Financial, investment, mortgage advice please

[Mattzy 0]

Right, so I've spent the latter part of this year working myself debt free and cash positive. But am looking for some guidance at this stage for the next step.

My names Matt, I'm 20, have a solid job of nearly 3 years earning good coin for my age, with little outgoings* (insert correct term here) and I'm looking to take the first step towards my first home, potential investment or your suggestion.

I understand being young is essentially a good thing because I can take larger risks in terms of an investment / stocks etc... But I'm keen to get peoples thoughts on what to do, who to speak to and what I need etc.

Really I'm just at the stage where I’m researching different ideas, i understand there a many many options and just want opinions as I'm sure there are many successful property owners, investors etc here on BS

Discuss!

Cheers,

Matt

[CamB 48]

My only advice would be to consider carefully (despite what everyone will tell you) that property is some sort of wunderkind of asset classes that can always outperform other asset classes.

[M3 Cab 0]

Your right Matt there are many many options.  The reality is that now is a good time to get into most things.  The property market is bottoming out as are the sharemarkets and there are good bargins to be had and good returns to be made. Although i dont know a hell of a lot about the sharemarket I do invest through a broker and mostly high risk options trading.  It has shown very good gains over the past 10 years even when the markets were at there most volatile last year it returned 9.8%.  It didnt require a lot of intial investment either which is good when your starting out. 

My expertise is in property and for the past 4 years it has been my job. I have always invested in property from rentals to spec's and done right its a solid investment. I started a property fund two years ago with a group of investors (including Bimmersporters) and again the returns have been good.  The best gains will always be through a long term strategy and DONT listen to those people who tell you there is big quick money to be made as those times have past. My advise is to decide what it is you want from any investment, how much time your prepared to put into it and ultimately what risk your prepared to take.  If you want to know more about property im always happy to help and give my perspective.

chur Doug

Edited May 11, 2009 by M3 Cab

[mtech1e30 0]

The best investment I have found is a simple book.

http://www.maryholm.com/investmentbook.php

Get Rich Slow by Mary Holm. Buy it. Read it. Understand it. Then look at putting your money somewhere.

It explains all the basics of investing money from bonds, term deposits, shares to property. The most informative source I have found.

btw, I am a 22 year old uni student. I read this book when I was 19 or 20 and its knowledge has been a huge help over the past couple of years, and will continue to be in the future.

[darkwolf 0]

Best advice - first home. Reason being that while your investment MAY get up to 15% you are still paying rent to some other bugger.

If you are putting money into your own home, although you might not make as much money, you will definitely not be lining some body elses pockets. When you think about the fact that you are basically throwing $5200 away (assuming your rent for your room at $100 /week + expenses - I don't know if you rent your own house or what) that's a nice chunk of money being wasted each year.

I went in on a mortgage with the family. Still ended up paying about the same ($15/week) as I was when I was renting, but it wasn't going to someone else which made me feel better.

EDIT:

At the end of the day, I wouldn't expect property to be a winner everytime but with keen eye and some hard work (which working yourself debt free implies you're not afraid of) you can make something. And that money you'd be spending on rent is theoretically going into your investment.

Look at the total cost of the house as well. Not just what you can get it for now? But how much is going to need to be done? Is it in a street where the money could be made back? Are your neighbours the type of people that if you left your wallet on top of your car it'd still be there when you came back outside? what are you going to pay on your interest on your mortgage? Are you going to be able to repair the place and make mortgage payments? If you move in and the water heater dies, can you afford to replace that? If not, do you use less of a deposit so you have that cushion, or go for a cheaper house so your repayments are less so that you can put money aside to repair things as and when they happen?

Edited May 12, 2009 by DarkWolf

[OLLIE 26]

I decided I like to invest in high risk ventures just as they become listed (or before) It's exciting. I do LOTS of research into what the venture is and importantly who the key stakeholders and decision makers are. If i believe in the people involved and what they are doing/selling and the calculations are right then i close my eyes and invest - long term. Seeing the companies grow and develop is really interesting and seeing my investment double over 12 months is also cool. In saying this i have bugger all experience and am only talking 4 digit investments here, but nonetheless so far i like it even though right now it's not looking good (i just have to wait).

I also like to invest in things I have more control over - my own ventures, myself. I invest money into my product design business and into clients businesses. I guess i'm naturally entrepreneurial and in my field of work this is common. It's all very high risk but by being directly involved I have a certain amount of control and influence and of course a very thorough knowledge of what i am investing in. The returns are far greater than property (percentage wise) although I am yet to receive any....

Correct me if i'm wrong Matt, you are a software developer? Web developer? Do you have any novel ideas? Bits of software you really think would be commercially successful? If so then why not invest the money in making those ideas (one of them) a reality, if you succeed you can do it again, and again .... I know a few people who have built successful software companies in such a way and i also know people who invest in them.

Some food for thought

of course you'd have to leave the house until a bit later in life, but by then you'll have bundles to spend.

[CamB 48]

If you are putting money into your own home, although you might not make as much money, you will definitely not be lining some body elses pockets.

It's not quite that simple! I choose to rent at the moment as its considerably cheaper than paying a mortgage on the same property. With house prices declining, the only pockets I am lining are my own.

In fact, such is the relationship between renting vs buying in my area, house prices would need to increase by at least 5% per annum for me to prefer buying over renting. If they are flat for a year they have to play catchup to maintain the relationship.

I actually quite like renting, but then again I have an excellent landlord who appreciates me (pay on time, don't complain, 2 and a bit people in a 3 bedroom house not full of partiers).

Having said all that, I will buy a house soon - new baby and wife tell me to. I can't put them off any longer.

Edited May 12, 2009 by CamB

[Mattzy 0]

Awesome stuff guys, will have a thorough read when I’m home from work.

Thanks for that Doug. I appreciate it, I'll be sure to drop you a line.

Ollie, I'm currently working in IT Sales which involves aspecs of business to business procurement, services and build integration.

I also like the idea of following an emerging technology through shareholding. However then I've got questions like, do I diversify and invest in several sectors as I imagine this would be safer? Or take a risk and just follow the one. I guess there’s no real right or wrong answer huh?

I guess the downside of stocks (probably my materialistic generation speaking here) is the fact that it’s not as tangible as buying a house/apartment and renting it out?

Total noob here guys, but please keep the discussion going. Good stuff!

[bravo 34]

If you are looking at buying your own home do a search and find my write up from a year or two back.

If you are only able to afford to buy entry-level, DO NOT buy your own home. Buy a rental investment in an area with good rental and capital returns (but maybe not where you'd necessarily live yourself).

The incoming rent should be close to your own rent, so that equals out. The cost of the mortgage and so on should be much the same (maybe slightly higher maintenance plus additional costs for advertising for a tenant and lost rent), but the interest on your mortgage, and all those expenses are tax deductible (under the current laws), but not on your own home. Getting a third of your interest, rates, insurance, and maintenance back every year definitely helps! (minus the tax payable on the rental income of course).

In my opinion, until you can afford the sort of house you plan to live in for a long time and settle with family, it makes much more financial sense to rent and buy a rental home. Especially whilst rents are fairly low and the housing market is also lower than it has been recently.

The other option is commercial property which is also really good, although with the current economic climate, the sort of place you can probably afford may have trouble finding tenants as small companies go out of business and there is a glut of properties (I am experiencing this on my commercial, but my residential is cranking along, and I just reinvested in it by making improvements and increasing the rent accordingly while building costs are down and interest rates are low)

That said, I agree with the philosophy of not all your eggs in one basket, so I agree with all of the other suggestions above. i personally also have shares, and even have some money going into kiwisaver for the kickbacks.

Next on the list is some overseas shares maybe in the form of an index-based fund, and maybe some currency, commodities, or a venture such as Ollie describes. Although I'm holding on until I decide what I'm doing work-wise as I don't want to tie up cash I may need.

[bravo 34]

Here's the thread with my little rental property write-up from 18 months ago. You can change the interest rate to 6-7.5% depending on your fixed term, and most banks will now want 20% deposit, but the numbers still stack up.

I also like the idea of following an emerging technology through shareholding. However then I've got questions like, do I diversify and invest in several sectors as I imagine this would be safer? Or take a risk and just follow the one. I guess there’s no real right or wrong answer huh?

If you have enough money to spread it out, diversify - it's a no-brainer. Unfortunately, most small time investors (like myself) usually don't have enough to really make diversification work well, unfortunately we can't afford not to diversify either. I remember when I was 16 and $10k was considered a decent amount to kickstart an investment and allow diversification - now its closer to $50k.

That said, there are plenty of reputable financial products out there that allow diversification with lower investment amounts that also offer a range of risk profiles and provide semi-decent returns with fairly low fees. But you'll have to do your own research.

Nice little prophetic post of mine from 18months ago:

Also, there are right and wrong ways to get into property investment. There are also differences in taxation on rental properties versus those you buy, add value to, then sell. Do some homework. There are some good books out there on property investment in NZ, and some good info on the web.

Also, don't put all your eggs in one basket - right now we are at a peak in the property market (give or take), and allthough values will continue to rise, sales have started to tail off which means you are paying the highest price just before possibly the slowest point on the graph. It may be better to invest in other areas until property has been flat for awhile (or dropped). Those looking to make a quick buck have already done so and most will now be looking at consolidating (I am). Those that got in at the end with little knowledge and too much finance will soon start to feel the pressure of the rising interest rates. Expect to see an increase in mortgagee sales soon and maybe get in that way.

Those of us with a few brains stopped increasing our exposure to property 6-12months ago and fixed our interest rates as it was obvious where things were going. (I am currently earning more interest on cash in my savings account than I am paying on my mortgage).

Or if actually being a landlord is too hard, you can buy units in property-based funds which often provide relatively good returns considering the lower risk.

[*Glenn* 854]

Take all the above advice... but the best advice I can give you is be very careful about the partner you choose in life. The partner you choose will, and should have a huge effect on how you come out financialy. Choose the wrong girl and you'll be ______. Choose the right partner and you'll be set for life.

There's also room for thought on this one. There's an old saying...... "Cock caught in a cash register".....

(I had to say that)