New to propertychat, 24 years old, need advice

Hello

I am hoping to get some advice from some of you more experienced users on this forum.

My background:
-24 years old, come from a poor family, limited to no experience in property, finances, etc.
-I have a considerable amount of money saved in the bank (between $150K - $200K). Been saving as a kid, working my backside off since graduating with f/t work and casual work on weekends. Low expenses ($75-100wk for board with parents).
-I do not gamble, smoke, drink or do drugs at all. Waste of money.
-I have no knowledge at all about any of the advanced lingo / terms with property, and I have only just started browsing the MoneySmart government website to understand what different terms mean, how people invest and grow money, etc.
-My only experience in "investing" if you can call it that is: (1) saving money by working; and (2) putting it into a term deposit

My goal:
-I want to be financially independent and life a comfortable life.
-I want to own a property. Preferably a residential one. not sure if IPs are a good thing or not.
-My dream is to buy a house in a really well-off area hopefully without a mortgage some day (the feeling of having to make constant repayments scares me and makes me very anxious)

My questions
-Apart from telling me to seek independent financial advice (which I am hoping to do some time in the future), what do you think I should do to achieve my goals?
-I have been thinking of getting an investment property. Is this worth it? How do I go about it? What returns can I expect?
-Is getting into stocks worth it? Again, just looking for as much general info as possible.
-Please keep all responses "dumb". My background is not in property or finance and assume I have the knowledge of someone fresh out of high school with no experience in these issues.
-Gov is allowing you to withdraw $10K from super. Worth it or not? I hear that with compound interest and expotential growth $20K now is like $500K in 35 years...

Expected questions I will get which I answer here:
-How did you get so much money?

• Working f/t + casual jobs. I love working and work 7 days a week where I can. I have never taken a holiday and have only lived in OZ
• Not spending a lot. I spend $75-100/wk for board and everything else I try to save. I will maybe buy some video games now and then but I try to keep the expenses low. I maybe eat out like 2-4 times a year.
• Never been on holidays and I live a fairly comfortable, routine life.
  
• Living with parents and saving as a kid lots of money. I do not waste. I dont drink, smoke, drugs, etc. All of this I totally avoid

-How are you so inexperienced in property/finances?

• I have no idea. I come from a poor family and have always believed in "delayed gratification". This year I've tried eating healthier, getting together a schedule, trying to maximise all these different efficiencies in my life.
• My main experience is just saving. I love saving and I hate spending... and I've always viewed stocks as being very risky and uncertain.

 

You can save, and don't like to spend.

But you don't know how to make money.

Read for 6 months. Learn how investing works and what risk is.

 

Additional Question
-Been thinking about buying an apartment in the city just to rent it out to people, once the COVID-19 outbreak/situation is over. Is this worth it?

• The idea is that I want to be able to get a steady source of income, without a mortgage. It's basically an unlimited money stream, plus I pay body corporate, which I think is tax deductible.
• The downside is that it means I would exhaust all my capital. But then I would be able to sell at any time / within a reasonable time, right? Even if the value of the apartment goes down, It wouldn't be all entirely bad because I would be able to rent it out for longer just to make back any lost money / get extra profits.

Any tips?

 

Honestly you dont know enough to discuss actual things to do. People could discuss your post line by line but you would just end up with more questions.

Do some learning first so that you ask the right questions.

 

Part of that learning exercise is me being here and asking questions Thanks for your suggestions though

 

The first you need to do is to continue your education, either go to the bookshop and buy new or second hand books of the following:
- The Barefoot Investor, Scott Pape.
- Some of Noel Whittaker's books, Making Money Made Simple, Golden Rules of Wealth, Beginners Guide to Wealth etc.
- Some property investment books e.g. from Michael Yardney, Margaret Lomas, Jane Slack-Smith. etc. Note most of the authors who write property investment books have courses to sell and what-not, so buy a number to read for guidance to get a perspective.
Spending $200 on books is the best investment you can do.

At this stage do not recommend to buy an apartment in the city. After reading the books, develop your action plan and consider multiple pathways to evolve. e.g. some regular investing in funds/ETFs etc; a cheaper property you can afford to focus on paying down the mortgage and adding value, developing your career / income potential, check on your super etc, and go from there.

 

Do nothing but read for the next month. This forum is probably better than any books.

And then report back in, you will have a new perspective.

 

Do you think it's worth buying an apartment with cash (no mortgage) and renting it?

 

Some good advice given already. Your current situation financially might be great for your age, but 150-200k is not enough to "buy a property in the city and rent it out for income" unless your current and future source of income is high enough to cover costs when it's not being rented. Do you plan to live with your parents forever as a way to generate cashflow for example? How are you going to support yourself in the future? Will a lender even approve finance without proof of steady income and future earnings capacity?

Consider this, at your age I was a broke uni student. I partied and had a good time (still do in fact). But now in my 40s I can save in one year what took you many years to achieve, and I don't have to live with parents to do that. I invested in education first and I enjoy my career, so investing in property now is becoming like a hobby. I don't depend on it for income and I can afford to bear the costs involved if a property is not rented. If you want to get into property either as a career, or as something on the side, do what everyone so far has told you..... invest TIME in education and with your positive mindset you can't go wrong.

 

Clarification: For those who say I have no higher education, I have a university degree and am currently working in the profession. You could say my area is more in the maths/sciences/law kinds of areas... not so great with finances/property. I have a Law degree and have done a lot of maths subjects (good grades and everything, just never got stuck into money-making as much as I am now), but I've just been saving money for ages so wanted to become more knowledgeable

 

no

 

Why? Any particular reason at all? Just so I can understand a little better

 

Yes many reasons.
Some include
a) unleveraged returns. Your funds could be employed elsewhere with a better return
b) what if you want to buy a main residence in the future
c) what if you want to borrow in the future
d) what if you need funds for personal use.
e) cash out restrictions on financing

etc

 

Just relax buddy

 

A lot of my friends who are also lawyers/bankers/mathematicians/researchers, age range 22-27 have very little saved up. I am talking between $20K and $50K. And I am wondering if that's because they've taken out mortgages to support IPs or homes they've bought with finance....

I don't understand how some people on $100K salaries can only have like $15k saved at the end of the year. Where does the rest go? This is another question i've always asked myself...

 

Whatever you do, DO NOT BUY AN APARTMENT IN BRISBANE!!!!!

There is still a huge oversupply.. demand has caught up to a small degree, but the supply still in the pipeline is so great capital growth will never come close to that of a house.

As an example, the last unit I bought (Greenslopes) for $310k back in 2011 is worth about the same. Had I spent $330k on a house in Mt Gravatt, it would be worth $500-550k.

Well done on your savings so far! Keep reading/researching at the moment. I recommend listening to the free audiobook ‘Unshakable’ by tony Robbins.. free on the BCC Llibrary website.

 

Gear up and buy something $600-700k in this down cycle. General thoughts at that level.

Buy Syd or Melb, ideally middle ring. Don’t buy apartments but flats and units are ok. Be careful of house and land packages.

Shares are ok but most people see daily price fluctuates and end up selling when it falls, rather than ride out the crisis and make multiple baggers. Also every company in the share market is much more different than one house vs another house. Never gear on shares. I had a few investors in my fund do that on his own portfolio, I couldn’t believe it. Even I as a professional don’t do that. Needless to say they all lost a lot of money (a lot more than $150-200k)

 

The problem is that your focus has been on saving. Thats important because you need money to start, but you have no investment knowledge. An informed risk of buying a good investment property with gearing, will beat savings any day. But there is risk.

investing is not taught at uni. Accountants, lawyers and finance people suck equally at it.

forget everything you think you know.

 

Couldn’t believe that. I was an investment banker and had like $200k saved up when I was 22/23. As a banker you don’t even have time to spend money. Perhaps it’s mortgages. I was buying a house basically every year from 22 to 27.