21 Years Old, Total Newbie

[ENP]

Hi everyone, sorry for the long-ish post...

This is my first post. I've always been interested in property since I picked up my first Rich Dad book about 10 years ago. I want to invest in it before I'm 30.

A little background...

21 years old, male, working full time in Auckland, New Zealand. Finished a 3 year university course in agribusiness and horticulture. Been working for about 2-3 months now. Have put a budget in place, so saving around $150+ a week to pay off my student loan of roughly $25000. (hopefully will be paid off in 3 years time).

First goal is to get the student loan out of the way (major priority, the debt is no use to me and can gain 10% discount if I pay it off fast). I'm involved in kiwisaver, so will withdraw all my contributions and get $5000 from the government towards my first home, have to live in it for 6 months to qualify so will have to live in it for those initial 6 months but then not sure about it.

Here are my questions...

- For saving up for 3-4 years to gain a deposit once student loan is out of the way, where should I put this money? term deposits? forex? a single stock? managed fund?

- Should I buy a rental first or my own home first, or buy a 3 bedroom place and live in it while renting out the other rooms?

Look forward to hearing from you all. Thanks.

[Mark_B]

Firstly, your post considerably shorter and easier to read than some of the drivel posted on this forum, so no need to apologise.

For saving up for 3-4 years to gain a deposit once student loan is out of the way, where should I put this money? term deposits? forex? a single stock? managed fund?

Think about what this money is for....

Given your investment timeframe (4 years or less) and the need to know your money is there when you need it (ie. when the time comes to buy a place you don't want to find your $40,000 short-term investment is only worth $30,000) imo you can really only look at low risk investments. That rules out forex and any form of share investment.

Interest rates are low and really can only go one way in the foreseeable future. Consider a combination of "high interest" call accounts (the interest isn't that high atm) and, as the amount builds up, switch to TDs, but do bear in mind your investment timeframe and the general rule that as interest rates are rising you go short on TDs (ie. I'm not a fan of 5 year TDs with interest rates where they are and the trends that are emerging).

Should I buy a rental first or my own home first, or buy a 3 bedroom place and live in it while renting out the other rooms?

Do what you think works best for you. Either option could be fantastic or not depending on any number of factors. Some investors choose to rent and buy IPs. Some start with their own home and go from there. There is no right or wrong.

This is not advice and do your own research.

[ENP]

Given your investment timeframe (4 years or less) and the need to know your money is there when you need it (ie. when the time comes to buy a place you don't want to find your $40,000 short-term investment is only worth $30,000) imo you can really only look at low risk investments. That rules out forex, and any form of share investment.

I was leaning more towards term deposits anyway. Basically for the reasons you said.

But what about when buying the first home? I don't have a choice for the first 6 months as I have to live there to get the governments $5000, but after those 6 months are up, what is the best option, live in the house with flatmates and be their landlord also or leave and rent somewhere else while owning the property.

I know its 6-7+ years away but I like to plan out these things and have goals to work towards.

Thanks.

[Mark_B]

Honestly I wouldn't get too worked up about that now.

By the time your deposit has grown to the size you start looking to buy the law could have changed. Not to mention changes in your own life that could make whatever decision you come to now completely irrelevant (you might be married or have a long-term partner , have children, be about to move overseas for work or other reasons, etc).

Irrespective, imo you'd be doing yourself a disservice if you didn't re-examine any decision you came to now, at some point in the future.

It's nice to have a plan to work to, but life happens...

Don't put the cart before the horse. A deposit is your primary focus atm.

[Tan]

The first home subsidies may not be there in 6-7 years.

Have you looked into using the subsidies now getting in flatmates at the same time, then using the profit to repay the student loan?

There is another thread that is similar

http://www.propertytalk.com/forum/showthread.php?t=24268

[ENP]

Honestly I wouldn't get too worked up about that now.

By the time your deposit has grown to the size you start looking to buy the law could have changed. Not to mention changes in your own life that could make whatever decision you come to now completely irrelevant (you might be married or have a long-term partner , have children, be about to move overseas for work or other reasons, etc).

Irrespective, imo you'd be doing yourself a disservice if you didn't re-examine any decision you came to now, at some point in the future.

It's nice to have a plan to work to, but life happens...

Don't put the cart before the horse. A deposit is your primary focus atm.

Fair enough point. Thanks for all the help!!

[ENP]

Have you looked into using the subsidies now getting in flatmates at the same time, then using the profit to repay the student loan?

No...

What is this? Can you give me a link or something please?

[AMR]

Why pay off the student loan? It's interest free and inflation will gradually destroy the value.

[revdev]

Why pay off the student loan? It's interest free and inflation will gradually destroy the value.

+1

My student loan was never a priority, but building assets was. If you put your SL to one side for awhile your timeframe to raise a deposit will shorten significantly. However, do what feels right for you.

All the best

[ENP]

+1

My student loan was never a priority, but building assets was. If you put your SL to one side for awhile your timeframe to raise a deposit will shorten significantly. However, do what feels right for you.

All the best

Getting rid of it now frees up my options if I want to work overseas where it will start charging interest. Who's going to give me a loan for a property with a 30k student loan?

Also if you pay more than just the minimum, you get a 10% discount, a fairly good risk free return.

[revdev]

Who's going to give me a loan for a property with a 30k student loan?

ENP, the same banks that loaned to me with my $30k loan.

Maybe some of the brokers on here can comment, but I'm sure banks do not see a SL as having the same weight as a normal bank loan (not backed by any of your collateral, interest free, Govt unlikely to recall the loan etc).

[ENP]

ENP, the same banks that loaned to me with my $30k loan.

Maybe some of the brokers on here can comment, but I'm sure banks do not see a SL as having the same weight as a normal bank loan (not backed by any of your collateral, interest free, Govt unlikely to recall the loan etc).

It's also the mental thing of I'll have it looming over me. Hence why I want to get rid of it asap. If it was purely financial and not the fact that it's weight on my shoulders then I might consider it.

Not really sure now, you've opened up my mind to the possibilities when you made that point.

[AMR]

Yea, I have a SL and got a loan no problems. My broker explained that they would simply deduct the minimum payments from your salary instead of looking at it as an ordinary servicing debt.

[Rosco]

+1

My student loan was never a priority, but building assets was. If you put your SL to one side for awhile your timeframe to raise a deposit will shorten significantly. However, do what feels right for you.

All the best

I agree, I personally wouldn't worry about it.

I'm pretty sure that banks can't actually ask if you are repaying a student loan. Might be a question for a mortgage broker?

Do you have parent's that could help you slightly with your first investment property? If they put up $50k of equity now, this could probably help you into your first house now. I'd do it as a rental, and keep renting as cheaply as you can elsewhere.

Kiwisaver? Aren't you only 21? I imagine the $5k will disappear shortly along with any perks that have remained. Also who cares about the $5k, its peanuts in the long term, and I would focus more on the right property in the right area, rather than being forced into something to get the subsidy. If you buy a $300,000 property, you are hoping to get 5% capital gain long term (lots of investors probably hope for more and others will predict less), so that's $15k a year. If you wait 5 years to get the subsidy and buy something, then thats $75k of capital gain that you could have missed!

Ross

[mortgage broker]

Banks do use the student loan deductions in the servicing calculation. It can make an impact on boarder line cases I guess, as it can be a few hundred dollars per month. Borrowing $30,000 less from a bank could cancel a lot of that out.

The amount may allow more borrowing by changing the deposit amount.