Domain Article - How a 20-year-old bought three investment properties

How a 20-year-old bought three investment properties: His seven steps to get started

I am not sure if the individual or their mother view the forum but I don't see this as any amazing individual.

Was gifted 60k, has had zero growth (it has been only 2 years) also his yield is based off what he paid for it and not his estimated value. It would be like my father who paid 15k for a unit in St Kilda and it rents out today for 500 pw getting 173% yield... I think it is stupid.

So far his only capital gains using his figures has been 2.5k on the first one or less than 1% so lets call that nothing. The second one is 13k which is better but hardly enough to do much with and this one that he has bought BMV that is yet to settle the bank will value it at that price settled price likely for the next 12 months. I won't argue his BMV but to me it seems more like MV, I recently have purchase a place where the vendors paid 100k renovating the house and the land 2 doors up would make my land value about 670k (using their m2 and converting to mine, which is about 10% bigger block). I am purchasing it for about 700k however I am not saying it is BMV because it isn't BMV it is actually MV. If I really wanted to I could say I bought it about 100k BMV (30k for house shell + 100k reno + 670k land = 800k) but this is a lie. A reside report said the land was worth 1.2M so did I purchase it for 500k BMV?? Nope.

Not envious with his situation but his 'estimated profit' is 75k which 60k is his baseline due to a gift and 17k is from a property that hasn't settled yet being BMV. So really zero or negative.

Don't get me wrong I think he will do better than the other 20 year olds but at 20 I had probably half of what he in total net worth (did have 30k before I was 20, being 10 years ago) but I didn't have a gift.

What are your thoughts?

 

Give him a break!

He's 20 and he got given $60k. He could have blown it on a big weekend out, a trip to bali and a BMW. Elizabeth East is good for cashflow but not capital growth. But if he can pay down some debt and increase cashflow he might be able to buy in an area with better capital growth potential in future. I agree it's not a brilliant portfolio but I think it is a solid start. But then I didn't by my first property until mid 30's so anyone starting out in their 20's is doing well by my standards.

 

At last, relevant figures are included in a Domain article! Kudos to @Jennifer Duke for that.

It's a start for him. At the end of the day he's spent $60k and managed to 'make it back' if you will. Investing it in the first place puts him in what must be a small % of 20 year olds.

It's nothing particularly exciting and not a strategy I would adopt (buying high yield low capital growth properties that is), but on his income it's OK.

 

$60,000 at that age is a massive handout and in no way represents the norm. This is just an edge case. I don't think the article mentioned if he was still living at home or not, but thats another large saving that's not always open to everyone.

It actually ends up setting a bad precedent, that parents should feel somehow obligated to help out their children in such a substantial way, when in reality the majority probably don't have enough to retire on themselves.

 

Agree with @Perthguy.
The kid could have blown it on a car, holiday etc, but he didn't.
He has a good mindset and will hopefully go further.

There are people on this forum who present themselves as "knowledgeable individuals" but are really interested in spruiking their own wares - those are worse in my opinion.

 

The $60,000 was given as a gift to help with investing, yes he could blow it on a holiday or the BMW but in reality his choice was rather limited probably something like invest the 60k or the parents said they will scratch you from their will.

I agree he is further ahead than most 20 yo but he also had a 60k head start. In reality if he saved $150 per week and did that week on week he would of had $15,600. Compared to his $14,800 in CG of which $17,000 is on a property that hasn't settled.

If you take away the property still to settle then he has got $59,300 which is less than his starting position.

I do wish him all the best with his journey and not sure why Jen wrote the article if it was meant to inspire people or make them think differently about property. However I wouldn't call it an amazing journey or something most people could relate to getting a 60k gift on their 18th birthday to buy a property.

 

I think the article was to point out that mindset was important.

It was also refreshing to see articles that weren't about smashed avos

Robert’s seven steps to get started

• Family assistance A helping hand can be a simple way to jump-start a property portfolio from a young age.
• A “savings” attitude Work hard and save as much as you can to fund your property aspirations.
• Not being scared of Lenders Mortgage Insurance (LMI) LMI can allow you to buy sooner and is often tax-deductible on investment properties.
• Seeking out trusted advice Find a seasoned investor to give you guidance, but don’t be scared to trust your own research.
• Consider markets outside your backyard Australia is more than just a few capital cities. Explore the real estate options across the whole country.
• Look at the “worst-case scenarios” In every aspect of your portfolio, plan and insure yourself for what could go wrong.
• Get creative to push your portfolio further Rent properties out by the room, think about development possibilities and look where others don’t.

 

65k is a great salary for 20 years old but long-term he probably would have been wiser to invest in an education/trade. Capital growth wise I don't see his portfolio achieving much- at least in the short-mid term. He bought 2 properties at Elizabeth East with the second one being "on a large parcel of land that he hopes to eventually develop into apartments". Not knowing the specifics it seems very unlikely that the zoning would allow for apartments and also who the hell would want to live in an apartment in Elizabeth!!! I also can't see how he would be self-managing these properties when he lives in Perth...

 

He spent 60k and he's turned it into cashflow from day one. That's excellent. It's only been 2 years so give it time, growth might occur who knows. Please try and remember what 20 was like. His first years are learning years, and he's earning positive cashflow...can't shoot him down for that.

 

I'm sure it's doable. I think there a person on here who invests in a similar type area and self manages and aren't located in the same city.

 

I remember my 20s (was 10 years ago), yes I was young and inexperienced but my self made net worth was greater than his.

Being gifted 60k for investing purposes and buying in Elizabeth along with renting out the property by the rooms to get cashflow positive is not a great feat even for a 20 yo. As I am sure he doesn't need to self manage or rent the rooms by the room to get CF+.

If you took 2 years since I bought a property and compared to his 2 years my asset grew by about 50k p.a or 100k in 2 years compared to his three of 15k (which we can debate about the actual gain).

 

I remember my first paycheck was at around age 20 for around $1500. I felt like the richest person in the world and spent $1250 on a home gym kit. When my dad finished facepalming he gently asked "son, next time you're thinking about buying something, maybe run it past us first."

I like the kid in the article and (as said above) it's great to not be reading about smashed avo for once. However I would have bought only 1 property and put the rest into VAS or similar ETF/LIC.

 

The article is really about mindset and demonstrating that you can get ahead in the property market. As others have suggested, he could have wasted the $60k gift but he's put it to good use. The lessons at the end of the article are reasonable as general advice.

Given the properties purchased and starting in 2011 it's a reasonable result. I've seen quite a few people get similar results buying in similar areas during that period. If you were starting today the results would likely be quite different as things have changed in so many ways since 2011.

 

But how?
Surely you'd have to fly over and see the places in person regularly. If you're not doing regular inspections (at least every 6 months) you could be getting paid your rent on time each week, but your house might be a meth lab for all you know.

 

Yes, you're clearly the best. Well done.

 

Thanks, where is my article?

 

Well I was just thinking you should contact Jennifer. Honestly it's always good to hear other people's stories. Personally I try not to compare myself with others because it either leaves me feeling a bit crap, or I'm at risk of developing an overinflated sense of my own success.

 

How old are you? :O

 

I don't try to compare to myself but when there is an article that talks about 3 properties at 20 with a 60k gift and >75k total assets from a 60k base of which 17k is still to settle. It doesn't impress me but he is doing better than probably 99% of 20 yo including ones that were gifted 100k.

I am not actually interested in having an article on me, I am more reserved and I am sure if some of the family members read about it they would probably become jealous.

 

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