It is possible for people to launch into the property investment market in their early twenties – in fact, this is a great time to start, when you are first launching into your career and don’t yet have any other financial responsibilities such as a family to support.
However, buying an investment property can never be an impulse decision – it takes self-discipline and applied knowledge to start building a profitable investment property portfolio.
Set a budget and save
The first step of course is to start saving for your first deposit, which is usually at least 20% of the purchase price (can be lower, check with your broker). You will need to be focused and realistic, and quite single minded in order to save a sufficient amount. Your best option is to set a budget and create a clear financial plan that will help you remain focused and prepared once you do buy your first property.
Think long term
While some of your peers will be looking into short term gratification – visiting pubs and night clubs, booking overseas holidays or buying a new car – you need to establish a mind-set that focuses on the long term rewards of building your investment portfolio.
Learn from the experts
While you are saving your deposit, take this time to educate yourself about the property investment market and the best type of property for your first investment. Read articles about property investment and monitor the real estate section of your local newspaper, so you can build a vision of an affordable and profitable investment property. Consult local agents and mortgage brokers as soon as possible so they can offer their insight into the market. Seek advice from a professional accountant, who can oversee your savings plan and advise you on your first home loan.
Consider a family guarantee
If you have the option, you could ask a family member to act as guarantor of your bank loan. The guarantor allows the equity in their property to act as additional security for your home loan. This strategy could potentially reduce the amount of deposit you need to save. You can split the loan into two portions, so your guarantor is only guaranteeing one portion of the loan. That way, you can pay off that portion first, so you can release your guarantor from the agreement as soon as possible.
Invest, don’t gamble
Gambling is a game of chance where you can hope to win big but you are perhaps more likely to lose it all. Investment is based on knowledge and experience, so you make decisions that will be profitable in the long term. Learn everything you can about the property and the market, so you can make objective, beneficial decisions.