young, keen, patient but naive

[itsjai]

Hey all, i only found this site 2 days ago and must say i am amazed, so much great info, i am en-devouring to read and learn as much as possible

I am 22 years old, currently have one more year at uni, studying robotic and mechatronic engineering. Been working as a lifeguard and duty manager for a council at their public swimming pools, last 2 financial years have managed to pull in $30,000, this financial year im on track to bring in $35,000 to 40,000+ depending on my reducing package from one of the pools which is closing. Just bought a new $40,000 car, probably a silly idea but it makes me happy and i only owe $4,000 the parents.

Now i have started to think about my financial future and worked out my aim is to get to a point where i am financially comfortable to bring up a family etc... not fussed about being excessively rich although i wouldn't complain if it happened.

Will be living at home for another 3 to 5 years, as the folks are basic grey nomads living in their caravan and never come home

So im thinking i best start out with a small IP:
- Looking in Ballarat at older 3 bedroom houses, as close to central Ballarat as possible and if possible try for a property that has the ability for future sub division and sell of empty land
- Spend less than $230,000
- Borrow Less than $210,00 from the bank on a 30 year loan
- At interest rate of 7.50%, weekly repayments are $338
- Rent it out for $230 to $250 a week
- Put away minimum $200 of income a week, that plus the rent covers the mortgage repayments plus leaves extra for other costs like property manager, insurance, repairs, interest rate rise and rates etc..
- Keep house for at least 10 years, hopefully it will double in value
- Wait for equity to go up 2/3 years, then buy second investment property.
- Repeat above process for second rental property then in another 2+ years buy some land and build a house for myself.

above is the ideal plan, most likely wont work out like that, but thats life...

I have about $8000 in bank shares which im willing to sell.
Have access to borrow up to $20,000 from the parents or grandparents free of interest until i graduate uni, then would cop interest.
Parents are happy to guarantor a mortgage.

Not sure whether i should enjoy my lifestyle for my last year of uni, save up some cash for a larger deposit and then take the plunge into an IP in 12 to 18 months or if i should try now and do it now...?

as i said in the title im "young, keen, patient but naive" so if you have any advice i would love to hear it.

Many Thanks.
Cheers. Jai

 

[mary&mat]

Hi Jai,

I'm sure the more experienced will jump in to offer you some advice, but here's my 2c worth...(not telling you what to do as only you know which investing strategy will suit your plans...& I'm in no way an accountant or financial advisor so please don't think I have all the answers )

Sell the car...that $40K is a millstone around your neck...I'm assuming you have a loan for it? You've enjoyed it for a little while now so get rid of it before it loses any more value.

Don't sell the shares, you can borrow against them.

Don't know much about Ballarat, but keep hearing a lot of interest in it from different sources. Growth for the next few years is meant to be a bit flat, so I wouldn't base my investing plan on relying on the property to increase in value as much as it has over the last 5yrs or so.

You sound like you will be earning a decent wage from your career when you finish uni. If you have a high income, negatively gearing a property may be something to look into.

Check out as many resources as you can like API mag...the figures in the back are helpful in comparing performance etc. Read books like 'The Richest Man in Babylon' & others like 'Rich Dad Poor Dad' to round out your investing knowledge. Also Jan Somers books, and look at what the successful people on here have done. There's quite a few posts about people attaining financial freedom using various strategies on here.

Best of luck,

Regards,
M&M

 

[wobbycarly]

Hey all, i only found this site 2 days ago and must say i am amazed, so much great info, i am en-devouring to read and learn as much as possible

I am 22 years old, currently have one more year at uni, studying robotic and mechatronic engineering. Been working as a lifeguard and duty manager for a council at their public swimming pools, last 2 financial years have managed to pull in $30,000, this financial year im on track to bring in $35,000 to 40,000+ depending on my reducing package from one of the pools which is closing. Just bought a new $40,000 car, probably a silly idea but it makes me happy and i only owe $4,000 the parents.

Good work! I wish I'd been as enthusiastic about working part time when I was your age.

And yes, the $40,000 car was probably a bit "silly" financially but it's a lifestyle choice, too. A $4000 car would probably still get you where you need to go, but perhaps in less comfort and style.

Now i have started to think about my financial future and worked out my aim is to get to a point where i am financially comfortable to bring up a family etc... not fussed about being excessively rich although i wouldn't complain if it happened.

Will be living at home for another 3 to 5 years, as the folks are basic grey nomads living in their caravan and never come home

"Milk" this for what it's worth. By that, I don't mean to sponge off your parents. Pay a fair board and/or contribute to household expenses, but try and live as cheaply as you can, IMO.

So im thinking i best start out with a small IP:
- Looking in Ballarat at older 3 bedroom houses, as close to central Ballarat as possible and if possible try for a property that has the ability for future sub division and sell of empty land
- Spend less than $230,000
- Borrow Less than $210,00 from the bank on a 30 year loan
- At interest rate of 7.50%, weekly repayments are $338
- Rent it out for $230 to $250 a week
- Put away minimum $200 of income a week, that plus the rent covers the mortgage repayments plus leaves extra for other costs like property manager, insurance, repairs, interest rate rise and rates etc..
- Keep house for at least 10 years, hopefully it will double in value
- Wait for equity to go up 2/3 years, then buy second investment property.
- Repeat above process for second rental property then in another 2+ years buy some land and build a house for myself.

above is the ideal plan, most likely wont work out like that, but thats life...

Sounds like a good plan! And you've got one (a plan) which is a great first step.

Can't comment specifically on Ballarat, but would suggest you consider the following:

• Get your loan on Interest Only
• Get an offset account against the loan
• Pay as much into the offset as you can

This will maximise your tax deductions over time (may not be too important now, but you would want to be well positioned when you DO start paying more tax) as well as ensuring you maximise your cashflow without tying up the money in the loan.

I have about $8000 in bank shares which im willing to sell.
Have access to borrow up to $20,000 from the parents or grandparents free of interest until i graduate uni, then would cop interest.
Parents are happy to guarantor a mortgage.

I would think having your parents in the loan may have unwanted consequences down the track with refinancing, etc. But I'm not an expert - this is a gut feel. Worth investigating, I'd suggest.

Not sure whether i should enjoy my lifestyle for my last year of uni, save up some cash for a larger deposit and then take the plunge into an IP in 12 to 18 months or if i should try now and do it now...?

as i said in the title im "young, keen, patient but naive" so if you have any advice i would love to hear it.

Many Thanks.
Cheers. Jai

Hope this helps.

 

[lizzie]

before you start you need to sit down and work out your goal.

where do you want to be financially - and by when?

do you want to retire (choose to retire) and travel by 35? if so, in today's dollars, what are you going to need to get that?

did you want a passive income of $100,000/yr before tax/after tax? at todays' rents of $300/wk (less expenses), so how many full paid out rentals are you going to need to bring in that sort of $$?

once you've worked out how many rentals you'll need, how are you going to get them fully paid out? the best strategy (to me) is buy almost double what you want, hold for several years, then sell half and use the profit to pay out the mortgages on the other half.

so, now that you've worked out how many rentals you're going to need, and by when, how are you going to buy them? you will find that the ability to purchase snowballs as your equity goes up and your income goes up.

how much maintenance do you want to do? houses need more maintenance than units but tend to have a slightly higher capital growth.

what can you do to increase you equity faster? are you handy and can tackle a reno? can you find land and subdivide and build a 2nd house on? can your income allow you to buy land and rebuild a townhouse complex on it?

so many factors to consider. but first - start with the end goal in mind.

 

[Lil Skater]

Just bought a new $40,000 car, probably a silly idea but it makes me happy and i only owe $4,000 the parents.


- At interest rate of 7.50%, weekly repayments are $338
- Rent it out for $230 to $250 a week

Have access to borrow up to $20,000 from the parents or grandparents free of interest until i graduate uni, then would cop interest.
Parents are happy to guarantor a mortgage.

Hi Jai,

I'm Sam, and here to be your buzz kill!

Firstly, it's good to see you're getting into things young, if you been looking around SS at all you'd know i'm a few years younger than you, but i'm like an annoying piece of furniture, at times that you want to throw out but you just can't cause you know I add some kind of value from time to time.

Secondly, the car, ouch! How'd you manage to get a loan for that amount? (I'm assuming it's a loan anyway..) You're repayments would be very high in comparison to income, i'm on a similar wage and know I cannot afford to be spending in excess (assuming) of $100 a week on a car. Get rid of it, it's going to effect your serviceability when buying a property too. Try buying something half the price, you can still pick up quite a nice car for $15k new.

Now this next bit I don't get. You may not be able to borrow so much, if at all in rural towns. You can pick something up for a similar amount in the suburbs that will rent for a similar amount, it should have a smaller risk of vacancy rates and it should also increase in price much quicker. If you have your heart set on something in a rural town, I suggest looking for something positively geared as you have to assume for the worst at all times. Plus this means you can keep your $200 a week for something else.

Generous parents, can I have some of that? I'd take the $20k, but I would not let my parents go as guarantors for a property.

I strongly suggest not using a guarantor as it can wreck family relationships, and if you go down they do too.

Anyway, that's all from me for now, hope I wasn't too mean! I have a habbit of doing that!

 

[twobobsworth]

Just bought a new $40,000 car, probably a silly idea but it makes me happy and i only owe $4,000 the parents.

Congrats you just paid $40,000 for something that will be worth $30,000 next year.

 

[jaycee]

I think everyone, including the original poster, already knew that mate....

 

[itsjai]

Thank you all for the reply's will take it all on board
Looks like i need to research a lot, set a goal and then make some decisions.
Just bought a few second copy's of said suggested books and will continue to read a learn from this forum.

Many Thanks.
Cheers. Jai

 

[The Y-man]

Just bought a new $40,000 car, probably a silly idea but it makes me happy ...

Hey, and that's what matters.

That sort of budget would have only covered a few years of running costs on my old car, so wouldn't fret - enjoy.

Use it as your motivation to invest from here on - i.e. how to make that a $120,000 car, then a $600,000 car.....

Good on you.

The Y-man

 

[jacbmw]

its funny, one of my big motivations is cars and particularly doing something like Targa Tasmania or something. But until i can afford to buy and race a car of my dreams then i would prefer to just keep punting around in my old Volvo (oh and i dont car when it gets ruined carting all manner of crap around doing renovations etc haha)...