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19 yo looking to invest

Discussion in 'Introductions' started by Rclank1422, 18th Dec, 2015.

  1. Rclank1422

    Rclank1422 Member

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    Hi guys,

    I've just turned 19 and I'm looking to invest in property. I chose to not go to uni and so began working 6-7 days and have been able to save up 100k. I live with my parents and I have almost no expenses other than my gym membership. I did some rough calculations and in May 2018, I should have close to 300k, if I continue working 6-7 days.

    My father owns a successful yet small security company and I've been working 6-7 days whilst also doing some babysitting and fixing computers on the side to earn more money in order to be able to invest early. I had actually been thinking about investing while I was still in year 11, but I never got around to working retail or something similar. I wish I had though. I have been doing my own inexperienced research and I've decided on buying in either Brisbane or Gold Coast. In my own inexperienced opinion, I think it would be safer for me to purchase a 300k house as if there is any shortfalls, I'll have it covered, especially since it will be my first property.

    What I'm not sure is if I should wait till May 2018, till I have arrived to about 300k and purchase a property outright or I should invest now, or alternatively wait till May 2018 and put in a 300k deposit for a house that is valued at something higher. I spoke with a few real estate agents and they all are pushing me to buy now, which I understand is their job. However, their job doesn't involve looking after my best interests. I feel like I've been given a good opportunity to do something so I would like to make the most of it and so I don't want to get conned or make the error of buying in haste.

    I understand that there is a considerable risk when investing and so that's why I've chosen about a 300k house so I can pay it off relatively quickly if anything goes go wrong.

    All in all, my dream scenario is to be receiving $1.5-2.5k a week in rent by the age of 30, allowing me to be able to invest time into opening a charity for a disability that I carry around with me.

    Before you judge me, for being spoilt or anything similar. Whilst all my high school friends are up to their necks with uni debt, or on the dole and getting wasted every weekend. I've been working almost everyday to achieve my goals. I made what some others my age would call scarfices by choosing to not get the latest iPhone with the most expensive plan, or getting subscriptions to every media service available or just sitting home and playing video games every day. Anyways, that'll be me.

    Thanks
     
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  2. monalisa

    monalisa Well-Known Member Premium Member

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    Wow! congratulations on your achievements so far - saving that much deposit, and so much diligence - amazing!

    Do you have a perm role?

    Worthwhile determining your servicability in the first instance.

    It is OK to buy cheap properties - make sure they are well located, and do your cash flows calculations for each property you come across, before deciding, so you know what shortfall you are up for.

    You will benefit from starting as early as you can - as long as you do your due diligence!

    As you are from Sydney, I take it you have been searching in Sydney? What is your view of the Sydney real estate market and where it stands currently?

    What is your rationale behind paying down an investment property?
     
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  3. Rclank1422

    Rclank1422 Member

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    My role is permanent and I'm earning capacity will either stay the same or increase. I have been searching in Sydney, however in my own inexperienced opinion and research, 300k will only get me a two, three at best bedroom apartment, that to in an area where my tenants are likely to be stabbed. I would like to purchase houses that have at least some considerable land component to it.

    One particular real estate agent that I spoke to said it would be best for me to purchase a property in Brisbane and wait for capital gains before selling it and buying in Sydney.

    As you probably would of guessed by now, I'm not the most experienced in real estate so hence I'm here. My thinking behind purchasing a property outright is that the interest aspect of purchasing a property would be eliminated so then I can begin getting closer to that $1.5k-$2.5k a week I'm after. I get the feeling by the tone of that question regarding my rationale must mean there's a better and easier method of doing the same thing.
     
  4. monalisa

    monalisa Well-Known Member Premium Member

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    @Rclank1422

    What areas have you been looking at?

    The advice you have received from the agent is great advice. Investors who have seen a few cycles have indicated that Brisbane tends to follow Sydney in growth. I do not think it will have the 'Sydney' growth - but having exposure elsewhere until it is time to buy in Sydney would be great.

    Have a look at Somersoft forums - PC's predecessor

    Somersoft Property Investment Forums - Powered by vBulletin

    In particular the interviews: Interviews - Somersoft Property Investment Forums

    From @MsAli and my experience, we opted to borrow, and maximise exposure to the market and therefore opportunity.

    If you have a $300k paid off property, if markets grow 5%, the growth will be $15k.

    At the same time, if you used $300k as deposit and buying in costs (assume deposit of 12%, as it minimises Lenders Mortgage Insurance (LMI) plus 5% for buy-in costs like stamp duty, solicitors etc), you could buy 300,000/0.17 = $1,764,000 in real estate. Now if the same portfolio increased by 5% you will have $88,000 growth - being $73k higher than when you only have one property.

    Now take a booming market (e.g. how Sydney was the last few years) - say you owned $1,764,000 in real estate, and the market grew by 50% that is $882,000 vs if you only owned a $300k IP - this will give you only $150k growth.

    Hope this helps :)
     
    Last edited: 18th Dec, 2015
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  5. MsAli

    MsAli Well-Known Member Premium Member

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    Congratulations @Rclank1422! Very impressive!! You will do great things :)
     
  6. Steven Ryan

    Steven Ryan Mortgage Broker Business Plus Member

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    @Rclank1422, what a great effort at such a young age. @MsAli is right, you will do great things.

    The big pieces of the puzzle you seem to be missing are the concept of leverage and a time buffer. @monalisa has explained the concept of leverage wonderfully. There's one more thing to add there too. That extra growth you can achieve by leveraging can by used to buy more properties and the whole thing compounds.. compounding + leverages are an incredible combination.

    The other piece of the puzzle is a time buffer of safety net. Whatever it may be, keep enough cash/liquid assets aside so you can weather any storms and survive financially, for whatever period of time you feel comfortable, should your income suddenly stop.

    Example:

    If you buy a $300k property outright, you will have $0 left in the bank in case of emergency.

    Or you could keep $25k in the bank and use $75k towards the purchase of a $500,000 property with an 88% loan.

    Which sounds safer? :)
     
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  7. wylie

    wylie Moderator Staff Member

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    Congratulations on what you've achieved at such a young age. I would see a broker right now, and find out what you could borrow with your $100 deposit, how much of a loan you could service. The Brisbane market is tipped to move upwards. Goodness knows, it sat idle for so many years, it is about time. My concern if you wait another 18 months to two years is that you could be benefitting from that growth if you buy now.

    Last time the Brisbane market moved quickly we met a couple who sold their beautifully renovated house and moved into a rental in our street. They probably made $100k profit from their renovation. They took a six month lease and missed out on every house they contracted for. There were five or more contracts on each one, and they kept missing. They took another six month lease (and possible a third - cannot recall).

    What I recall clearly was that she said to me one day "the market is rising $10k each month". Each month they rented, the price of buying back in was rising about $10k in our area. So, after twelve months, I believe they probably "lost" all the profit they had made on the renovation they just did.

    I'm not saying "jump into anything" immediately, but see a broker so that you know what you "could" afford now if you decide to buy now. Don't forget that a lender will take a percentage of the rent into account to help you repay.

    Good luck. I think you will go far.
     
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  8. Tim & Chrissy

    Tim & Chrissy Well-Known Member

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    Well done, you're definately on the right track. I bought my first unit when I was 19 and had big plans. A career change after uni, marrying at 23 and starting a family straight away put the brakes on a lot of my plans and I'm only getting back to them now that our youngest is 2 (I'm 32 now and the kids are 2, 4, 6 and 8).

    My advice would be to go for it now, let other people pay off your property through rent and with interest rates so low your likely to do a lot better getting into the market as opposed to leaving the money in the bank. You'll also gain invaluable experience as a landlord and investor over the next 3 years that you won't get simply saving the cash.
     
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  9. Daniel007

    Daniel007 Well-Known Member

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    Great to see that you did decide to come onto propertycha, as you can see the responses are a lot different to whirlpool, no tally poppy syndrome here.

    Best of luck, you'll learn plenty here.
     
  10. DiligentPM

    DiligentPM Well-Known Member Business Member

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    Great job. You are surrounded by well educated and experienced investors able to mentor you through the acquisition phase.

    Welcome aboard!
     
  11. Leo2413

    Leo2413 Well-Known Member Premium Member

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    Well done so far. Your miles and miles ahead of your peers.

    You said your goal is to "receiving $1.5-2.5k a week in rent by the age of 30". You will need approx 3.5-4 million in net worth and you have 11 years to get there.

    Now you really need to buy some property books and start studying, then ask questions on here to build your knowledge on wealth creation and let the process begin. Buy some books by Australian authors and start learning some of the basic concepts which are so important to know. Build a strong foundation (most dont do this). Its your best chance to reach your goal imo.

    Well done. You have the chance to be great. Go for it.

    .
     
    Last edited: 24th Dec, 2015
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  12. Biz

    Biz Well-Known Member

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    Well done but don't throw away your youth working 7 days a week. Go out, get wasted, live a little. late teens early 20's are the best time of your life! Plenty of time later when your old, fat and ugly to worry about yields and bastard tenants.
     
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  13. Sonamic

    Sonamic Well-Known Member

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    Welcome to the forum @Rclank1422

    Great effort so far! Read read read, and ask questions.

    With your determination and ability to earn and save rapidly I'd buy 2 in Brisbane now in the price range you're looking at. That will allow you to have a base to build off and see how it all works. If you're working 6-7 days a week you'll also find some nice Tax Breaks as a small side bonus to aid cashflow.
     
  14. Foxy Moron

    Foxy Moron Well-Known Member

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    This. There will be cheap properties with upside potential and cheap properties that go no-where.
    Trick is to spot the difference. House location is key. Near a decent shopping centre or popular train station could be a clue. I would cut your teeth on one now with gearing to get in the game if the buy price is fair. In the next year or two keep your options open for another – opportunities arise at the most unpredictable times. Thinking long term, a neighbouring property to the first one could come on the market at some point and would be great to pounce on that. Think a bit like a monopoly player for next 20 years, (measured growth without silly debt exposure) and good things can happen. Also come to understand a term called dollar cost averaging.
    Any fool thinks they’re a genius buying stuff in a boom market. The smart ones learn techniques to do well throughout the entire cycle. Read and learn from other posters here how this can be achieved.
     
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  15. Gockie

    Gockie I'm an ISTP-A female, so I might be a bit quirky! Premium Member

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    Good advice Foxy Moron. :)
     
  16. Leo2413

    Leo2413 Well-Known Member Premium Member

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    Fantastic advice imo.
     
  17. Truly Exotic

    Truly Exotic Well-Known Member

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    The good thing is the market is at a sensitive point for the most. So the good thing is you dont have to rush out and buy

    Weve just come out of a few years where everyone was buying and everyone was making a zillion dollars and being property guns.

    The next few years when most markets cool or plateau or drop will make it a buyers market.

    While consumer confidence will go down. So at least you dont have to listen to every friend or relative boast about being an expert at every single bbq

    Just take it easy and not jump into anything to impulsively
     
  18. Azazel

    Azazel Well-Known Member

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    Agree - although you should be able to find a balance.
    Do some of the fun stuff while you're young enough to enjoy it.
     
  19. BKRinvesting

    BKRinvesting Well-Known Member

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    Congrats on getting to where you are now!
    As above, look into the concept of leverage.
    Your journey will be much much slower without it.
    Maybe give 'rich dad poor dad' a read and look out for the concept of good and bad debt.
    I started investing at 21, and I often wish I had started earlier :) I started with a total outlay of less than $10k, so a bit of luck and leverage has massively helped me get where I am now.
    You're miles ahead of everyone else. Don't be afraid of jumping it. Mistakes are opportunities to learn from. I have learned so much in my 4 short years of investing, and I am so much more confident than at the beginning. While having a plan is great - life is all about finding and going after the opportunities presented. It's a fun game, make sure you enjoy it :)
     
  20. Bran

    Bran Well-Known Member

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    The brokers probably know better, but you might need to be declaring this extra cash - i.e. babysitting, repairs to improve your lendability, even if you pay more tax.