Why I decided to invest in property in my 20s and how I made it happenÂ
Aged 17 years old, working part-time on an apple orchard, I first realised I wanted more stability in my life.
Wayne was a co-worker who my boss and I picked up every morning on our way to work. Wayne was 37 years old, had no car, no house and never really chose to have much of anything.
All of Wayne's money came in and went straight back out again. He was the kind of guy who lived on a diet of olives and cheese. Every day, he would slowly climb into the ute, late, still wearing his food-stained yellow singlet from the day before and say the same thing: "Better late than never."
I made the decision then and there that I didn't want to be part of Wayne's world. Up until then, I thought all adults had it figured out. Clearly, they didn't.
(If you're reading this and think Wayne's life sounds amazing, you can probably stop reading now!)
I wanted my money to build a foundation for me, and I knew that property investing could provide this.
And I thought it was never too early to start. You can absolutely get on the property ladder in your 20s. I know, because I did it aged 21.
The right time to invest
Looking back now, I had no idea what I was doing. Not ending up like Wayne was one motivator, but I was also tired of share-house living.
I was working at the mines as a driller's offsider, but in case you thought I was raking in a 6-figure salary in my early twenties, let me put you straight. I was earning about $65,000 a year. It wasn't big money at the time, but it was enough for me to save up my first deposit, if I avoided going to the "wet mess" too often (that's miner talk for the pub).
Instead, I chose to read books on real estate and business in my camp room and I started putting away as much as I could towards a deposit for my very first property.
Luckily, I'm a pretty slow reader so I didn't have to spend too much on books!
My first property was a small 62m2, 2-bedroom apartment in Adelaide. I still remember walking down the street, feeling so proud of myself, that this little piece of the city was mine.
There's no secret
What was my secret to getting into property so early? The secret is that there is no secret. There are just simple steps to follow and a commitment to making investing in your first property a priority.
You will need just 3 things:
- A property deposit
- Adequate income to service the home loan
- Property knowledge
Getting the deposit
It is the deposit that frightens a lot of first time property buyers, so let's focus on that. How much will you need and how can saving it seem less daunting?
In most cases your home deposit will be between 10 and 20% of the property's purchase price – and you'll need additional funds to cover "closing costs" (fees and charges, stamp duties and possibly lenders mortgage insurance).
In some cases, banks will lend you the money for your property with less than a 10% deposit but these loans are rare and can come with other downsides that can outweigh the benefits of having a lower deposit. It's always best to do some research online and speak with a good mortgage broker to get a clear picture of the best fit for your situation. You might also be eligible for any government grants to help with your purchase.
How much do you need?
Your total deposit is going to vary greatly based on your purchase price and what state you're purchasing in. For example, let's say you're about to buy a unit in Broadbeach, Queensland, for $400,000. If you were going to put down a 10% deposit on the loan you would need $40,000 in savings, plus closing costs of approximately $10,000 – a total of $50,000 savings.
Save it faster!
Saving a deposit is a lot like running a marathon. You need to just keep running, even if you're out of breath after the first couple of kilometres! If the ultimate goal seems impossible, break it into small bite-sized chunks and it will feel a lot more achievable. The trick to reaching the finish line with any big task is to never look at the finish line, just keep focused on the next few steps ahead, and getting to the finish line will take care of itself.
If you're able to save $2,000 per month that's great! You can get to your savings goal in about 2 years ($2,000 x 25 months = $50k).
If you're only able to save half that you'd be there in about 4 years ($1,000 x 50 months = $50k).
Remember to stop and celebrate your "proud me" moments when, after a few months, you congratulate yourself on saving a massive chunk of cash towards your deposit. This will motivate you to keep pushing on and hopefully achieving the amazing accomplishment of becoming a property owner.
Even if you set out to save your deposit in 2 years and it takes 2, remember the wisdom of Wayne "Better late than never."
Todd Sloan is an award-winning real estate agent, host of the popular Pizza and Property podcast and author of Australia's Home Buying Guide (Major Street Publishing, 2021).
Disclaimer: The views and opinions expressed in this article (which may be subject to change without notice) are solely those of the author and do not necessarily reflect those of Finder and its employees. The information contained in this article is not intended to be and does not constitute financial advice, investment advice, trading advice or any other advice or recommendation of any sort. Neither the author nor Finder has taken into account your personal circumstances. You should seek professional advice before making any further decisions based on this information.
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