Investment Strategy for a 22 year old

Hi all,

I am a 22 year old from Melbourne with a keen interest on wealth creation and am looking to buy my first investment property in the short term. My long term goal is a passive income of $1800-$2000 per week. I'm still trying to map out the best strategy to get me there, I will also note i am still living at home with parents and will continue to do this for a few more years to keep my overheads low.

I am currently sitting on 130k cash, earn an annual income of around 83k with constant overtime that will bring me up to close around 95k per year, as mentioned before my overheads are low and i currently have a monthly surplus of around $4200. I have spoken to a mortgage broker who has given me a current borrowing capacity of 750k.

In terms of strategy, i understand you need both growth and yield to grow a solid portfolio. I was keen on buying one really strong growth asset first up to form the foundation of my portfolio, I was thinking a 2br home with period charm in a desirable and investment grade suburb like Footscray, West footscray or Seddon. However something like this will eat up majority of my current borrowing capacity. Keeping in mind i still will have to purchase my PPOR in around 4 or so years im a bit skeptical i will leave myself short come that time.

Do you guys think that a purchase like that would be a good first move for me? I really think those areas will do well over the long term and would really benefit my portfolio having an asset like that drive growth.

In terms of my PPOR i was looking at buying something a little cheaper, think sunshine west or st albans that i could possibly subdivide, build a townhouse to rent out while i live in the existing property. That way id be sourcing a home for myself while still investing at the same time. Something like this would still cost me around 600k to purchase.

Do you guys think this is a realistic approach?
should i be using so much of my borrowing power on my first purchase?


Thanks

 

I think you'll get better yeild and cash flow in Regional Vic (Bendigo and Ballarat). Worth looking into.

 

Thanks, I do own shares but I've never thought about investing in a REIT like that. If its so simple to create wealth like you've shown then why do people even bother with buying individual residential property? whats the drawbacks to this strategy?

 

I think your strategy is a good one man. A young guy should certainly be looking at growing your asset base first before chasing yields/cashflow. High growth assets tend to have low yields however with your monthly surplus you could manage. A property with shorterm uplift and long term growth will definitely enable you to subdivide your PPR at a later date. Once your LVR is around that 60% mark you’d be able to develop.

 

@The Y-man with work from home becoming the norm and even government offices making WFH a regular thing, how do you see this affecting commercial real estate?

 

Hey Mate, (GwithmyWoess)

how did you go?
did you end up buying that property?

did you buy shares / split?

 

hahaha

I somehow read the joined date instead of post date.
And that is after two coffee's haha. *(Hence why I was interested to see the outcome)

 

Could you please explain this??

 

Couldn't agree more with "ROLF"

understanding clearly where you are, then understanding your "END GOAL"
& creating a very clear path to get there is so valuable.

Once you have done that, you should have a far greater understanding of how each and every asset & dollar you spend assists with getting to your end goal.

and with good projection tools & custom projections, you can get an idea of possible timeframes based on X returns.

but the power of compounding is strong

The sooner you start, the quicker you will get there.



in relation to your strategy vs Y mans vs others.

There are so many paths that can move someones financial position forward.
Each of the options has their own value & some more than others.

one thing is however buy the time you go to buy your PPOR your purchases & investments should of increased your borrowing power, not hindered it.

If you did decide property matches your long term goals some of the important things are
-is it below the current market value (buying below the average sale for that property)
-can you add value? (reno, zoning changes, small upgrades, etc etc)
-whats the affect on your cashflow (positive or negative geared)
-after any fixes is capital growth likely?

This is very brief but the questions above can give you an idea of how the property may assist/hurt reaching your long term financial goals.

Wish you all the best!