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

Discussion in 'Investment Strategy' started by Meeds, 17th Oct, 2021.

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How you would use 40k

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  1. wylie

    wylie Moderator Staff Member

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    Just to clarify. Does your mother have her own house and would be willing to allow you to use her equity to get into something?

    Or does your mother rent with you and is prepared to lend you some of her savings?

    Depending on the answer, this is what we did to help our oldest son.

    He bought his first little unit and to allow him to get there without paying LMI, we gave a limited guarantee, up to a certain value. I think it was $50k but can't recall.

    He could have used LMI and not had us provide this guarantee (from memory).

    I certainly wouldn't risk your mother's roof over her head (if I've got that right above and she owns something herself). But perhaps if you come up short, can afford to repay your mother, she could borrow say $20k or whatever might help you stretch into something cheap as a first step on the property ladder, and not put her property title or her future security at risk.

    I think if you reach out to a broker, there could be ways to get into something before prices rise even further. At least you will get an idea of what you could get into.

    Starting out late is better than not starting at all.
     
    wylie, 18th Oct, 2021
    #21
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  2. Shazz@

    Shazz@ Well-Known Member

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    Are you able to share with us your goals? Is a PPOR part of the strategy?
    Also, what is your profession? I think your income will be limiting, but if you can increase that somehow, that would go a long way. As an option, perhaps you can utilise your skills in a better paying industry.
     
    Shazz@, 18th Oct, 2021
    #22
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  3. MB18

    MB18 Well-Known Member

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    This IS a property forum so there is a bias towards leveraging into property, but at the end of the day.... 40k savings, 56k p/a, and a conservative attitude to risk? Just dont.

    Don't get too excited about the powers of leverage, its a double edged sword.

    I'll be one of the minorities to say go with shares and keep it simple with one or two broad based ETFs.
    You wont get yourself into financial strife, and if the portfolio takes a hit you will still receive dividends until the storm passes.

    If you really want to gear you could consider the like of NAB equity builder (currently 3.75% upto 75% LVR).
    Longer term you could also consider selling down part of your holding to purchase a ppor.

    Agree with the posts above, check out the Barefoot Investor book and at least make a start somewhere be it shares or property.
     
    MB18, 18th Oct, 2021
    #23
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  4. The Y-man

    The Y-man Moderator Staff Member

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    Have a look for the ETF/LIC threads if you are not sure about picking shares and want to spread the risk/return a bit.

    The Y-man
     
    The Y-man, 18th Oct, 2021
    #24
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  5. wylie

    wylie Moderator Staff Member

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    It would be good to get an idea of what you'd like to buy and where. And see how the mortgage compares to the rent you are paying now.
     
    wylie, 18th Oct, 2021
    #25
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  6. SeafordSunshine

    SeafordSunshine Well-Known Member

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    Dear Meeds
    Could I suggest, as a first step that you make an casual appointment with your local bank loan person ?
    Don't officially 'apply for a loan' because it may show up on your credit rating.
    You need to guard your credit rating ' with your life'!
    Also make a budget, how much I spend on food , clothes , electricity,
    Make lots of drawings (cut out magazines pictures) about what your property looks like .. stick them on your fridge!
    Enjoy your journey and keep posting on here!
    I hope this helps
     
    SeafordSunshine, 18th Oct, 2021
    #26
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  7. MWI

    MWI Well-Known Member

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    Buy a property in BRI and renovate to add value. If currently not enough $ then SAVE SAVE SAVE as much as possible then progress.....
    Just because you have $40K doesn't mean you should invest if investment is not right.
    Meanwhile educate yourself, read some books on RE if that's the asset class you wish to learn and invest into.
     
    MWI, 18th Oct, 2021
    #27
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  8. Meeds

    Meeds Member

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    She doesn't have any savings. None. She was completely conned by her "good friend" and accountant. Destroyed her. She does have the house. My name is on the title hence FHB PPOR being off the cards.

    What I would hate is to end up in her situation. I don't want for much. I am in Brisbane. Like the city and the people here so darn much. Happy with a 2 bed place but strata is so expensive. I figured I could put people in to help pay it off whilst I stay with Mum. Pipe dream it seems. I could push putting 500 towards but if rates increased I'd do my dough so thats probably my answer
     
    Meeds, 19th Oct, 2021
    #28
  9. Meeds

    Meeds Member

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    I work in retail. I've probably hit the ceiling, asked for more money but denied. Really my goal is to have a home for myself in the future. I don't need anything fancy. Not a person looking for the best of anything but its a big commitment and it appears I'm not there financially
     
    Meeds, 19th Oct, 2021
    #29
  10. Meeds

    Meeds Member

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    Thank you for this
     
    Meeds, 19th Oct, 2021
    #30
  11. Meeds

    Meeds Member

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    I had no idea about the "applying for a loan" credit rating thing, thank you for the heads up
     
    Meeds, 19th Oct, 2021
    #31
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  12. wylie

    wylie Moderator Staff Member

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    I would approach one of the brokers here and lay out your circumstances. I would not go direct to a bank. They will only know their own product, and I'd not trust any banker not to hit your credit rating, which would be a very bad thing.

    Do you live in the house your mother owns, but she's there too. Sorry, I'm a bit confused. Are you wanting to live in a place on your own. Your mother would stay in her own house?

    I can't help but wonder if you can stay with your mother whilst buying something in an area you can afford. Maybe move in initially and then if you have trouble paying rent, rates, maintenance etc, you move out, rent it out while you move in with your mother, or rent something cheaper. That way all expenses for the rental become tax deductible.

    There is a six year rule, which I don't totally understand, but if you move out after you establish it as your main residence, you can rent elsewhere, or live with a friend or your mother, and move back in before the six year limit. I believe you can move out more than once as long as you move back in before six years is up.

    A good broker will help you with this.

    Sorry if I'm not correct in my assumptions. And with rates so low, buying in a cheaper area could at least get you on the property ladder, and provide housing as you get older.

    Don't give up. Find a broker and ask some questions about how to get into a property without jeopardising your mother's property.

    I'd rather have someone paying off a property than arrive at age 60 with shares, but having to pay rent for the rest of your life.
     
    wylie, 19th Oct, 2021
    #32
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  13. wylie

    wylie Moderator Staff Member

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    ... forgot to add, look at fixing at least part of the loan to avoid any sudden rises in the rate forcing you into a tight financial position.
     
    wylie, 19th Oct, 2021
    #33
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  14. Angel

    Angel Well-Known Member

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    Please think about where you intend to live. There is no point buying an affordable home in an outer LGA (local govt area like Ipswich or Logan) but not being able to commute to your place of employment and therefore losing your job.

    Secondly I assume from what is stated that one day you will inherit your Mum's house. You could add additional funds into your Superannuation to improve your financial situation and save yourself the dramas associated with trying to buy a house in a rising market.
     
    Angel, 19th Oct, 2021
    #34
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  15. wylie

    wylie Moderator Staff Member

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    Wise words (as usual @Angel), but if all someone can afford is a place where they cannot live long term, or ever, at least it is allowing tenants to help pay off that house, and having something to live in when retired, rather than face paying rent for ever. I would hate having to pay rent into old age.

    And I guess if the OP is an only child, it is likely that he one day will inherit, but I wouldn't make that Plan A.

    If all I could afford was an outer suburb house, I'd still buy it, put tenants in, claim everything I could whilst renting where it works best for me. It all comes down to how much I could borrow.

    I also don't suggest stretching so far that life becomes so difficult you can't afford to eat well. But that's what a broker will help with.

    I can't help but picture myself when I was younger, desperate to get into the property market, but constrained by being female, not earning enough, and high interest rates. But I made it happen through dogged determination. As soon as I could, I bought a tiny old house, but it was a start.
     
    wylie, 19th Oct, 2021
    #35
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  16. Meeds

    Meeds Member

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    This gives me hope! It is exactly me lol. Can't rely on plan A. Not an only child and high chance she may need to sell in her later years. It's hers to do so. I'm just trying to hustle for me :)

    @Angel am going to ask my boss to up my super. It is needed. Great advice.
     
    Meeds, 19th Oct, 2021
    #36
  17. Ryan23

    Ryan23 Well-Known Member

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    Can you consider up skilling to help raise your income. There are plenty of commonwealth supported tafe and uni corses at the moment that you can study online. They are heavily subsidized and may not even cost anything out of pocker. You’ve probably got at least 25 years of working left, so even if it take 1-3 years it’s not a big deal.
     
    Ryan23, 20th Oct, 2021
    #37
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  18. skater

    skater Well-Known Member

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    I'm not up on the regulations in Bris. I know some councils you can put a granny, and others you can not. BUT....is it possible to build a 2 bed granny at the rear of the house. You could then live there independently and not impinge on your mother.
     
    skater, 20th Oct, 2021
    #38
  19. skater

    skater Well-Known Member

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    This! The age pension for a single person is abysmal.
     
    skater, 20th Oct, 2021
    #39
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  20. Angel

    Angel Well-Known Member

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    For example, keep saving for your own home at a slower rate than you do now. You can still continue saving from your after-tax income, and also place an amount pre-tax into your super, and it should grow quietly for you. Search your Superannuation company's website and the ATO website for info on salary-sacrificing or making a tax-free contribution if you do not qualify to salary-sacrifice. There is a section in PC about it too. Dont go straight to your boss until you have researched this further and understand how it will benefit you. Barefoot Investor has a chapter on it, I think.
     
    Angel, 20th Oct, 2021
    #40
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