Young investors - tell all

[Hados]

Update from November...

I've got stuck into researching properties in my local area after spending WAY too much time on the forum over the last 2 months

Was casually looking on RE.com and doing the standard Sunday drive-by of all the properties that I knew were on the market to see if anything interesting was happening. Came across a place that I hadn't really taken too much notice of while checking out another. It had a faded sign on the front lawn (weeds) and had obviously been vacant for quite a while.
I looked the address up on RE.com and the ad came back 'renovate and prosper'... Very interesting I rang the agent who lives 3 hours away and organised an inspection- apart from the 1960's wallpaper, LINO in 2 of the bedrooms and old school kitchen, it all seemed to check out ok. I did some research on the house and found out that it had been on the market for over 3 months and the elderly owner is sadly on her death bed.
The agent hinted to me that if the vendor passed away while we were in negotiations that it could take up to a year to finalise (something to do with the power of attorney??)

Anyways, I offered $30,000 below the advertised price and because of the circumstances, the offer was accepted almost straight away! I negotiated a longer than normal settlement and early access to undertake some renovations. Received word today that my finance was approved (was fairly tight going as I've only just bought another IP) and am over the moon.

Now it's time to get my hands dirty with my first reno! cant wait!

 

[Nathan]

Congrats on the deal.

I dont know where you stand if the vendor dies prior to settlement, therefore id hurry settlement up. Thats just me though, i am not solicitor but i wouldnt prolong settlement.

Update from November...

I've got stuck into researching properties in my local area after spending WAY too much time on the forum over the last 2 months

Was casually looking on RE.com and doing the standard Sunday drive-by of all the properties that I knew were on the market to see if anything interesting was happening. Came across a place that I hadn't really taken too much notice of while checking out another. It had a faded sign on the front lawn (weeds) and had obviously been vacant for quite a while.
I looked the address up on RE.com and the ad came back 'renovate and prosper'... Very interesting I rang the agent who lives 3 hours away and organised an inspection- apart from the 1960's wallpaper, LINO in 2 of the bedrooms and old school kitchen, it all seemed to check out ok. I did some research on the house and found out that it had been on the market for over 3 months and the elderly owner is sadly on her death bed.
The agent hinted to me that if the vendor passed away while we were in negotiations that it could take up to a year to finalise (something to do with the power of attorney??)

Anyways, I offered $30,000 below the advertised price and because of the circumstances, the offer was accepted almost straight away! I negotiated a longer than normal settlement and early access to undertake some renovations. Received word today that my finance was approved (was fairly tight going as I've only just bought another IP) and am over the moon.

Now it's time to get my hands dirty with my first reno! cant wait!

 

[GK2722]

Great inspirational stories guys.
Have a look at my article,

 

[Hados]

Congrats on the deal.

I dont know where you stand if the vendor dies prior to settlement, therefore id hurry settlement up. Thats just me though, i am not solicitor but i wouldnt prolong settlement.

Thanks Nathan

I was told that the contract and settlement stands as long as it is signed by both parties and the enduring power of attorney (which it has been). Will double check just to make sure

 

[fokas]

Anyways, I offered $30,000 below the advertised price and because of the circumstances, the offer was accepted almost straight away! I negotiated a longer than normal settlement and early access to undertake some renovations. Received word today that my finance was approved (was fairly tight going as I've only just bought another IP) and am over the moon.

Now it's time to get my hands dirty with my first reno! cant wait!

Fantastic! Congrats! Looking forward to the reno pics and updates!

 

[tess85]

I don't have any IPs yet though, so I'm looking forward to the slow and steady approach of accumulating properties my goal is to buy 1 every 12-18 months so I'd better get cracking...

First goal achieved (and exceeded)!

Within 18 months after buying our PPOR we will have purchased not 1, but 2 IPs which we're very excited about!

Both have > 7% yield and were bought under market value.

Have exchanged contracts on one of them and am about to exchange on the other.

Both of these were purchased at 80% LVR although I suspect that we will need to go to 90% LVR for the next purchase (and thus pay LMI). We are now on the hunt for a CF-, high growth investment as I think we have enough CF+ ones. I'd love to buy IP3 in inner west Sydney but might want to diversify as all 3 properties are in or around sydney. (I think the land tax limit may be looming as well!)

Our story:
Hubby and I don't come from wealthy families, so we've had to knuckle down and work hard in order to set ourselves up financially for life.

For a while we had 2 jobs and were able to save, save, save for the deposit on our PPOR and 2 IPs. This was when we were students or had just graduated from uni. We didn't see movies, eat out, didn't have overseas holidays like all our friends, resisted the urge to have all the latest gadgets. I remember I used to walk EVERYWHERE to save on the cost of a bus ticket (which, being a uni student and having a concession, was already pretty cheap!) We lived as cheaply as we could, but it meant that we were able to get in the market early when prices weren't as high as they are now. Buying our PPOR was probably the best decision we ever made.

Now that we are doing quite well in our full time jobs we've been able to dispense with the 2nd job and enjoy life a bit more... delayed gratification. We're going to revalue the IPs in a few years, maybe refinance at 90% LVR and use the equity for the next IPs.

Our plan from here on: keep saving and buy IP3 within the next 2 years. Unfortunately there's we're going to have a bit of a break before buying IP#3.... call it pregnant pause... certainly hurts the serviceability, but that's life, and at least we have 2 cf+ investments working for us already.

Thanks to everyone on the forum who has answered my many questions Couldn't have done it without joining SS and learning from the wealth of knowledge here.

 

[stumunro]

congrats it's so hard to continue or even worst, start investing when you go into a relationship / marriage

 

[tess85]

Personally for me, it was easier investing after being married than before, because we had double incomes to help the serviceability along

Investing while having young kids.. that'll be a challenge, methinks! Might be harder to make time to inspect IPs, do renos, buy interstate etc.

 

[Alex P Keaton]

First goal achieved (and exceeded)!

Within 18 months after buying our PPOR we will have purchased not 1, but 2 IPs which we're very excited about!

Our story:
Hubby and I don't come from wealthy families, so we've had to knuckle down and work hard in order to set ourselves up financially for life.

For a while we had 2 jobs and were able to save, save, save for the deposit on our PPOR and 2 IPs.

Great to hear your story and congrats oh and thanks for sharing it

 

[AndrewT]

Inspiring stuff tess! I hope we might be able to get our first IP this year. My partner just got a job as a Property Managers Assistant which will come in handy. Both of us are low income earners at the moment, which really does hold you back to get into the next property but we are determined to do it. I work 7 days a week to boost up our income, and slowly we are paying off our debts and saving each dollar.

As much as we want to get into the property market, I think we have realised how important it is to make sure we both have steady, secure jobs. By the time 2 years have past we should have a combined income of over 120k a year. We have already talked about having a family when I'm around the age of 30, which gives us 6 years to build up a decent investment portfolio!

Hopefully, if we buy well for our first couple of IPs then we can enjoy the benefits of buying the rest of our property through equity. Fingers crossed!

 

[Nathan]

Congrats Tess,

Also to everyone else one here.

 

[Rickardo]

Great thread.

I'm 25, purchased first IP at 22 and second at 25.

Have been working professionally for about 5 years after finishing uni.

Hold gross assets of around $1mil, with a net worth of $250k. Looking to crack the $1mil+ net worth before 30, should be comfortably achievable.

 

[ARF]

Hi all,

I'm 23 now, bought a PPOR in April of 2009 when I was 22 (using the generous FHOG). Lived in it for 6 months and now am letting it while I rent with my girlfriend.

I originally started in shares in 2008, gearing into index funds. When the FHOG boost came in I decided to buy a property, but I had to realise a loss of about $3,500 on the shares (GFC! lol). But I negotiated an extra $3k off the price so it all evened out I guess!

Bought an apartment in Teneriffe, Brisbane for $327k. Currently have $312k oweing, rented for $350/wk and identical units in the same complex have been sold for $350k, $355k and $365k recently (RPData). So pretty pleased with my purchase.

Aim is to buy another IP late this year / early next year - looking at mid-ring suburbs, min. 2 BR with something unique (garden, outdoor area) close to busses/trains and shops.

Rickardo, how did you get to $1M gross so quick!? Great work!

 

[tess85]

Good to see that there are other young people out there who are investing!

$1M gross means (say on 80% LVR) having net worth of $200k right? I guess it is doable after a few years in the workforce. It means borrowing enough to buy 3 IPs, about $330k each. Of course you need to be able to sustain that level of debt so it's not advised to jump straight for $1M gross assets. A slow and steady accumulation process is one that I prefer!

I suspect that having bought our PPOR in Sydney may have hampered our PI journey... the PPOR we currently live in cost us more than the 2 IPs put together (Sydney ain't a cheap place to live and we wanted to be close to the city and family members)

If we had rented we would be able to own about 5 IPs by now. But it all boiled down to personal preferences... we wanted someplace to call home and didn't want to keep on renting.

Keep those stories coming! I subscribe to API and I notice that it often features quite a few older investors who were able to buy prime properties for what seems to be so little money, eg. $60k, $100k (obviously they had the advantage of buying 10-20 years ago). It's good to read those stories but hard to imagine that a $300k IP will be worth $1M in 30 years time.... would really like to see how young investors are doing it, unlike older investors who had the advantage of buying when prices were more affordable.

 

[battler]

unlike older investors who had the advantage of buying when prices were more affordable.

Can you explain this please?

 

[skater]

unlike older investors who had the advantage of buying when prices were more affordable.

They might be more affordable on today's income, but often were not more affordable at the time of purchase. Not only do you get CG with the passage of time, but incomes increase as well as rents.

 

[tess85]

I am referring to the increase in the house price:average wage ratio that has occurred over the years. I've seen the numbers posted on SS before, but I can't find the relevant thread now. But you can turn up similar things through google eg.
http://www.housingaffordabilityaustralia.com/content/the-housing-affordability-problem

Naturally the above link is somewhat biased however if you look up the ABS figures for AWE (average weekly earnings) and the Residex historic house prices you can come up with your own ratio.

EDIT: Please note that I did not invent the house price:salary ratio which is so commonly used in finance. I only mentioned it because I have read about it quite often, and it has seeped into my brain by osmosis. I now realise that it completely leaves IRs out of the equation, which is of course a major factor when considering housing affordability.

Moving right along.......... keep those young investors' stories coming I love hearing other people's stories!

 

[AndrewT]

Lately I've been looking into the idea of building a granny flat out back. Been having bit of a look around and it seems that the price range for one of these would be about the 70k mark. Might be an idea to increasing the cashflow on the property we live in now. We have a 720sqm block with lots of room down the back.

Estimated rent on current PPOR = ~$370pw
Current Loan: $299,000 (80% LVR - $345,000 Purchase Price)
Yield: 5.57%

With Granny Flat
Estimated rent on PPOR = ~$340pw?
Estimated rent on GF = ~$160pw?
Total = $500pw
Loan = $369,000 (88% LVR - $415,000 Total)
Yield: 7.04%

This is assuming the 70k part was 100% LVR. Figures stack up alright but I would have hoped for a better yeild than 7.04%? What are other peoples thoughts. The other option would be to buy another IP for around the 150k mark.

 

[sash]

Tess...I'll let you in on a secret....age has nothing to do investing. Rather it is the mindset!

I wish in hindsight I picked up stuff and 60k...100k....but that is like looking in the rearview mirror. Most of the stuff I have picked (at least 60% of the portfolio) up has been in the last 1-3.5 years....and some of these have gone up 50%!. I will be 43 this year...so I started most of the rapid expansion on my late thirties/early 40s.

I have met old and young investors and the most important successful factor is having a go.

By the way...prime properties do not always return the best returns....that is the biggest mistake I see people make. If I did that I would have maxed out my serviceability.

I am not trying to be disrespectful ....just stating some of my experiences.

A friend of mine who I have kind of taken under my wings from a property view has gone from zero properties to 3 properties in less than 1 year. It was easy to show him things because he had the right mindset and he is 36. His gross now 750k...and probably about 90k-120k in equity growth..he has a target of getting to $2m in gross assets with equity of $700k in about 3-5 years and he is doing this with a wife and kid.

I am big believer in mindset....

Keep those stories coming! I subscribe to API and I notice that it often features quite a few older investors who were able to buy prime properties for what seems to be so little money, eg. $60k, $100k (obviously they had the advantage of buying 10-20 years ago). It's good to read those stories but hard to imagine that a $300k IP will be worth $1M in 30 years time.... would really like to see how young investors are doing it, unlike older investors who had the advantage of buying when prices were more affordable.

 

[Rickardo]

Rickardo, how did you get to $1M gross so quick!? Great work!

1mil gross is really not a huge achievement, i did it simply by purchasing 2 properties which have gone up through natural growth pretty steadily, along with holding some shares and cash over about 5 years of working. While i spend a fair bit of time reading about and keeping up to date with investments, my actual strategy is fairly passive and is just always ticking along in the background, with not too much of a time commitment.