Future self employed - first home

Kinda Long post, but here it goes...

Im currently 17, and will be going into self employment once i turn 18, in Aug next year. I'll be a sole trader, plastering.

My prediction is that I'll be making between 50 - 75k pre tax gross annually. I have minimal living expenses living at home and would be able to save a large chunk of my income.

My understanding is that its a 2 year necessity of tax returns, successful trading etc to be approved for a mortgage. However have seen people saying 1 year of financials was enough.

My main concern is approval, i want to spend sub 310k (ideally around ~250k) (should have a 50 - 80k deposit). in logan or ipswich areas. I purely want to use this property as an equity stepping stone for future investments. However am aware and will be researching the areas and understanding infrastructure, future infrastructure, flood zones etc. Now back to the approval, being young with almost no credit, relatively newly self employed will i struggle to get financing?

I'd ideally like to purchase at around age 19. Or early 20. I've seen mixed opinions about using items such as small credit cards e.g $500 or car financing to build a credit rating, opinions on this?

Also, would i need to go easy on the tax deductions during my first 2 years which i would be showing the banks.

Anyone here been in a simillar situation able to provide insights? Would really appreciate any comments about this situation, or methods of preparation etc

All advice welcomed

This probably could have been written better... But its late. Hopefully this is the right place to put this.

 

Maintain diligent records. Its typical for sole traders to use a card to buy materials etc. Just use it like a bank account with a small balance that is fully paid off each month. Debit card is even better

As a self employed contractor the lenders will look at you differently to a employee. Get a broker and work with them, initially just so you know what they will want and then later to help you through. Typically lenders will look at 2 years. Your youth doesnt help but dont put that off. I have a plasterer client who is young and he makes a significant income after expenses. He does a lot of hand finished work that gets top $$$ and has made a name for it.

Best tips I can give are
1. Dont undercharge. Find work you can "sell" and do more of that and less of the standard stuff. But of course the standard stuff fills the gaps...Some tradies want to race the price to the bottom on hipages. Others are known for a great job.
2. Work lots of hours and maximise income.

 

Hi Paul, thanks for the reply.

My main income will be Ornamental aswell as standard cornices, here it seems many look to get away from that, so there is a slight demand over the usual setters etc, especially if the final product is of a high quality you will be kept on. It is not as material intensive, so i won't have a lot of material expenses, just mainly 1 compound but still around $200+ a week. But its quite versatile and often gives the ability to earn $600 - 700+ a day gross given there is a steady flow of work, my calculation of projected income is a base figure however i don't expect to earn more than 95k realistically , as there will be competition and i am only 1 person. Of course if the offerings are there i will be willing to venture further.

 

Also building might be slowing, hopefully it picks Back up with the new government property deposit guarantee. I don't expect it to fall through completely but who knows.

 

If you get busy teach someone else. $95K is only a limit if you think that way. And when you get bust creep your prices up. Better still do both.

My client has 5 in his team. He makes around 30% on each of them. So its more than doubled his total profit. The more he has the more reliable he has become.

That deposit guarantee will be a tough nut. Only 10,000 will get it. And its going to be geographically spread out. A person in Odnadatta may have more luck than in Sydney. And many will buy existing housing ..The guarantee and a 5% deposit may be difficult with house + construct deals.

 

There's a few lenders that will only want to see your financials for one year, but they still want to see that your ABN has been in place for at least 2 years. This policy only applies to a couple of lenders and only when you're borrowing 20% or less of the property value.

Also quite a few lenders have withdrawn from this type of policy in the last few years. It would be reasonable to assume that you'll need to present 2 years of your tax returns.

Don't do this, it's a US thing. It doesn't help your credit rating at all and restricts your borrowing power. These days the best way to get a good credit rating is to pay your bills on time.