Young investors

Hey guys,

Not sure if you have stumbled across this article (and the ensuing comments, albeit some painful comments)

http://www.news.com.au/finance/real...ry/story-fndban6l-1227323065428?pg=1#comments

Being a young investor myself (well a prospective one anyway), I agree with the article in the sense of encouraging him to work hard, save and get into the market early..

But as a few of the comments suggest (90% of them are pure rubbish), I feel its also very risky for people to over-leverage themselves during a peak of a cycle.

What are your thoughts on it? Is it better to wait until the timing is right, you're financially secure and wiser? Alternatively, do we get in there as early as possible regardless of what the market is doing?
 
Imo it all comes down to serviceability. If you're on a 50k income and have a permanent position and can live with your parents than it'd be fairly safe leveraging yourself on the basis that you're purchasing positively geared properties.

Interest rates aren't really a concern to me. Look at the US. Since 2006 they've had low rates. In Australia we survived the GFC but many commentators believe we just delayed the effect of it. With the demise of mining and mineral prices I'm fairly confident that low rates are to stay for at least the next 5-10 years. Unemployment is only at 6.1% but anecdotally unemployment seems higher and according to Ray Morgan surveys Australia has an unemployment rate of 10+%.
 
Insightful comments at the end..

My only input is that the article might mislead people by mentioning the costs required for the $330,000 purchase:

"I saved $28,000 -- my parents lent me $2000"

What about stamps, legals etc?
 
Insightful comments at the end..

My only input is that the article might mislead people by mentioning the costs required for the $330,000 purchase:



What about stamps, legals etc?

95% LVR with capitalising the LMI onto the loan?
I haven't done the calculations, but seems about right.
 
That young guy have great and bright future ahead the rest. He start early, and get result he get.. He did the right thing by get education and invest in the right market cycle.

For the rest (or the one who put negative comment), I prefer for them to keep it that way. Well less competition, and more and more customer/tenant. And yet the same people complaining how hard to save, while having the latest gadget, overseas holiday every 6 months and eating out every day.

Early bird get early fresh worm..
 
95% LVR with capitalising the LMI onto the loan?
I haven't done the calculations, but seems about right.

If all the LMI is capitalised, literally only Bankwest would do it for an IP - most banks have a max LVR of 97%, so in reality a 95% lend is almost myth.

You'd want squeaky clean everything for that deal to get across, and by going with BW you're shooting yourself in the foot in terms of equity release down the track, b/c their servicing is crap.

It might work for a few investors, but definitely not for all. So in short, those numbers are pretty misleading for a newbie investor without good advice.
 
I recently purchased a house. Cost price 334000.
All of my expenses added up to about 30k.
That was with 5% deposit and lmi borrowed ontop.
30k fully streached. Don't know how he did a 10% depost (28k and 2k from mummy and daddy) unless he got more money from mummy and daddy that they are not telling you about.

Houses cost more then the 10% deposit! Haha. My advice would be to save 45-50k for a 330k property with 10% deposit to play it safe for yout first property, leave the left over in the offset. To account for the extra expenses that nobody mentioned in that article.

Good on him, still sounds risky and not 100% true.
 
The thing about these novices are they think that after they've bought their first box 12 months ago and been fortunate to have ridden a boom, they always say they plan to buy another 2 or 3 in the next 12 months.....

It's great to have positive goals, but reality's going to hit them.
Can't rely on perpetual CG to keep you going to accumulate property, not in the short term.
 
Great work from the young man, would take some serious dedication to have that amount of money saved at 18 and ready to go. :)

The few people i know that started at around that age are doing very very well for themselves by 30. A few could probably retire from investments alone and some portfolio rebalancing. Achievable over that time horizon i think.
 
I say good on him and well done. People who write the neg comments are the same ones who will be saying property prices cannot increase again.

I read one comment that made me laugh that in 5-10 years what if the interest rate increase. Well in 5-10 years the rent would increase which would either cover all the increased interest or really help offside it along with if he was still working his wage would of increased (you would think anyway). However if he was smart when things start to go the other way he would have planned for it or able to make changes.

I didn't know the average age of my generation to own an investment property was 25, but then again we are not as old the other generations so it makes it kindof easy lol. However 16% of my gen has two or more properties. I almost call bs on this stat, as I am part of this generation and going through all the people I know and I would say it would be closer to 1-5% unless they are counting people ppor as the investment. Either that or I need to find a new group of friends haha, then again I prefer quality of quantity.
 
It's all about cashflow. If your numbers work, then it works.

If you're just borrowing recklessly then it's much riskier. But the downside is capped because banks wouldn't lend to you in the first place.
 
Who cares about his LVR or which lender he went to for the deal or how he funded stamps...... :mad:

Fact is, he saved $28,000, purchased an investment property and has taken responsibility for his financial future...

Kudos to him. :D:D
 
good on the guy, I admire the young ones giving it a shot, i wish I had started earlier.

imagine when he is 29, his property could be easily worth $700k, thats $350k equity,

while his friends could have partied their 20s away without saving a cent,

he now has $350k equity, not many 30 year olds with $350k of anything

$350k vs $5k saved in 10 years!

Good on him!
 
good on the guy, I admire the young ones giving it a shot, i wish I had started earlier.

imagine when he is 29, his property could be easily worth $700k, thats $350k equity,

while his friends could have partied their 20s away without saving a cent,

he now has $350k equity, not many 30 year olds with $350k of anything

$350k vs $5k saved in 10 years!

Good on him!

Reason why I started early too.

However imagine in another 10 years from then!

he would have 1.1M compared to maybe 300k (as the others had to save a deposit + cost during that time) and that is without him doing anything else except maybe repairs.
 
Nothing changes. They told me the same thing 10 years ago. What are they doing now? Writing the same thing from their cubicles while I'm on my sun-lounge by the pool mid day on a Tuesday. Literally! (Sorry, I find that liberating)

They'll still be saying it in another 10 years

I'm not a 'told ya so' kinda guy. It's the fact that no one is ever prepared to listen to those who are actually living proof of their argument. It's actually crazy how different people's minds can justify whatever it is they want to. That is the definition of 'crazy'
 
Who cares about his LVR or which lender he went to for the deal or how he funded stamps...... :mad:

Fact is, he saved $28,000, purchased an investment property and has taken responsibility for his financial future...

Kudos to him. :D:D

Absolutely - having that much cash at 18 is incredible. I think I had about $800 when I was 18.
 
Absolutely - having that much cash at 18 is incredible. I think I had about $800 when I was 18.

I had 30k at 18, earnt 400 pw working McDonalds and spent $100 ($50 for fuel when I could drive or buses and $50 for spending) Do that for 2.5 years and you have $39,000, I did buy other stuff with the approx. $9k like TV or something.

Eat maccas at work so no food expenses (if I did it was like $3 as you get 50% discount). Free parking at my parents office carpark as I worked at the city maccas.

Had 100k by 24 (change jobs which 4-5x my maccas pay) but also came with increased expenses (rent, bills, food).

I did want to buy in woodridge when I was 18 but got rejected (casual employee unless parents went guarantee) but glad I was rejected as it allowed me to buy better stock.

Yes I had an easier lifestyle (didn't pay rent or food when at home (still had to pay for takeaway or out with friends). However I also didn't have a flash lifestyle of going to the pub on a Friday night and blowing $100 on drinks, instead I was the kid at maccas serving the people who had just spent their $100 whilst I earnt $150 for that night.

I live by delayed gratifications but some people are just lucky or you can create you own luck...
 
I had 30k at 18, earnt 400 pw working McDonalds and spent $100 ($50 for fuel when I could drive or buses and $50 for spending) Do that for 2.5 years and you have $39,000, I did buy other stuff with the approx. $9k like TV or something.

Eat maccas at work so no food expenses (if I did it was like $3 as you get 50% discount). Free parking at my parents office carpark as I worked at the city maccas.

Had 100k by 24 (change jobs which 4-5x my maccas pay) but also came with increased expenses (rent, bills, food).

I did want to buy in woodridge when I was 18 but got rejected (casual employee unless parents went guarantee) but glad I was rejected as it allowed me to buy better stock.

Yes I had an easier lifestyle (didn't pay rent or food when at home (still had to pay for takeaway or out with friends). However I also didn't have a flash lifestyle of going to the pub on a Friday night and blowing $100 on drinks, instead I was the kid at maccas serving the people who had just spent their $100 whilst I earnt $150 for that night.

I live by delayed gratifications but some people are just lucky or you can create you own luck...

Congrats Big Will awesome story! would love to hear where you are at on your property jounrney?
 
I had 30k at 18, earnt 400 pw working McDonalds and spent $100 ($50 for fuel when I could drive or buses and $50 for spending) Do that for 2.5 years and you have $39,000, I did buy other stuff with the approx. $9k like TV or something.

Eat maccas at work so no food expenses (if I did it was like $3 as you get 50% discount). Free parking at my parents office carpark as I worked at the city maccas.

Had 100k by 24 (change jobs which 4-5x my maccas pay) but also came with increased expenses (rent, bills, food).

I did want to buy in woodridge when I was 18 but got rejected (casual employee unless parents went guarantee) but glad I was rejected as it allowed me to buy better stock.

Yes I had an easier lifestyle (didn't pay rent or food when at home (still had to pay for takeaway or out with friends). However I also didn't have a flash lifestyle of going to the pub on a Friday night and blowing $100 on drinks, instead I was the kid at maccas serving the people who had just spent their $100 whilst I earnt $150 for that night.

I live by delayed gratifications but some people are just lucky or you can create you own luck...
Good post, love your maccas analogy
 
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