It’s incredible how little the younger generation are taught at school about simple savings and investment concepts.
Even if kids aren’t in a position to invest right now, education is critical because once they see the possibilities, it will motivate them to study hard, save well and more importantly to set goals and priorities for their future.
There’s always a lot of media hype about how many kids will never be able to afford a property on the Northern Beaches, but this is simply not true, and neither does it require the bank of mum and dad, or an above average income to make it happen. It simply requires education and planning.
In fact, by investing safely and effectively, young adults who are in their late teens today could be holding three to five properties by the age of 30 and could very well have enough wealth to buy a house on the Northern Beaches.
From little things, big things grow
By investing in an affordable property in a growing area outside of Sydney – something worth between $200k and $300k – property is easily attainable for anyone on an annual salary of around $60k.
A low deposit of $20k or $30k plus costs is required or perhaps a small guarantee from parents could be an option. A shared investment between parents or two or more children is another great way to get started.
Once you get started with one property, simply let the equity grow for a year or two and then use that equity to buy another affordable investment property in a high-growth region. Then you have two properties growing strongly and the end goal is suddenly starting to turn into a reality.
Equity Growth Forecasts:
There are suburbs in regions of Australia which are forecast to grow in value at up to 10 per cent per annum and are set to achieve six to ten times more capital gains than Sydney property over the next 10 years.
A good property investment advisory will use a mixture of macro and microeconomic research and analyse planned infrastructure spending, jobs growth, migration and other key drivers of property hotspots to help you identify the most promising of these high growth areas.
You should also be looking for excellent rental yields that cover the interest repayments and holding costs.
And so, assuming very conservative capital growth of around 5 per cent per year on a $300k property, you’ll have over $30k in equity in two years, not to mention the tax and depreciation benefits – enough to get you started on a second property and so on…
With more than 10 per cent growth forecast in some suburbs, you could expect to more than double this figure. And in that time, Sydney property is forecast to barely increase in value, meaning these young investors will now have enough equity to secure that Northern Beaches dream property, right at the start of Sydney’s next upwards cycle!
Where to start?
Given that it’s not taught at school, a good starting point would be for parents to bring their children along to a Property Investment Education Workshop to learn the foundations of safe and effective investing.
A session like this will empower young people to set some great goals, get their foot in the door and set themselves up for life.
Important Note and Warning: This information is general in nature and should not be considered personal tax advice. We highly recommend you discuss these concepts with your accountant, property investment adviser and investment finance mortgage broker jointly to ensure any considered concepts are suitable for your personal financial situation, as one effect of the concept may negatively impact another part of your plan.