My eldest daughter, Mia, just turned 14.
For her birthday, I gave her my four best tips to beginners wanting to create riches through property and live life freely.
One of the goals that I’ve enrolled her in is, by the time she’s 18, to buy her first property.
“One property a year,” I told her.
That’s all you need to do.
Buy one property a year for the rest of your life, and the game will be on.
“Wait, ” you ask. “Does it mean that in 10 years I should accumulate 10 properties?”
It means that you buy 10 and you can sell 3 along the way, or 5 along the way, 7 along the way, or buy more, sell less. There’s so many opportunities there.
So what are the “property basics” I gave my daughter as a “starter kit” for life?
The following are my best tips for property beginners. We’re talking absolute newbies.
Maybe you’ve got a job.
Maybe you don’t have a job.
Maybe you’re at uni.
Maybe you’re seeing a bright future ahead of you in the investment space.
Maybe you just want to buy a nice house!
So I think one of the tips that is fundamental to everybody – whether you want to buy shares, or whether you’re wanting to buy property, or you just want to make money in business generally – is this:
You want to be saving as much as you can.
- Reducing your credit cards
- Reducing your consumer debt
- Reducing your spending
- Reducing your appetite for spending.
Whatever saving more requires –– I suggest you do that.
Go on the holiday overseas later.
I remember when I was in my late teens and early 20s, my first job I was earning $25k a year.
$500 bucks a week roughly.
I was out of uni, and a lot of my friends were going overseas. Going to the UK. Partying. Living it up.
It was challenging, because my first goal in my 20s was to buy a house… ASAP!
I lived very frugally.
In terms of relationships, it wasn’t that much fun because I didn’t want to spend money.
I didn’t want to go to town and hit the bar. Didn’t go out for nice dinners. I’d rather just stay in and not spend money.
It wasn’t really ideal…
I wasn’t the best date or the best person to hang out with. Because I didn’t want to spend any money.
But it got me into my first house.
Spending is a big emotional maturity thing.
It’s definitely not taught in schools.
Too bad, because saving money is absolutely critical.
Some of you may have read about the Barefoot Investor. I think that’s some good fundamental stuff there.
And things like reducing your debt on your credit card. Getting the lowest interest rate if you do have a credit card.
Because at some stage, you’re going to have to go to bank and borrow money. And if you’ve got a credit card, that will be detrimental to your borrowing capacity.
I don’t have any credit cards personally, I cut them all up years ago.
At one stage, I had 12 credit cards and every brand that you could get. I pretty much maxed out during the GFC.
So it’s not like I’m goodie two-shoes.
It’s just that I’ve gone extreme and gone the other way now.
Save money, and have a goal to buy your first property by a certain age.
I think if you set a 6-month goal or a 12-month goal from where you are right now, that would be realistic.
I know deposits need to be probably a lot bigger now than it used to be when I was in my 20s.
In the early 2000s, I bought my first probably $55,000.
Here, first homeowners’ purchases probably closer to $550,000, which is ridiculous, but still it is where it is.
And my encouragement is to get into the property market sooner rather than later.
There is an opportunity, I think, with rising interest rates over the next 6 and 12 months that the market will adjust.
Then it will probably go projectile pretty quickly after that. Because the market will stabilize and hit the bottom or a floor as they call it.
But I think for those who are looking at buying the first house, the next 12 months will be an opportune time to do that…
If you’re willing to set that goal.
Cut some of your expenses. Reduce eating out. Those overseas holidays that we talked about. Some of the alcohol that you might consume.
But that’s the first part, definitely saving some cash and getting ready to put a deposit aside.
And here’s the second:
Talk to a finance broker before you need one
Generally, in my experience for the majority of first homebuyers, they’ll generally buy in their personal name.
Look, I’m not an advisor so I can’t say anything about that. But that’s what most people do. I suggest talking to a finance broker as there may be better options.
If you need a finance broker, we suggest you to Ollie Hooper from Stax Home Loans. Have a chat to him. Top guy there.
Tell him I sent you.
My point is, have a chat to him about what you need to do to get yourself deal-ready.
Get yourself shipshape. So you know how much you can borrow with your current earnings.
That will determine what suburbs you can potentially look at.
And being a beginner, (i.e. with a smaller budget,) you’ll probably need to look at cheaper suburbs.
Whether you’re looking at the outer fringes of Logan, Caboolture, Ipswich, Moreton Bay, that kind of Bay Side, under 500 grand if you can find it.
You might start with a townhouse.
You might start with an apartment.
Just get started!
Get in the process. Build some equity. Build some capital there.
Definitely have a chat to your finance broker. Start learning the jargon.
Redraw facility… offset facility… line of credit… interest only… principal and interest…
There’s a lot to learn about!
I know I’m rattling all these things off however, jargon, and the language is quite different to normal, everyday conversations.
So learning about that, understanding that, getting the appropriate bank accounts open as well, and really getting a strong savings history done.
The third thing, when you’re ready, is…
Start going to open homes
And starting to talk to real estate agents, too.
At this point in time, with the interest rates starting to climb quite rapidly, we’re expecting another 0.5% rise very soon, the next month or so.
Agents will get more motivated to talking to you – I guarantee that. I’m already starting to get phone calls, emails, and text messages from agents that I haven’t heard from for 6 to 12 months.
They did not want to talk to me during the boom –– they did not need to.
But now the market is quite different. The numbers at Open Homes are dropping. The number of bidders at auctions is quite low.
Suddenly I am someone in demand because they know I can invest.
Go to Open Homes. Talk to real estate agents. And you’ll find the ones that just have no filter.
Build that relationship with them. Get to know them. Talk to them. They will tell you what’s really going on.
My last tip for beginners?
Look beyond the first deal
Like I said before, my best advice to my daughter Mia is to buy one property a year.
And that doesn’t mean you have to buy and sell every year to be able to generate value. The opposite!
Look at other ways for that property to generate income.
So maybe your first purchase can be buying a house with five bedrooms, where you can live in one bedroom and rent out the other three or four. Start creating multiple sources of income.
Accommodation is at a premium with the rental crisis.
You can be getting rental income from other people, and helping the community as well. For a bedroom with an ensuite, you can get anywhere upwards of $250-$450 per week, depending on the location and the condition of the property, car parking, etc, etc.
I definitely recommend for those who are looking at buying their next property, whether it’s an investment property or owner-occupied, to look into options of extracting multiple sources of income from that property.
Because if you had, let’s say, 3 tenants paying you $300 a week, that’s $900 a week.
$45k grand a year that you could be earning!
Yes, you might pay tax on that, but you’re gonna have to pay tax on any income that you make.
$45k grand a year, and you don’t have to physically go out and labor for it.
- If you catch COVID –– you’re still getting the rent.
- If you’re sick –– you’re still getting the rent.
- If you’re on holidays –– you’re still getting the rent.
That’s what I love about building a cash flow machine.
A handful of mini boarding houses for example. If you had, 2 of them, 4 of them, 10 of them at five rooms per building $350 bucks a week, per room.
That’s a lot of rent coming in.
Tie that into your thinking now, so when you buy your second place, your third place, you’re using that rental income to
- Really build your cash flow
- Build your serviceability
- Build your war chest of deposits moving forward
So in summary:
1. Build the habit of saving. If you can save 20%, 30%, 40% of your wages.
That’ll make it excuse a huge difference there.
2. Talk to a finance broker and find out what you need to get yourself in a position to buy.
3. Go talk to some real estate agent get it some open homes.
Maybe half a dozen open homes every Saturday in the lead up to buy your first place. (I think that’ll be very healthy.)
4. Look at adding multiple sources of income from the buildings you’re buying.
Whether it’s got an existing ensuite, existing kitchenette facilities, adding Granny Flat facilities, etc.
Start generating ongoing passive income that will serve you for many years to come.
So hopefully you got a lot of value out of that and learn a few things over the next weeks or months.
I’ll reveal a few more top tips whether it’s for beginners, intermediate or advanced.
Any questions? Please type them in the comments below.
And I’ll catch up with you soon.
7 thoughts on “Property Millionaire’s Advice To His Eldest Daughter”
thank you, I will send to my daughter and son.
hope they will buy soon too.
I said to them same thing. I have set models of this strategy already, bought 4 residential house Only. two renovated into boarding houses.
I wish your daughter wealthy, healthy and happy
Well done Jian, sounds like you are doing well and being a great role model for them. Keep up the good work!
So informative. I am in my sixties and would like to have pssice income
You know it’s never too late to start. My past client Graeme Jarry started doing splitters in his 60’s . You just have to start…here’s his story
I absolutely love all of this stuff. We have 2 rental properties and are in the process of purchasing a third. But the only thing that i cannot get my head around is yes, you get the rental income but obviously not all of it because of loan repayments and costs so really you only start making an income from them once the loan is paid down correct?
wanted to do this in our early marriage, my dear husband didn’t want to .
at 60 bought one place and eventually 2 more after selling first then sold these to beable to retire
as had no big super.
if only I could have done it much early, so your advice is WONDERFULL FOR YOUNG PEOPLE 🌻🌻🌻
Well done, yeah I complete understand when people are fearful of losing money. We will always make mistakes, it’s just making smaller ones along the way. Making money is not a race, take your time there’s so many opportunities right now .