Young Person Starting Out

Hi all. I do not know what to do in terms of how I save/invest my money. I do not want to be povo in life. I am 20, and I am starting a new job with salary of $52k. I live at home with minimum board and other expenses and while it’s really tempting to move out as some other friends are doing I know it will set me back heaps considering I have the chance to set myself up now before I MUST waste money on the cost of living.

Was thinking of buying a apartment in the city and having it rented out/paying it off while I’m at home, then I can sell it later on or move in myself. I have done more research and I’m wondering whether investing in property may be a bad decision for me as it’s effort and whether I should just put most of my money into something like a diversified managed portfolio that invests 90% in the ASX/ 10% cash (Since I am young, I think it’s okay to be a bit more aggressive as I have time on my side) There’s so much information out there and it all seems to confusing and it makes me feel frustrated not knowing what to do with money. I have 30 year old friends, I have spoken to them. They all bought their cars, their clothes, their depreciating assets. They are all still renters. They are all povo and have as much in the bank as I do now even on high salary! Might be good to get my nice car now but I don’t want to have regrets in 10 years time and feel sick in the stomach when I add up every dollar that has been burnt
 
They are all povo and have as much in the bank as I do now even on high salary! Might be good to get my nice car now but I don’t want to have regrets in 10 years time and feel sick in the stomach when I add up every dollar that has been burnt

But what will you regret?
Not having stories of being so drunk you cant remember, thus it was good?
Being so stoned out of mind you dont know what day it is?
Working 80hrs a week to have a weekend away and blowing it all on...well cant remember anyway?
Spending a week's wages just on drinks & food at a trendy club?
And yep, 95% are still "povos" at 30, 40...etc because all that can easily eat up >150k yr.
And 6mths of all that easily equates to a decent s/h car.

A good investment is never a bad decision.
But you need to decide why something would be a good investment.
There's plenty info everywhere, just beware of "advice" (loose term) from those who gain a commission on your transaction.
It may be good to seek out someone who did'nt blow their $$ in their 20s & 30s for a chat and ask them a few questions.
Generally they are the ones who never talk about themselves, never talk about blowing $$ on wild weekends, and never talk about owning assets.
Nice house, nice car, nice car but dont seem to want for much lavishness in life.
 
budget for fun

It's the one word you'll see all over these forums. Budget!

Set up automatic transfers to split your pay. Live like someone on half your salary. Get a debit card and when the ATM runs dry you're done till next payday - don't touch your savings.

The years from 20-25 will (and should be) the wildest years of your life. Shout the shots, go travelling with mates, be up for anything.

As for cars; put on a shirt and go test drive at the dealer, or give your mate a carton to drive his 200sx. Get yourself something older and muck around under the hood, it'll get you around without a care for car park dings or queasy stomachs at 3am.

As for houses; either stay home or share-house. Keep stashing $x away into investments. Don't buy your PPOR until you've found and been with the right person for 2 years. Yes, there's exceptions such as buying into the right area at the right time - but those are rarer than you think.

And remember, the story of your life will be written in experiences, not possessions.
 
I bought my first place when I was 21.

Not only was it a good investment, it also taught me how to be smarter with my money.

I think that lesson alone is worth investing while you're young!
 
You can bet that in 5 years time, if you don't jump in now you'll be kicking yourself.
And for gods sake stop handing all your money to the tax man! You know you can get all that back right?..

Mark my words ;)
 
It's good that you are thinking of your financial future at 20.

I think that you have 3 good options for investing

1) Invest in property
2) Invest in shares
3) Salary sacarfice into superannuation

Unless you are salary sacarficing into super, I wouldn't go into a managed fund. I think you would be better off investing directly into shares. Investing directly into shares will give you a greater lesson in investing than putting money into a managed fund.

A major key with investing is budgeting/saving. If you can save you will be doing well.

If you want to invest in property, I recommend that you speak to a mortgage broker (I'm not a mortgage broker, but I found them helpful in organising finance) and see how much you can borrow. Once you know how much you can borrow than you can start looking at properties.
 
Anything is possible,

Sounds like you have good foundations to work from, solid income and low outgoings.

I purchased my first at age 18, and now have a sizeable net worth at the age of 24.

I am fortunate to do things now days on my terms. You need to be committed and make good decisions and at times be frugal. I did sacrifice a bit, but make up for it 10 fold today. Deals will always be out there, and money can always be made.

If you enjoy the journey then your living the dream.

You need the balance. i would say live at home and buy up big if i were you. I did such, for certain while, but dont do it forever, just do it as a kickboard.


To get solid portfolip look for bread and butter properties, buy under market and dont get to negative geared if any. And repeat the process as many times a year as possible.

It is easy to get the first 10, then easy as first 10 to get the next 10, but goals change and keep an open mind with a flexible plan. It needs to be solid, but be open to change the plan if it is going to propel you.

Goodluck.

Nath.
 
G'Day Damien

Welcome to the Forum

My three children are all property investors, and they have done this from putting groceries into bags at Bi-Lo

With a salary of $52,000 at age 20, you can be a millionaire by the time you are 30 - if you actually want to do this.

It's as simple as having a plan. Doesn't have to be an elaborate plan, just something quite ordinary but you have to decide what you want to do and work towards that purpose.

My younger son started full time work at 16 & half - he had been very ill for two years with chronic fatigue and by the time he was better he had 'gone past' going back to school.

We knew what his wages would be at 18, so I calculated how much he could borrow and he simply saved the 'mortgage payments' for eighteen months and bought his first property on his 18th Birthday.

He bought his second property six months later, had a lull for a couple of years and bought the third just before he turned 22. The first two properties were 'concrete bunkers' in Kilsyth for about $165,000 each, and we refinanced them December, 2008 with a value of $235,000 each. The third property is 'off the plan' for $410,000. He now controls property worth nearly $900,000 - not bad for a 22 year old who left school in Year 9.

Between properties 2 and 3 he bought a new car, has been to England twice and has a girlfriend who likes eating out and enjoys fine wine and weekends away.

He still lives at home with us but will move in to the apartment on completion.

All this has come about because he could see that investing in property provides the opportunity to make money while you sleep. If we average the growth of the bunkers, each property has improved about $75,000 in 3 years (probably a bit more than the original refinance valuation now).

That's $150,000 / 3 = $50,000 per annum .... $961 per week (plus the rent of about $235 per week each). Every day when we wakes up, the darn things have 'earned' him the rent, but also the capital growth ... simplistically, $5.72 every hour of every day.

What he earns, the properties earn, too. Those bunkers sure know how to bring home the bacon!

So while you are earning your $52,000, why not have a couple of properties earning $52,000 per annum for you, too?

Whichever part of Melbourne you live in, there will be opportunities disguised as concrete bunkers. Don't be too proud to buy what you can easily afford. Buying lower than your capacity means that you can buy again that much sooner. And again.

And really, there is not much work with property so don't let that dissuade you. Some people love to renovate and mess about, but others see property investing as an arm's length business transaction.

One of the bunkers I renovated completely (yes, that's right, Mum did it!) but the other one went from settlement to tenant and we didn't even go inside except to show property managers through. Haven't been back there since, and the only maintenance has been to send the plumber for the heater.

So get cracking! There is nothing to stop you being the 30 year old millionaire instead of the 30 year old povo, it takes no more effort to growth wealth than to spend every penny but you do have to actually do it.

Good luck, enjoy the journey. My son bored all his friends witless driving them around to look at his properties but none of them have bought anything yet - despite their superior academic education they have all bought doof doof cars instead!

Cheers
Kristine



And before everyone debunks my figures, the HOTTA has improved about $150,000 under it's own steam also in three years in a quiet market and all we have done to that is to repaint inside the wardrobes and fix insect screens after the tenant requested it.

Daniel, go get it!
 
Hi gools

House Of The Third Age:

The bunkers are at one extreme of the market, the HOTTA is at the other - not extreme - but the most expensive property we have ever bought, and in a niche market being actual bay side, Melbourne.

My point was that the concrete bunkers have shown considerable capital growth, even considering the events of the past couple of years, but this growth is not 'just' because the bottom of the market has lifted. The market the HOTTA is in has also grown ... and just about everything inbetween has, too.


Yes, it's fun to work out the capital growth as being a sort of parallel income, which, of course it is, even though it is unrealised income. If we work and our properties work there is this 24/7 growth going on 'even as we sleep'!

Property is sort of like the lazy person's way to riches. Buy property, make money - and go to sleep on the job, the property doesn't care, it just keeps doing it's job, 24 hours a day.

Cheers
Kristine
 
Hi Kristine.

Very inspiring post. It's only made me want to get into it more now. The problem with my parents is, they like to play it very safe. They have always taught me to put money in the bank for a rainy day etc, but they didn't start investing until retirement crept up on them. They are a little against the idea of me investing in property at 'such a young age' but honestly it's my money.

Do you need a large amount in the bank before you are able to take out a loan? What's stopping me getting into everything is the belief that everything is too complicated. But a friend at work sat down with me the other day and explained things really easily to me. Are there are books that will help me build up a bit more knowledge of all the processes, terms involved etc. I don't want to jump right into something but at the same time I don't want to procrastinate and throw away 5-6 years of time.. at 20 time is on my side. I want to make the most of it now.
 
I've got some slightly more general advice.

Firstly, you will make mistakes and they will cost you money. But, as my father once said, "The man who never made a mistake never did anything."

Secondly, there are a lot of sharks out there who will try to rip you off. Be very careful what you sign, and if there's likely to be a lot of money involved then seriously think about hiring a solicitor to check or write a contract. Even (or especially) if it's with friends.

From bitter personal experience, it's cheaper to hire one upfront than when it goes wrong.

Thirdly, a good accountant has a moral objection to you paying any more tax than you need to. That is a good thing. :)

And lastly, be aware that the property market is cyclical, and Australia is one the most expensive places to buy in the world. Don't expect prices to rise ahead of wages forever, and be aware that there is a potentially high downside.

If I was buying, I'd be looking for properties whose rental income will cover mortgage payments, or can be made to do so.

Good luck!
 
Great post Kristine.

Damien, first welcome to SS - stick around here and read as much as you can, including going back through the old threads from past years. You'll learn so much and in 5yrs time you'll be doing fantastic.

Save up the money you need for the first deposit, buy a suitable property whose figures work for you, and you'll never look back.

Managed Funds or direct shares may be an option for you in a few years, but it's great to have a solid base of a property or three and the leverage they offer sitting there accruing income and capital growth for you.

Read Jan Somers 'More Wealth' book (someone post a link for me? :D), inspirational read and should really get you excited about property. Then as you're going ask all the questions you have here on SS and you'll have no doubts left in your mind.

PS If you buy your first property at age 20 you'll have beaten me by a year, so perhaps hold off, too many SS'ers already started before me! :D
 
With a salary of $52,000 at age 20, you can be a millionaire by the time you are 30 - if you actually want to do this.


He bought his second property six months later, had a lull for a couple of years and bought the third just before he turned 22. The first two properties were 'concrete bunkers' in Kilsyth for about $165,000 each, and we refinanced them December, 2008 with a value of $235,000 each.


Whichever part of Melbourne you live in, there will be opportunities disguised as concrete bunkers. Don't be too proud to buy what you can easily afford. Buying lower than your capacity means that you can buy again that much sooner. And again.

What are concrete bunkers exactly? Old Units that look like old toilet blocks??

Kristine this post of yours gives me great hope and has motivated me! I had it in my head that I needed to buy something more expensive like a villa to make it worthwile and to get good CG. But now I have found out I cant afford it on my salary. I see the most important thing is (when your on a lower than average income) is to get into the market and buy what you can afford to.

Also thought that having a courtyard and laundry was very important. But there are some tenants who cant afford their own laundry and courtyard so dont mind living in a unit complex that offers communal laundry cos there rental is more affordable. Could you offer some thoughts on this? Could you re-assure me.

I have decided to go ahead with the $220 K loan approval and a buy a 1 bed.
 
G'Day Kim

Yeah, for a while there we referred to them as 'The Latrines' - architecture is not their strong point!

When I was Body Corporate manager, we managed a block of flats with a very noisy (echoes) central courtyard where the laundry facilities were. Parking at the back of the block (in the dark), just a bog standard block of flats.

They sold for about the $80,000 mark back then. Haven't seen any for sale for a while, from memory the last ads I saw were for about $180,000.

These are still the cheapest property in the area, and yet have seen good growth by any standards.

When No: 2 Son bought the first and second units, he was earning $10,000 gross per annum, rising to $12,000 a bit later when he had finished the Retail Cadet training.

No matter the income level, there will always be opportunity if someone sees it as such.

Buy within your uppermost limit. Remember the Irish Shilling and keep a little in reserve - this covers you for a rainy day (vacancy, hot water service etc) and allows you to buy again that much sooner.

Cheers
Kristine.
 
Very inspirational stories from your life Kristine!

I am a FHB, 23 years old and on 66k. I had actually decided on the unit and still in cooling off period. The asking price was 375k, the vals came back at 365k. However the strata is $3000 per year. I feel it may be very very expensive to afford - may keep me hand to mouth with other expensive at family home so I am considering pulling out and going for a 330k or so old unit or townhouse.

What do you think about strata and investing?
 
Yes, it's fun to work out the capital growth as being a sort of parallel income, which, of course it is, even though it is unrealised income. If we work and our properties work there is this 24/7 growth going on 'even as we sleep'!

Property is sort of like the lazy person's way to riches. Buy property, make money - and go to sleep on the job, the property doesn't care, it just keeps doing it's job, 24 hours a day.

Cheers
Kristine

Good point.

As a very rough guess, I reckon I've averaged no more than $1000 per week of PAYE income since beginning fulltime work at aged 18. Some very good years along with very bad years.

Assume working to 65 as a normal, that's a total earn of about $2,444,000 before tax over my working life of 47 years.

We have made about half of this from property in only the last 10 years.

If we do no more investing for the next 10, we will surpass that figure in less than half the working years, but we will be investing more along the way, so who knows?
 
Hey all,

First post here so hello :) I stumbled across this thread off Google, I too am 20 years old and am interested in getting started in property, but I have no idea where to start, I agree with the original poster in that it all seems a bit complicated and hard for someone my age to be getting into property investment, it really interests me and my father has done well through rental investments.

How hard is it for someone like me to start in this area? What would be the first steps for me to take? Any books or something I can read to get me going, its hard to know what to listen to on the internet especially as most of it is rubbish!

Love your posts Kristine :)
 
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