Young Investor - at the crossroads...

[Jun]

Hi everyone, my first post.

Some background, I am 19 years old, currently doing IT at uni and basically earn enough money to get myself to the next paycheck. Im not enjoying my course and dont believe I find it "totally rewarding".

I am deciding to deffer uni for a year (or longer) to persue fulltime work to save enough money for my first IP. I know I want to be in the IP game, and my goal is to own 10 properties by 25, which I feel is possible IF i start now. I eventaully plan on finishing my uni course. University doesnt seem like the "solution" to my problem, I only did it because it seemed to be the thing to do after high school. I know a degree can open doors and is worthwhile to have, so I plan on having one eventaully. But I believe working hard now to set myself up while I am young seems more rewarding....what are your thoughts?

So the question is, what advice would you give to the budding young investor. do you think it is worthwhile to work fulltime now (mind you Im basically starting from nothing) and get into the game as early as possible and dedicate myself to it. My reasoning for this is I am learning and gainging the knowledge everyday, have no dependants, I have only a smallish hecs debt and believe I am in a great position to start young once I start earning a decent salary.

Any thoughts, suggestions, feedback would be great!

 

[Corsa]

Hi Jun

Thanks for your post! You are truly in a unique position to set the goals that you want to acheive and go out there and make them happen. I sincerely wish you all the very best in your future endevours.

From where you are sitting, I think the best thing is to take a few tips from the books of people who have "been there, done that" and have a few tips they would have given themselves 10 years ago.

This post "What advice would you give yourself 10 years ago" sstarted by one of the somersoft moderators [highlight]geoffw[/highlight] is truly inspirational and you can learn many lessons that other forumites have shared with us all. Link

One of the posts, made by [highlight]Pitt St[/highlight], highlighted the importance of some of the questions you are asking now ie "should I study now" or "should I work full-time and study later". I will let you read it for yourself.

I think this is one of the most important threads I have ever seen on this forum - thank you to all who have contributed.

If I bumped into an 18 year old version of myself I would say this:

I know you can be ignorant, but please listen to me.

(If that didn't work I would get myself in a headlock and say "I am stronger, older and smarter than you!")

For what it is worth, my advice to myself would be that if it is wealth you desire, then:

- withdraw from full-time university study and study part-time (if at all)
- get a job in a bank (I did work in a bank straight after uni, but the opportunity was lost on me at that time)
- listen and learn to those around you
- watch the financial practices of customers and fellow officers - both good and bad
- ask questions about financial management and plenty of them
- annoy the lending officer / bank manager as much as you can and learn all you can about lending and real estate
- find a good accountant who understands both property and legal structures
- save and save and then save some more
- read books (in early 1994 it would have been "Building Wealth Through Investment Property")
- spend more time with people you can learn from
- buy as much property (houses with land) as often as you can and hold onto it
- I know that car is fast, but it will cost you $$ - look for affordable reliability

To be a better person:

- value every second you spend with friends and family
- listen more and take a genuine interest in those around you
- spend more time with people who inspire you

In general:

- back your own ability
- think outside the square

MB

If you can learn from any of this, you can truly be a richer person from it.

Best Wishes

Corsa

 

[Jun]

Corsa thanks for your reply. I did read that actual post and that got me thinking!

Yep, I have read that thread and the "your lifestyle" thread, and have read books from koyosaki etc and am reading The richest man in babylon right now. I have also attended a few seminars with my father who has taught me a lot!

I also have pmed a few of the younger people on here finding out what they have done.

I am also thinking about getting into the RE industy for fulltime work, because i could learn a lot from it. Also I was thinking baout a job in a bank as well, I'll be workin on that.

 

[BV]

Jun

To make money you need to have money
If you don't have money then u need to borrow it.

But to borrow it you need to have a job.
If you don't have a decent education you can't get a decent job.
At the moment, the best paid unskilled/low skilled jobs are in the building
industry. Do you want to work in that industry for a while?
while you stay at home,to keep costs down.
I wouldn't drop my studies.
You can afford to wait. Real estate had its golden period.
I don't know where you live but the general feeling is that it will take
a while before real estate will take off again.
Some areas will plateau, some will fall a little, some will fall a lot.

I would continue with the studies but would switch to Real estate
related studies that you would enjoy and try to get a part time job
in the RE industry.

In a few years time you will be ready for the next boom

Good luck

 

[Peter Parker]

Hi Jun - Assuming that you're be borrowing, getting finance is most important - getting a stable employment record will be a great help.

During this first year of working and saving, I'd also be reading PI books and this forum. Also research areas for prices, rents, housing stock and likely future demand by talking to as many people as possible.

Try to find something affordable where you have saved up 25% of the purchase price (20% deposit + 5% costs). Pick something that would be affordable to both you and your tenants, while being well-located, attractive and tenantable. Try looking around 70% of the median price for an area - ie affordable but not being the very cheapest.

Assuming your work income is low-moderate, a low-maintenance unit, duplex or house in a major regional centre where the rental payments at least cover the mortgage (and some of the other costs) might be a reasonable start.

Note that expansion of the portfolio will depend on serviceabilty and LVR, and that you'll need to juggle capital growth prospects with cashflow when selecting future IPs to ensure that you can keep borrowing.

Regards, Peter

 

[Aceyducey]

Hi Jun,

Welcome to the forum!

In my humble opinion there's several different approaches you can think about for your next 5-6 years towards your property goal.

Firstly, the conservative approach would be to focus on getting your IT degree & a decent job. Forget the enjoyment factor & focus on the dollars. This provides a good underpinning & safety net - at least for awhile - for your investing. Achieving your investing goals would be tough...but if you are totally committed & focused & look at creative (NOT illegal) strategies I'm sure you could still achieve the goal.

A second approach would be to look at an alternate course that does interest you & repeat the above. This will give you much greaer joy, but within the same limitations of balancing work & investing.

A third approach, and it seems the one you are leaning towards, is to focus on investing before degree. This is riskier in some senses, as you're relying totally on your native skills & expertise to make it happen. It's generally an approach followed by entrepreneurs, with widely varied levels of success. If you are willing to put all your energy & commitment into it - it is a course that can lead to great returns.

Right now you really need to think about how risk-tolerant you are. Are you confident enough to stand on your own abilities without the job safety net that many in society like to have?

If you are - great, follow your passion. The worse thing that can happen is that you miss your deadline & go back to uni....provided you don't do anything stupid & head for bankrupcy.

If you aren't - FIND your passion. Whatever course at uni, or profession outside of uni that you can imagine doing for the rest of your life (or five years at minimum). Use this as your safety net as you move forward in your investing.

Good luck & remember, anything that doesn't kill you makes you stronger (but can be VERY painful while it happens).

Where possible try to use hindsight in advance...when something goes wrong, think about how you'll look back on it in ten years & see how it opened your eyes to opportunities that you had previously not dreamt of.

Cheers,

Aceyducey

 

[Jun]

BV - I understand that, and I will be finishing my studies. But it is possible for me to earn about 700-1000 a week by doing 2 jobs, which I am willing to do. I have a good position in a 5-10 job, and will be trying to find a good day job so I can save roughly 400 a week. Im still young and dont have large expenses yet. But I do understand what side your coming from, I do wish to have the safety net and I do understand that you need money to make money. I also know what you mean by doing my course, but is it worth doing something no matter how good it pays if you really dont like it? I really dont think I'll enjoy the IT industry, its not my thing.

Spiderman - Yep, I understand I need to convince lenders that I can service a loan. Thats why I want to start now...I am doing exaclty what you suggested right now and looking into these things. Is 25% the average for a property...I thought a 10-15% deposit would be enough with about 5% for other costs. Other than that the criteria you mentioned is about the same to what I had. Aiming for places close to transport, the city, shops, schools etc to rent out that can hopefully be postively geared. I know what you mean by the limit as to which I can borrow, but Im kind of thinking about that right now...

Aceyducey - The 3 approaches is very true...But the course I am doing doesnt suit me at all basically. I know I should have a safety net, but I was thinking your 2nd approach, either change into another subject or get into a secure type of job as a safety net. I find RE interesting, and I believe I can do well in it. If I could get into sales, and develop a career out of it, I think that safety net would be good. Plus I will do my 2nd job as a means to live off.

All good constructive advice, are there any younger people out there who have been in the kind of situation in at the moment?

 

[mitch]

Dont forget to live !

Gday Jun ,

this is all great advice but dont forget to live .

Unless you firmly beleive that you will go to a far better place when you die dont forget to live your life .

You only get one life and no matter how hard you try , you cant go back.

At 19 l was doing all the things that l cant do now at 41 with a wife and three kids .

Now l have lots of time to plan and invest and dream about the lack of responsability and all the freedom l had in my teens and 20s.Not that l would go back if l could (well , maybe for a week , but that would be all!)

Buy all means plan for the future but live your life and watch out for that bus

Regards Mitch

 

[geoffw]

Two small point.

1. Uni may be a good opprtunity just for you to work out your view on life, the universe, and everything. It's a time when you can meet with people who share (or don't share) your views, and it's a great time for formation of views.

2. Maybe contradictory. But you will have access now to FHOG and stampo duty exemptions which MAY not be available alter.

 

[Jun]

Mitch - haha yes you're so right, I am living it up right now. hopefully I wont regret not doing enough when I am older, but I seem to be lovin life at this point.

Geoffw - Yep Uni does have those advantages I know. Its a great place to be, I was just thinking of that today. But it doenst really seem my thing. Im still thinking long and hard about my decision. In regards to your 2nd point ... yes, FHOG I will be trying to take advantage of, but what type of stamp duty exceptions are available right now?

 

[geoffw]

Mitch - haha yes you're so right, I am living it up right now. hopefully I wont regret not doing enough when I am older, but I seem to be lovin life at this point.

Geoffw - Yep Uni does have those advantages I know. Its a great place to be, I was just thinking of that today. But it doenst really seem my thing. Im still thinking long and hard about my decision. In regards to your 2nd point ... yes, FHOG I will be trying to take advantage of, but what type of stamp duty exceptions are available right now?

Sorry Jun, that may just be a NSW thing...

Do you want to move to NSW by any chance?

 

[Jun]

We'll see, I wouldnt mind. I think there is the first home owners grant here in QLD. But you have to live in the place for 12 months. Must research a bit more, but I dont think I could afford my first home using "my money" ... but somebody elses, which rules this out until later.

 

[Ecogirl]

Jun
I've read all of the good quality responses you have had and obviously you need to make your own decision. As a person few years out of uni and who was lucky enough to accidentally choose a course that I really loved and get me a job that I love - I'll just make one point.

I went to uni straight from school for the same reason you did - couldn't think of what else to do. For me doing my course was the best thing I could have done at the time. I was just as ambitious as you are - I've been actively thinking about my financial future since I was 15 (weird for that age I know).

So the point I want to make - I made sacrifices regarding wages at uni because the industry I chose to make my career in pays well. If I didn't go to uni there is no way I would have been able to make the money I did when I graduated, with the skills I had at the time (without going to uni).

Some of my friends who didn't go to uni still earn less than what I do and they have been in the workforce 4 yrs longer than me (this could also be a factor of their lack of closed mindedness regarding generation of income).

I was talking to a RE in Nth Qld a couple of mths ago because I was thinking about changing careers into real estate so I can get the inside edge in investing. He told me to stay where I was because I was earning good money and the ave RE sales person that he knows earns only ~$25k a yr (he was obviously an exception b'cos he's a developer as well).

So gather all the info you can so you can make an informed decision and good luck in the future.

Ecogirl

PS - I can never only make one point

 

[Macca]

Hi Jun,

As you go to Uni, perhaps you could buy a house, live in it yourself to get the FHOG and rent out rooms to your fellow students.

 

[Jun]

hey ecogirl, thanks for that. Sort of lets me see things from different perspectives. Your friends who have been working for 4 years as you said may not have closed minds, which I definetly dont have. Their money may be wasted on things like flash cars etc, but I know Ill be making the money work hard if I persue the full time route.

Macca - I have thought of this too, and my dad has also suggested the very idea. Its a great idea.

 

[JPM]

Hi Jun,

As you go to Uni, perhaps you could buy a house, live in it yourself to get the FHOG and rent out rooms to your fellow students.

Now thats a good idea Macca, best of both worlds!!!

Jun,
A few of my mates went to uni. I got a job straight out of school, I had no skills so it was just process work but I worked every hour that they would let me. This was on $5/hr and it was only 1991 so not that long ago. But I had my first IP in 1 year and have kept it going from there. I'm now 31 and with $1 million net with all cash flow properties that achieve about $450 per week passive income.

My mates who went to uni are struggling with their PPOR because they were so far behind after paying the Hecs bill!!!

Not trying to big note here Jun, but what I'm saying is if you get stuck in and work hard then you can really get ahead without the degree.

Only you can decide though as there are no guarantees either way.

Regards,
Jason

 

[JamesGG]

Hiya Jun!

Funnily enough, your story reminds me somewhat of my own.

I'm only 18, and last year went to uni in an commerce/economics degree, simply because i didn't see any other options worth considering. Also, with Dad being an accountant, it seemed like a pretty good idea at the time.

Within a few weeks, I'd just about had enough. As the year progressed, I became more and more bored with the course, and the likely employment options upon completion didn't appeal in the slightest anymore.

So, like you, I started looking at other options. Few other courses interested me, and I decided uni wasn't the place for me. By the end of the year, I'd started looking for full-time work, with a view to invest. Dad being an investor as well as an accountant meant that I've been learning about money from a young age, and obviously haven't given up the search for knowledge.

It got to the point that I was at uni on a minimal basis, and even ended up missing an exam (that for the record, I probably would have failed anyway...) because I was at a job interview to become a real estate agent.

In the end, I didn't get the job because the director thought I was too young, but I kept looking. Took up a factory job for 6 weeks just to get some cash coming in, and just 3 months ago found myself working here as an agent. So much for being too young!!

I'm yet to buy my first IP, but hopefully that won't be far away now. Judging by your posts to date, I have no doubt you'll be able to succeed in your goals, whether you continue at uni, or otherwise.

The point of all this is, you need to follow something you are passionate about. I passionately loathed going to uni - so I left, and found a job in an industry I love. But, whether that path is going to be right for you, is obviously something you need to decide for youself.

Sorry to ramble on so much, and best of luck to you!

Cheers,

James.

PS- To the best of my knowledge, the FHOG can be used for a property provided you move in within 12 months of purchase, and stay there for at least 6 months beyond that. In QLD, I think the state government got rid of stamp duty altogether for FHOs, and Macca's idea may help with funding once you've moved in as well...

 

[peelsman]

Hey jun

If i were you I'd finish your degree and get a job in IT. It still a reasonble gravy train and you'll be earning top money in no time and if you really want then you can save like buggery and start looking for bargains in the buyers market that should last a few years??? Im in IT to be honest I'd leave in a second if i could but the dough is so good. Try looking in the Sat newspaper at any job that pays above 80k and see some of the responsibilities you need. In IT 80k pa is achievable relatively quickly compared to other disciplines.

The previous advice to live a little is great 'cause they are great years and I wouldnt be in a hurry to tie myself down into 2 jobs(my thoughts), but thats a personal decision. I played in bands and generally did not much until I went back to uni at 28 when I was ready when i had some life experiences
good luck

HT

 

[Jun]

JPM & JamesGG - great stories and is something I get inspired by all the time I hear it.

Peelsman - Hey thanks for your advice. I know their is great money in IT, but Id rather do something I enjoy and will get me to my goals... Yeah I have thought long and hard but this course especially is absolutley not my thing.

There seems to be 2 sides, one arguing that going out an getting a job is not a bad thing to do, and the others believeing that finishing my course and then using that to start up.

Basically I have answered my own question and some of your advice has reinforced it. I strongly believe that going into the workforce now and getting the early headstart will be a good thing for me. I will learn a lot from it anyway and get a taste of the future. If i can score a job in RE or a bank it would be such a great bonus which I hope I can...but any fulltime job will be better for saving than what I am doing now.

So I am deciding to go the fulltime route. My plan is to save approx 400 a week, for a 20% deposit and 5% costs for my first house, which will hopefuly be around the 250k mark to rent out and in a good location with good capital growth and fingers crossed with +CF.

Any advice with my decision? thanks guy and girls, you been really helpful

 

[JPM]

Jun,
I think you've made the right decision.

Just remember: The more you can do without, the more you can save. The more you can save the quicker you can get into the game.

good luck,
Jason