Are you saving for your first home, or wondering how a regular Aussie can build an investment property portfolio? We’ve spoken to three people to find out how they got into the property market.
Historically, Australians have had high levels of home ownership. However since the 1980s overall levels have fallen, according to the 2015 Australian Institute of Health and Welfare report.
The report found there had been a significant decline in the proportion of Australians who owned their home outright, and a corresponding rise in the number of those with a mortgage. It suggests this could be because we are taking on home ownership later than in the past, and the fact that we’re also starting a family later.
Whatever the reason, there are plenty of ways to enter the property market and even create your own investment property portfolio – particularly if you’re prepared to think creatively. We’ve tracked down three people who have entered the housing market – here’s how they did it and the advice they want to share.
The property developer
Michael Tiemens worked at the Hawthorn Football Club in Melbourne in various financial roles for six years. He saved hard and invested in the sharemarket to build his capital to get into the property market.
When the 27-year-old had saved $50,000 he was ready to take the plunge. Michael was determined to learn all he could before jumping in, so attended a few property investment seminars. He could see real estate investments were a great way to get ahead and began looking at buying an investment property.
“My first real estate deal was physically relocating a one-bedroom granny flat to a holiday park in Bonnie Doon (in north-eastern Victoria). It cost me my entire $50,000 I had saved to relocate the granny flat, extend and renovate it. But after all this, I sold it for a $30,000 profit.”
In the six years after buying an investment property for the first time, Michael bought and sold 19 properties and undertook many renovations, house relocations and subdivisions involving rooming houses, multi-unit developments and commercial properties.
He now runs a property group in Melbourne and teaches others how to build a property portfolio.
“My career in property has been one of many challenges, learnings, failings and plenty of successes too. If I had to describe my passion for property development, it would be a crossroad of creativity and courage. It hasn’t been easy but it’s certainly been rewarding,” Michael says.
The late bloomer
Leaving the bright lights of Sydney enabled Michael Cluff, 49, to find the great Australian dream. The Thermomix consultant was living in Marrickville in the inner west but decided to move and rent a house in Dubbo in the central west of NSW, with his partner and their young son.
For Michael, Dubbo’s housing market was not only more affordable, it was nearer his family. The promise of a more relaxed lifestyle sealed the deal.
After six months, the home they were renting was put up for sale. They jumped at the chance to buy it. Comparing average home prices by city, it was far cheaper than Sydney and the dual-income family bought it with a modest mortgage.
“That was three years ago and we haven’t looked back,” he says. “We’re thrilled to be able to live the great Australian dream and have a place we can call our own.”
Dubbo has an average median house price of $335,000, so it’s no surprise that it is attracting a growing number of inquiries from big city dwellers. Dubbo mayor Mathew Dickerson says the cost of living in Sydney is rising at nearly twice the rate of other capital cities.
“With Sydney’s soaring median house price hitting the $1 million mark and making it harder for renters to break into the property market, it’s the perfect time to consider making the move to an area where house prices are drastically more affordable,” Cr Dickerson says.
Take a look at the average home prices by state and suburb if you’re considering a tree or sea change to get into the property market.
The alternative approach
Property investor Sasha Hopkins, 27, has acquired a property portfolio worth $3.2 million in five years – and on only one income. He did this by looking outside the box when investing.
Sasha, who now runs his own property investment company helping others learn how to build a property portfolio, believes Australians are still following their parents’ advice to buy something small and affordable.
“Investing in new property offers significant tax benefits. The right kind of property can pay for itself and boost your tax returns, so that eventually you can potentially be holding a portfolio of five properties on an $80,000 income and receive every dollar in tax back,” he says.
If building an investment property portfolio seems out of reach or you are nervous about the return on investment property, Sasha suggests considering these three ways to get onto the ladder.
Lazy equity: If the difference between the value of your home and the amount owing is more than $80,000, you’re sitting on untapped equity for buying an investment property.
Superannuation: Setting up a self-managed super fund allows people to invest in better-performing asset classes. Get independent advice as some strategies can increase your super balance more quickly than standard funds do.
Joint venture investing: If you have a good income but lack a deposit, or have a deposit but fall short on income, consider investing with a friend. When spelled out clearly in a legal contract, this strategy can help you begin to build your wealth.
Have you recently become a property investor or bought your first home? Tell us how you did it in the comments below.
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