Maximise property profits: invest young to reap from 2-plus growth cycles
Maximise property profits:
invest young to reap from 2-plus growth cycles
Property investors are best holding for at least two growth cycles to maximise profits in their assets, says a leading investment group who advocates that investors begin their journey before age 40.
“Many investors often wait for the ‘right time’ to buy; but seasoned investors understand that it’s time in the market that creates a highly profitable asset,” says Ben Dempster, President of The Young Investors Club (a division of The Investors Club), which represents investors under the age of 40.
“Younger investors have the luxury of sitting out any market downturns and witness the value hike from a growth cycle before it’s time to cash in. Historically house prices have doubled in around 7-10 years, but this is not always the case, leaving time for that second growth cycle can make all the difference,” says Ben.
33 year-old Ben, a young investor himself who owns three properties together worth $1.35m, says investing at an early age is achievable for many Australians if they follow a strategy and stick to it. “When I made my first investment at age 23, I was living at home. The unit was already tenanted, giving me time to save for furnishings while at home and I realised I got some tax benefits.”
“Parents can provide a leg up, either contributing towards the deposit or acting as guarantors on the loan to make the banks more comfortable with lending money. Guarantors don’t need to stay on the mortgage documents long: with some steady repayments young investors can be well on their way to owning it independently.”
Ben, who actively motivates other young investors, says the holding costs (rents minus property expenses and loan repayments) can be manageable, provided investors buy in areas with high rental demand (ensuring high rents) and low vacancy periods.
Another young investor, 27-year-old Sydney member of The Young Investors Club Tamara Treleaven says saving while at school and working casual jobs on weekends enabled her to buy her first property at 18. “It set me up with good savings habits, and didn’t stop me living the lifestyle I wanted,” she says.
Tamara’s first property has now tripled in value from $66,000 to $289,000 and she now has a portfolio of three properties. “My parents acted as guarantors on the loan and added to my deposit with the equity in their own properties. I’m working towards achieving a million-dollar portfolio by the time I’m 30,” she says.
“As a young investor, it’s important to surround yourself with positive, like-minded people. I believe being a successful investor is part good research and part support.”
The Investors Club 10 tips on beginning the investment journey young:
1. Property investing is about the long-term growth focus. Start thinking about your long-term financial independence and consider an investment plan. This may require a mental shift.
2. Talk with others who started investing young to gain a realistic view of the financial journey, sacrifices you may need to make, and rewards.
3. Your parents may be able to give a head start by helping with the deposit using the equity from their own property or acting as a guarantor on at least 20% of the loan.
4. Consider saving for your deposit while living at home, so you can still enjoy some disposable income.
5. Lenders look for evidence of consistent savings over time. Get into good saving habits from an early age by putting aside money from any working income, even casual jobs. To meet lender’s guidelines, you’ll need to show savings of 3% of your purchase price, generally over a six-month period.
6. Maintain a clean credit history by paying all bills or loan repayments. If you can’t make payments, make alternative arrangements with the creditor. A creditor may lodge a default against you on your VEDA Advantage personal credit file if your payments are more than 90 days late and alternative arrangements are not in place.
7. Buying with a family member may help you break into the market sooner. But be aware that individual circumstances change and stamp duty will be charged if one buys out the other.
8. Realise that buying at a younger age builds confidence and makes you comfortable with debt – an advantage for anyone looking to build a portfolio.
9. Be prepared to give up a night out every month to cover your investment’s holding costs (outgoings minus incomings).
10. Before you start investing, gain knowledge and get the right advice by joining a property investment group that provides support and education. You may not be able to afford a place yet, but that shouldn’t stop you from learning about the market, preparing you for the day you buy.
Join our Facebook group www.facebook.com\younginvestorsclub
Find a TIC workshop & conference in your area at www.tic.com.au/events
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Corinne Roberts | The Ideas Suite | t 02 9279 3330 | e email@example.com
About The Investors ClubThe Investors Club helps investors on average incomes and above build property investment portfolios across Australia and New Zealand. Since it was established in 1994, The Investors Club has researched, sourced and sold nearly 15,000 properties to more than 9,700 investors. More than 3300 of these investors today hold property portfolios worth more than $1m in value. The Investors Club offers many services free to its investors, including sourcing tenants, research and building inspections. It also holds regular property education seminars and conferences throughout Australia. To find an event near you, visit www.tic.com.au/events.