying to make is that if you try to set out a case study with figures to broaden newbies minds so they can put the right foot forward, it is pertinent that correct figures and feasible situations are suggested. Otherwise you do a disservice to the person receiving advice as the numbers won't stack up, and likewise yourself through having your advice be perceived as false. Last thing we want to do it make people think that it actually is impossible to better themselves financially.

Here is my much simpler version:

Person A who lives in Adelaide stays at home and says enough for a 20% deposit and costs for a 150k house/uni.

They buy said unit, also gaining the FHBG of 7k. They have a friend board with them for $120-150 a week to help with the costs. If they managed to get a 3 bedder for that cheap and can get two friends, more board money.

This would be tight, but potentially doable.

Other options include siblings buying a property together with a contract in place prior to purchase. The intention for the property to become an IP when their income increases.

Either way, I think a much more practical solution would be to advocating people interested in investing in building their income to a level where they have a broad range of options allowing for the best available investment choices.

 

[jaycee]

whats wrong with just finding the cheapest rent you can, living simply and saving a 5% deposit? then getting a loan for approximatley 3 to 4 times your gross income and buying a crappy property at the back blocks of nowhere? Perhaps on the outskirts of a major city, perhaps in an area that others fear to tread, perhaps in a regional town?

Whats wrong with renting that place out and continuing to rent somewhere else cheaper and then refinancing and purchasing again and then perhaps a couple more times once a year for a couple of years?

I think the taking in boarders thing might be a cultural issue that not everyone is comfortable with, however the basic terms are the same, live simply, save money, invest wisely and repeat.

Nothing

I'm sure there's 100's of things people could do.

Same as there's 100's of options if not more for people with lots of money, ot invest further.

Nothing new, lots of people have been doing this stuff without us noticing for years and years.

Many people of course do not realise that they can and that's the problem.

But it's not limited to low income earners and investing/ owning a property, nor is it any more unique when talking about investing/owning a property.

 

[wylie]

I want you to consider the figures I posted.
If you have the rent and required bond, there is going to some landlord that is willing to rent to you.

I would think it highly unlikely that any landlord would rent to someone not earning the rent amount each week, knowing they will be sub-leasing to others. They certainly wouldn't get past a property manager.


Rent is $600 week
http://www.gumtree.com.au/s-ad/dunlop/house/four-bed-room-house-in-dunlop-for-540-only/354425209
(this is a 4 bedroom house, in the ACT, close to unis etc)

You have 3 boarders at $250 week each ($325 food included)

I just checked Gumtree Canberra. You just are NOT going to get anybody to pay $250 for board. Seven out of eight adverts were $120 to $170.

The head tenant would purchase the food (if included). Preparing a stew,casserole,soup,chili,curry dish each evening for consumption the next day is reasonable. Have some fruit, juice,bread,rolls available for breakfast.
Lunches could be an assortment of tuna,roast chicken/pork/beef ,eggs,salad foods for wraps/sandwiches.

I'm sorry to say that knowing the young people I do know, including my own children, just makes me laugh at the above suggestion. I'm assuming you are saying the head tenant would be preparing this food and making lunches for the others .

Minimum wage isn't the problem, it is lack of self discipline.

Having a social life doesn't need to cost a lot of money.
Potlucks, game night,camping with friends.
Not everyone thinks bar hopping is fun.

The rest I don't disagree with, but our son HAS done it, bought a two bed unit on a $38K salary, borrowing $292K. His IO payments come to just short of $400 per week. His friend pays $150 and they shop and share food, but they are not strangers, so this works for them.

He has very little left over, but he went to London for a month last December because the flight that would have cost me the equivalent of $8K at his age, cost him only $1,700 and he stayed with friends for free (except for some money we gave him to take a side trip to Paris). He has done it because he really wanted his own place. He could have bought a four bedder at Slacks Creek but nobody was prepared to live that far out. He would not get as much for the room that far out even if he could find someone to share. His friend work in the city or past the city, so central is really important for their work/uni/social life.

So, like others have said, your post shows it can be done, and hopefully will make some young people realise it is within their grasp if they really want it, and are prepared to compromise something to do it, but the figures you are using just aren't going to fly.

 

[kathryn d]

CJay,
I'm not moving the goalposts at all.
When anyone hits a roadblock, do they stop, or figure a way around it?

If the problem is not having the bond and income to support renting a place that is high, you save it. I just gave some options for how this could be done. I'm sure there are plenty more.

I am not talking about share houses. That is completely different.
For boarders, they are willing to pay extra because the property is furnished, bills are included, leases would be flexible.
The head tenant is repsonsible to the LL for any damage that may ultimately occur. They are also responsible for any vacancies.

The place I mentioned we stayed in 2008, was in an owner occupier property.We paid cash. I have no idea what the others did, nor do I care. It was cheaper than a hotel for us.

Whether it is a cultural thing, I don't know. Doesn't mean you can't use it to your advantage. My daughter rented out her extra rooms. If she had been smarter, she would have used the money to pay off her loan. Instead she used it for fun money. She lived in the moment. She has gotten better as she matures.

If 4 friends want to qualify for a property and purchase it, it would come with problems. A good contract would be needed, for one.
Is it worth it? Of course.

 

[Intrinsic_Value]

much easier way.

Go on unemployment benefits, get government subsidised private renting, let out the rooms for cash, get food vouchers from the salvo's and go and get a cash job (should be able to get around $13 per hour cash in current environment)

Save the money, use a trusted relative overseas to set up an overseas bank account that is in AUD (so one gets the AU$ interest rate), transfer amounts in less than $10,000 at a time.

When the time is right, get off the benefits, have the relative transfer the money back as a 'gift'.

Start your life on mainstream bandwagon.

oops did i just make a politically incorrect statement

 

[Intrinsic_Value]

Total income comming in $895 per week with no tax.

opps forgot rent assistance: add another $60 per week.

This brings the income (not including the investment income) up to $955 per week.

This is equal to a single tax payer earning $62,000.

So under this strategy the person would be better off unless they could work in a proper job earning more than $62,000 per year.

Don't you just love our system.

Deleted part of my post, whilst madly typing away:
$895 per week is new start allowance for a single + working 50 hours a week on cash jobs paying $13 per hour.

 

[weg]

Honestly kathryn, your acommodation figures DON'T stack up. Even if they did you'd be messing around with small change.

My brother couldn't get more than $175 a week for a room with an ensuite, $150 for the others (in a desirable new upmarket house in Adelaides equally desirable eastern suburbs).

And so you paid more for some serviced short term acommodation in your travels... good try .

If you're trying to prove than people on a very low wage can achieve just as much as those people with the same savings habits, but who are on much higher incomes, then the answer it's no they can't.

For starters a low income earner will save far less and only when a frugal lifestyle is kept up, while a high earner will do well both ways.

Most people don't want to live a frugal life for 'years on end'. They rather earn more instead because it's easier while achieving the same or greater result.

 

[AlmostBob]

preconceptions, will get you every time
who's parents began in a McMansion ?

 

[kathryn d]

Weg,
If I believed that, there wouldn't be ads like this
http://www.gumtree.com.au/s-ad/heidelberg/other-shared-accommodation/looking-for-home/1000111138
Single man offering to pay $250 week for a room
As for IF the numbers did add, it would be small change?
May be it is. Either way you look at it, the head tenant is still able to bank every dollar they bring home.If $35K less taxes is small change to you, there is definately something terribly wrong with your thinking.

Did your brother put an ad on Gumtree and wait for replies, or did he actually answer them too? How proactive someone is also makes a bit of difference.

I'm not even trying to prove that a low wage can achieve as much as a high wage earner. That is for the individuals to prove that.

I was hoping this thread would be more of a positive one.
Showing people how it can be done.
Are there sacrifices, of course.
Are there roadblocks, of course.
Is it impossible..not in the least.

The trouble is, my numbers DO add up.
Having a high paying job, is not the be all, end all.
They work in USA, Canada, and Australia.

 

[dan c]

much easier way.

Go on unemployment benefits, get government subsidised private renting, let out the rooms for cash, get food vouchers from the salvo's and go and get a cash job (should be able to get around $13 per hour cash in current environment)

Save the money, use a trusted relative overseas to set up an overseas bank account that is in AUD (so one gets the AU$ interest rate), transfer amounts in less than $10,000 at a time.

When the time is right, get off the benefits, have the relative transfer the money back as a 'gift'.

Start your life on mainstream bandwagon.

oops did i just make a politically incorrect statement

Why bother?

Seems like a lot of trouble to go to, to make $60 grand a year. Not to mention the illegality and the tax avoidance.

 

[jaycee]

Weg,
If I believed that, there wouldn't be ads like this
http://www.gumtree.com.au/s-ad/heidelberg/other-shared-accommodation/looking-for-home/1000111138
Single man offering to pay $250 week for a room
As for IF the numbers did add, it would be small change?
May be it is. Either way you look at it, the head tenant is still able to bank every dollar they bring home.If $35K less taxes is small change to you, there is definately something terribly wrong with your thinking.

Did your brother put an ad on Gumtree and wait for replies, or did he actually answer them too? How proactive someone is also makes a bit of difference.

I'm not even trying to prove that a low wage can achieve as much as a high wage earner. That is for the individuals to prove that.

I was hoping this thread would be more of a positive one.
Showing people how it can be done.
Are there sacrifices, of course.
Are there roadblocks, of course.
Is it impossible..not in the least.

The trouble is, my numbers DO add up.
Having a high paying job, is not the be all, end all.
They work in USA, Canada, and Australia.

I think possibly because people already know that if they save & be "clever" (I use that word as I am not clever enough myself) to thin of the more appropriate one) with the money they save, they can do stuff, that we move onto the details of the post - the detailed technique suggested, and like is done with things presented by others on this forum, the numbers get checked & questioned... ask NATHAN , he'll tell you that just because the person who posted the thread said something is true, the rest of the forum is not oblidged to automatically agree with them

 

[investor2009]

I'm on a low income, would anything I have to say sway anyone?

I (we now I'm married) have managed to acquire many property investments while earning $40,000p/a. What I found is: Your wage can only really go up from there anyway, so you really have nothing to lose, I'm now on $55k p/a and still streets ahead of the majority who earn more than I.

And I/we now live in a nice house, with NO other renters because we surpassed the painful starting bit years ago, but it was painful at the time, theres no real way around that.

Losers mentality is 'can't, you know the rest. It's just that no-one seems to want to learn how to. Trust me, I know. Thats where the real problem lies.

Good thread Kat!

 

[kathryn d]

jaycee,
I never even claim to be clever.
These are not all my ideas, as I stated. I took it from another source, and just expand it.

I do have trouble with people telling me NO. (you can ask Rob )
If we had taken NO for an answer when we started investing, I'd still be working at the factory.

Not believing my numbers is why I gave examples. In hindsight, I should have provided the last one, where people are willing to pay $250 for a room.

Even if you couldn't get $250 for a room, add 2 single beds to a room and rent them for $125 with a place to lock their belongings (locked trunk?)

I don't think there is a situation, where a solution could not be found.
I guess that is the optimist in me

 

[investor2009]

Good reply Kat. There are so many negative posters on this forum these days that it gets to me sometimes. Which is why all the greats left years ago. I have considered doing the same. There are plenty of other forums to hang around..

 

[Macca]

Hi,

If you were to buy a house somewhere near a Uni that has OS students and offer accommodation and a shopping service (they cook) you would have a ready supply of tenants IMO.

When from OS it can be hard to locate somewhere to live, interact with LL in another language and rules, find your way around a new city, do the shopping etc

 

[wylie]

preconceptions, will get you every time
who's parents began in a McMansion ?

Who mentioned a McMansion?

And someone offering to pay $250 for a room is a far cry from every other advert offering rooms from $120 to $170. You wouldn't find many people offering $100 more than rooms are being offered for. Nobody is saying you cannot scrimp and save and do it, but just that the figures quoted just don't add up.

We did it on low incomes, and until this year, we had only one income for 20 years. I'm a glass half full person, but just believe these particular numbers don't work.