Son of investor excited to take a different direction

Hi all,

Im 23, Sydney based and my parents have been investing in property to rent and take advantage of negative gearing for the past 8-10 years.

Both have been on my back to get an investment as soon as possible to retire earlier but the big catch for me has always been getting a down payment, often over 40K in most parts of Sydney.

I have a reasonable knowledge of HMO style housing in the UK as I was planning on moving there soon and did a few weeks of research, im not currently clear on the legality or possibility of doing an equivalent in Australia, obviously the equivalent aussie term is 'sub-letting' but it doesnt seem profitable on the same scale as the UK. (Please feel free to show otherwise)

I cannot stress enough that needing a 40K+ down payment is out of my reach completely and need another form of investment, perhaps lead acquisition (Also unsure of legality).

Worked under an LREA for a while in Castle Hill by the name of Sid Morgan (Locals will know his...reputation) and learnt a lot of bad habits but a fair amount of buy/sell mechanics.

Here to learn and retire early, like the rest of us im sure!

Cheers
-Cory

 

Can I ask why a $40k deposit is out of reach? There are other ways of entering the market such as partnerships (buying with a friend or family member) if your time lines and goals are similar.

Alternatively start investing in index funds and bonds as there is no minimum.

Cheers

 

Hi Cory, welcome to Property Chat.
I'm not sure how sub-letting would allow you to build up $40K deposit and I'm not familiar with Lead Acquisition (forgive my ignorance).
Is there any chance your parents can gift you the deposit?
They may have equity in one of their existing properties they could potentially access to help you out.

 

Perhaps I should have included in my post but I am a part time student and only employed casually.
My take home earnings after bills and expenses is around $500 per month, a 40K deposit isnt something I can do until after finishing my study in 3+ years, depending on pursuing further study.

Sub-letting I just see as a way to make a little more per month to generate a deposit faster, im leaning heavily into the HMO style of investing that is popular in the UK, it doesn't seem widely used here and I cant quite tell why at this stage.

I have spoken to my parents and they just arent prepared to assist due to personal issues they are having, mum doesnt work etc.

 

Taking a very quick look at REITs on google, they appear to be a form of managed fund investing specifically into property, would that be an accurate description?

Not something I have heard of before

 

I've got to ask, but have you actually seen someone (broker or your bank) to actually determine what your borrowing capacity is? Disposable income of $500/mth doesn't go very far, you may need to wait until you finish studying and are in full time employment.

 

Not everyone can invest in property. A student without other resources probably cant.

People who do this young often start work early or start a business.

 

Absolutely right $500 isnt much.

Im interested in a form of investing that requires less capital to start i.e HMO/sub-letting lead generation with a fee to the owner/agent to generate capital to have my own, if someone can explain if/how this isnt a valid form of generating income in this country that would be appreciated

 

That seems fairly straight forward.

I will do some poking around, thankyou.

 

Sorry @Cory Sinclair I'm not familiar with HMO, so I'm not really sure what you're planning.

If you've intending to buy real estate, then you'll need to borrow money and you're going to have trouble doing that in your current circumstances.

 

If you plan to buy RE then its Deposit and serviceability . Without these two things its game over.

There. Simple.

 

Welcome. Sids currently in hospital with a gun shot wound to the head.

 

Welcome to this incredibly diverse range of people (both with their experiences and the knowledge) - you're bound to learn a LOT.

Given that you don't really appear to be in a position to invest directly in real estate now, I'd avoid it. It's not just about getting the deposit together, it's also about having the capacity to build a cash buffer for emergencies that insurance won't cover, and possible interest rate changes etc. On your income, I'd seriously consider if direct property investing is the best place to even look at starting.

But, while you have the desire to start your investing journey, why not start small - with something less risky, and without the need for ongoing expenses. Starting a small share portfolio that pays good, regular dividends (maybe even a real estate trust) may be a good place to start. You can start with only a few thousand dollars (or even a few hundred, if the brokerage fees make it worth it), add to it over the next few years, and when you're finally working full time, you'll have made some passive income to help increase your chances of accumulating enough for the deposit on a property.

 

I cant tell if you're joking or not but I can see it happening.

[edit] Just googled it, very unfortunate...

 

First up, I'm going to play devils advocate. Investing in Real Estate is NOT about negative gearing, and if you listen to the current lot of idiot politicians on offer, may not be an ongoing 'thing'.

To be honest, $40k isn't that much in the scheme of things, and if you really want to invest, then start saving.

So get another part time/casual job. Work out what are needs, rather than wants, & put the rest of your funds to work. My eldest had saved a deposit for her first home mostly while still at school, from part time earnings.

You can make some serious money from sub-letting, but it's not for the feint hearted. Besides it's not something to go into under capitalised. I have a friend that does this who spends something like $20k on each new sublet that they establish. You also need a fair bit of emergency funds, should your tenants move out & you are left to pay the rents.

Why should they be asked to help? The amount of youngsters who think that their parents should somehow set them up, astounds me. This is your journey alone. Mistakes you make are your own, own them & don't be a sponge to your family. On the other side of the coin are the successes. These too are yours, and yours alone. You may wish to share this with family, but that's a choice for you to make.

This. You are no where near ready yet. By all means read & educate yourself, but your first priority is to get some money together.

This is the best place for you at the moment.

 

I’ll swim against the tide here.

You’re 23! The world at your feet, footloose and fancy free by the sounds of it.

Keep saving, finish studying, get your qualification then strap on a backpack and see the world. You only get one chance to be relatively free of responsibilities with the chance to do whatever you want.

You have the rest of your (hopefully long) life for the discipline and restrictions of mortgages and other financial responsibilities.

I’m closer to 70 than 60, but one of my most enduring happy memories is of the year I spent on a working holiday around New Zealand aged 19 - definitely one of the best things I ever did (and, ironically, a huge learning experience).
Marg