Starting out plan for a 22 Y.O

Hello everyone,

I just wanted to jump on here and get an idea of my initial plan should be, not talking choosing my first property or anything just setting up a plan to get me to that point.

Firstly a bit about myself
I'm 22, single and currently have $28,000 in savings (22k cash, 5k shares), income is closing in on $55,000 p.a and currently saving around $9000 p.a. Income will be fairly stationary for 3-4 years before jumping up to close to 6 figures. I'm in an industry when I am unlikely to be see a stable career location for around 10 years as I move up. As a result I would like to work towards purchasing an investment property while i'm still renting.

I'd just like a bit of advice of what my plan should be at the moment, of course continuing to save as much as possible but what savings level would be a good point to seriously start looking at property etc.


Thanks.

 

Keep saving. Keep learning. Generally speaking a 10%+ deposit + fees may be a start point.

 

Hi there

Welcome aboard

Keep reading up on this form - it's an awesome free resource with lots of clever contributors.

In terms of how much to save - for an IP I'd aim for a minimum of a 12% deposit plus duty/costs (which are usually around 5% of the purchase price). A 12% deposit will enable you to take out an 88% lend with LMI added on top and open up the scope of lenders you can choose from....whilst ensuring the LMI isn't ridiculously high.

If you'd like to avoid LMI - aim for a 20% deposit plus costs.

Cheers

Jamie

 

welcome to the forum @log0008

nice starting point there at such a young age, I can't recall or remember what I was doing or thinking at 22 yo, but definitely not as forward thinking as you are now.

in terms of lending, best to keep saving for a while, because if you buy the 1st property as an investment, the Stamp Duty will eat into your current savings a lot, if you buy as your 1st home, you might get Stamp Duty exemption,

 

Hi Log0008,

If you read a lot of these posts from people that have bought and sold a few properties is that the single most important factor is time.

Its a ridiculous advantage that you never realise or understand how powerful it is until you are too old to take advantage of it. (though you are never too old to start).

I wish I came across this website at 22.......

Jamie's advice above is correct, the only point I would add is beg, borrow, steal - work double shifts, weekends, get a 2nd job-get a 3rd job basically do every thing you can to get your first rental IP. Then put someone in there to pay the rent and work as hard as you can to pay down the mortgage to the point it is break even (eg rent in=expenses outgoing) then start on the 2nd one.

Its important that time=capital growth but more importantly someone else is clocking in 40 hours a week in order to pay you for that capital growth.

Most people don't realise they don't actually start "their work week" until about Wednesday or Thursday.

eg first 4 hours on Monday is paying for your food that you consume that week, then the next 4 hours is paying your electricity/water/cable/phone/car bills etc.

Tuesday morning you start work having made zero progress and start paying for shelter....eg rent or mortgage - depending on how big a McMansion you live in you generally have paid your rent by about Wednesday afternoon or Thursday morning.....then you start earning money for yourself (or treats like holidays etc).

Pretty quickly Friday 5pm catches you......you cant earn any more money and you have to start again with the basics like food on Monday morning.

My point being.....is if someone else is paying you mortgage and you are living at home or sharing a rental flat with friends to keep costs down,,,,, then you get to start your work week for yourself earlier while your tenant......is paying off your investment property that over the last 50 years has consistently grown 7% a year.

I hope that helps.

Cheers,
Dean

(oh and buy and keep.....lots of people here buy and sell but I think paying stamp duty twice is for suckers.....but that's just my advice )

 

Hi @log0008 - Congratulations on finding PC at 22. Mona and I found PC (then Somersoft forums) at 23.

You have access to one of the best property resources here.

I would look at what has attracted you to property? What is driving you to invest in property over the long term? For us it was security, stability and a desire to have a family home for us and our family.

So what is it for you that is pushing you in this direction?

With APRA relaxing the lending restrictions, your dollars may go further.

With what you have available in savings, you need to weigh up whether it's worth buying an owner occupied property (starting small) in the first instance? You could down the track turn this into an investment property.

Well done on building up these savings.

Hope this helps.

 

Thanks to everyone's thoughtful replies, I will definitely focus on learning as much as I can and reading as much of this forum as I can.

Couple of things, sadly I can't pick up any more shifts as I am a flight instructor, working towards working for as an airline pilot - being a pilot is all about fatigue management and therefore I have legal hour limitations.

My main reasons for wants to invest are many, like most security and stability and also a safety net, I could lose my medical at any time as a pilot and thus be rendered jobless. Also coming from a regional area where I could buy a house for $150k and knowing I have to live in one of the big cities means I want to ensure my money does a much for me as I can.

 

Your biggest issue moving forward will be deposit more than income/servicing so definitely map out different LVR scenarios and see what you are able to do there.

I would get in touch with an excellent broker or banker - Jamie above has replied and would be an excellent point of contact.

 

Great. The internal drivers will see you achieve your goals more than anything.

 

Uhm there is your first mistake.......

Assuming you cant pick up more shifts - no one said it had to be at your day job......

Get a bar/hospitality course under your belt and pick up some shifts bar tending etc etc.
Get yourself a tafe book keeping certificate and do BAS statements for local businesses.....
Get yourself a website and doing maths tutoring for stresses out high school students etc etc.

I remember having a discussion with one of my "2nd job" boss back in the day (delivering pizzas in the Cronulla area) and he didn't believe me when the discussion around my day job salary came up (IT sales for Ericsson) he asked if I was making that much why was I also working 3 shifts a week for him - he couldn't see the point.

Lol....I neglected to also point out to him the car I was driving to deliver his pizzas wasn't actually mine and was the "Day job" company car and they were also paying for the fuel I was using.....even though he was paying us delivery drivers a "per delivery fuel fee"

 

If you're living at home, then saving $9k pa isn't nearly enough!

My wife, my son and I are on less than twice of what you're on (after tax), so per adult we’re on less than what you’re on. We manage to pay $34k in mortgage payments, pay for electricity, gas, rates, etc, plus put a fair chunk into our IPs.


Not meaning to be a dick, but you might need a reality check as saving will get harder for you, not easier.

 

You may not be able to pick up any more shifts in your current job, but you can certainly do something outside of instructing.

Good luck with it all. It's a super expensive career to follow. I should go through my logbook and receipts one day and see how much I spent. I kick myself now and then for not going with the QANTAS cadets, but I reckon I'd kick myself for not doing what I do today, had I been a commercial pilot I get a LOT more family time with what I do now.

When I was living at home, on $50k, I was saving EASY $30k a year.
But.. we don't know if he is living at home or not - In his shoes, I'd be living as close to the airfield as possible.

 

the key to early retirement is your savings rate. $9k out of $55k (preptax) is a lot, but if you can keep this level or lower as your income goes up your financial independance will come quicker. You need to invest in appreciating assets that also produce income (perhaps). It is the capital growth that will make you rich because of the pretax compounding and then tax concessions when realising the gains.

Along the way you need to minimise tax while concentrating on growth asset investment. a $1 saved in tax gives you can extra $1 to invest and to compound further.

Keeping your expenses low will mean you need less capital to support these expenses in retirement and this can bring financial independence (FI) 10 to 20 years early.

Once you have reached FI you can keep working if you want and you will enjoy it more if you don't have to be there like a wage slave, but are there by choice. You will have '**** you' money at this point.

 

Good on you for planning. My son is just a bit younger than you, living at home and is a full-time uni student and started a gardening business, insurance is pretty cheap and set-up was not much. I am constantly amazed at how much he is earning and saving, and it works well around uni, so this might be something that you could look at. A side hustle or a second-job may get you where you want to go faster. But yes, fatigue management if important in your role and it is good to see that you take that seriously. Your strategy will be different to the next person, however, if where you are wanting to buy a property is a flat market, I would consider saving as much deposit as possible- you won't miss out on capital growth in a flat market. I always believe that you make money when you buy, a good location in a desirable area with good historical growth.

 

Yes, fair enough, maybe I made a bad assumption.

 

The saving level you need will depend a lot on where you're buying, and what you're hoping to buy.

Perhaps a better question is 'when' you want to buy?

If you give yourself a timeline, this will show you how much you need to save each pay and a good money management plan will help you get there.

If you can't save enough by the time you want to buy, you may need to look at different areas or properties, OR look at saving more.

If you can avoid it, don't change your timeline.

We go into this a bit in our free course, so if you don't have anything structured in place currently you might find it useful - you can access in my signature below.

 

Hey,

Did you get started yet? If so how is your portfolio going?

 

Sadly, in my experience most aspirational real estate investors will stay just that for the rest of their lives.
I knew people that talked about investing for years and spend thousands on courses, but never pulled the trigger.

 

That's true, i'm definitely not going to be one of them.

My first property thread will be on this forum in a few months