How would you navigate a late start on a low income?

Hi all,

Interested to see how you would navigate my situation.

The nuts and bolts of my life/financials

38yo
56k pa (first full time job)
Single
No kids
40k savings
No debt
No education
No idea

Risk appetite medium to low. Ability to sacrifice high.

 

Buy.a PPOR - property trumps shares because you get the leverage by borrowing 80-90% from a bank. If your property grows 10% in a year, you are getting 50% return on your investment (if your deposit was 20%). Being a PPOR, you will also get tax benefits on sale.

But a PPOR - very simple strategy in your case!

 

Buy your own home (PPOR), renovate and sell tax free after twelve months. Do that 3 or 4 times until early 40s. Attract a mate with new found commitment.

There are a dozen contingencies (on the houses) so have to study up first.

 

Seeing it on layed out on paper like that is a little bit crook lol

 

I'm not in a position to do that with a PPOR. Its a messy situation

 

Investment properties have huge ongoing costs and it will actually consume most of that income for many years. To move along you really need any IP purchase to be positive net cashflow or have rents jump. A bit of an increase in its value is also necessary. Your finances are probably too tight at moment. Might be better hold fire on the property. That's ok. You're still young.

 

Appreciate the input to no end. It might not be a possibility for me. All good. I'll make it work. I've made it this far

 

Buy a house. It trumps shares as you can use leverage which will be hugely beneficial for you as a low income earner. Plus there are tax offsets and various methodologies you can use to minimise tax or pay 0 tax when you sell.

Your single, fairly young and no kids. What are you scared of? You have NOTHING to lose.

I was the most ballsy when there are no commitments, no family and no young kids that rely on you. If you go bust or broke who cares its only yourself. Do it now - you can afford to make massive risks.

The biggest mistake your doing is procrastinating. I guess you've taken your first steps but don't be like many ppl I know that are all talk and no action. They are still talking the same nonsense to me 15 years later and not a single home to their name and just watching everyone else become millionaires.

 

Have much to lose and have access to equity

I want to buy a house. I have access to equity BUT if I make a bad choice this will domino. Worst case scenario I stuff it and end up with no home for myself and my mother. I'm very fortunate in the fact my living expenses are super low (ATM) what I can do is throw 40% of my wage at an IP/never have kids and BTH either way, its super risky bizzo.

 

I've got an even simpler idea @Meeds . Go to a bookshop and buy yourself a copy of barefoot investor.

It was written for people just like you.

It doesn't try to sell you anything. It just gives you a roadmap.

It'll be the best $30 you have ever spent.

 

If it's your mother's equity, don't risk her security. Just don't do it.

 

I second this! Sounds perfect for the OP.

 

Read posts by those here like skater, mtr, sash etc that are detailed about the IP process.

Find the the most expensive suburbs and go to the local bars, clubs and cafes.
Only go to those with a demographic over 45yo. Find a nice wealthy single lady, preferably a widow and start dating her. Tell her occasioanlly about your hopes and dreams of buying an IP and how you're working hard and saving. Make her happy...

 

Bingo. Expenses are low because of my mother's help. I've been saving 400pw since I got my full-time job, about a year now. Its not easy. Lots of sacrifices and no life but thats ok. I guess I figured if I could do that, that could be a mortgage but I am stretched already and I can't save as fast as prices keep rising.

 

It is hers. I was hoping not to then thought I couldn't see another way but you are right and I won't. Comes back to earning capacity

 

Hahaha, people like that don't go for people like me.

 

All things considered with a mid life start to your journey you are doing well. It takes sacrifice to save and not many people can handle it.

Things to consider
- what is the career progression like? If you income goes up next year and then again the year after then it will get easier and easier
- have a chat with a broker from here and see how far your current deposit and income will get you THEN do some modelling with them on how much more you need to get something better
- consider a second job. It's even more work but it will assist with cash flow if you want to bump up that deposit
- think about what your $40k is doing - various savings accounts offer better interest or you could think about putting it into some sort of low risk shares to increase the funds
- are you eligible for First Home Owners grants? You can stack some of these benefits and really get your deposit working if you are

Edit: do not look at joint ventures, money partner arrangements or deals where you help finance a part of a development project. 90% of the time it will end in a really bad situation.

 

Thank you @Westminster. Looking like the second job is my only option for now.

That money banked gains some small interest. Don't know what low risk shares are-will investigate.

Not eligible for FHB and those last points are awesome. Thank you.