Kudos to this young man

[Timmy]

18-year old buys a house. I like his attitude and his gumption.
How I bought my first home when only 18

 

[jbocker]

Yes good on him. A healthy asset and should set himself up well, hope he doesnt forget to have fun too. It is far better to see this than some dead kid in the papers.
Some 'boys' at this age are far too interested in an overvalued car and do their best to destroy it, themselves and others, driving with their balls and not their brains. (apology for my crude but apt description )

 

[matty2.0]

Silly boy. House prices will fall. I feel sorry for him.
His equity value will fall.
I like his motives and enthusiasm however.

 

[jbocker]

Silly boy. House prices will fall. I feel sorry for him.
His equity value will fall.
I like his motives and enthusiasm however.

Maybe in the short term, what do you think the house will be worth when he is 28. I have difficulty seeing him having less equity then. If you know something let me know, I have a few and dont want to be siting on big losses.

 

[matty2.0]

Maybe in the short term, what do you think the house will be worth when he is 28. I have difficulty seeing him having less equity then. If you know something let me know, I have a few and dont want to be siting on big losses.

28? On average most people who invest in residential tend to move every 5 years or so. I think that's way too long a projection.
In the meantime, if he loses his job, or takes a pay cut, or his expenses go up, or he sells anytime in the next 5 years he is going to be in trouble.
I'm assuming that his 20K deposit represents a loan to value ratio of somewhere in the 80-90% range, especially if the house is worth 200K+ ... so his mortgage is a very high risk loan.

Interest rates will more likely rise from here on in. Well done to the bank who has got him on the interest treadmill.

 

[nomore4s]

Silly boy. House prices will fall. I feel sorry for him.
His equity value will fall.
I like his motives and enthusiasm however.

lol, what happens if you're wrong? What happens if we see a period of high inflation after this period of deflation?

28? On average most people who invest in residential tend to move every 5 years or so. I think that's way too long a projection.
In the meantime, if he loses his job, or takes a pay cut, or his expenses go up, or he sells anytime in the next 5 years he is going to be in trouble.
I'm assuming that his 20K deposit represents a loan to value ratio of somewhere in the 80-90% range, especially if the house is worth 200K+ ... so his mortgage is a very high risk loan.

Interest rates will more likely rise from here on in. Well done to the bank who has got him on the interest treadmill.

Alot of assumptions there, you don't know his personal situation or his goals . I'm willing to bet he is going to be alot better off then any of his mates in 10 years.

There is no such thing as a risk free investment, the fact is at his age even if he does get into trouble he has plenty of time to recover but if it comes off he will be miles in front. IMO having a crack is better then sitting on his hands hoping for a crash - he could end up wasting 10 years.

 

[jbocker]

28? On average most people who invest in residential tend to move every 5 years or so. I think that's way too long a projection.
In the meantime, if he loses his job, or takes a pay cut, or his expenses go up, or he sells anytime in the next 5 years he is going to be in trouble.
I'm assuming that his 20K deposit represents a loan to value ratio of somewhere in the 80-90% range, especially if the house is worth 200K+ ... so his mortgage is a very high risk loan.

Interest rates will more likely rise from here on in. Well done to the bank who has got him on the interest treadmill.

Yes there is risk.
All the more we both admire his motives and enthusiasm. You call him silly I will call him brave. Maybe he is both, but good luck to him.
I wouldnt normally suggest it, and have only sold one investment house in under 5 years, in fact it was 14 months. Bought $400K sold at $765K.

 

[cutz]

Silly boy. House prices will fall. I feel sorry for him.
His equity value will fall.
I like his motives and enthusiasm however.

Good on the kid,

He probably isn't too concerned of the state of the property market, i was also quite young when i purchased my property, must say it's nothing unusual, and i'm glad i did when i did.

What's your story matty2.0, is property ownership something that's been out of reach ?

 

[Julia]

28? On average most people who invest in residential tend to move every 5 years or so. I think that's way too long a projection.
In the meantime, if he loses his job, or takes a pay cut, or his expenses go up, or he sells anytime in the next 5 years he is going to be in trouble.
I'm assuming that his 20K deposit represents a loan to value ratio of somewhere in the 80-90% range, especially if the house is worth 200K+ ... so his mortgage is a very high risk loan.

Interest rates will more likely rise from here on in. Well done to the bank who has got him on the interest treadmill.

What negativity! I reckon if he's done as well as this by age 18, if he were to lose his job, he'd very quickly have another.
Most employers will be keen to have a kid with that sort of initiative.

Seems like the sort of boy who will set his targets and just find a way to reach them. Wish there were more like him.

 

[beerwm]

Silly boy. House prices will fall. I feel sorry for him.
His equity value will fall.
I like his motives and enthusiasm however.

i agree,

I dont know why he is building a house - seems like alot of extra expenses.
-- article implies he wont rent it out.

who knows if he will be able to cope with repayments if he loses his job/interest rates rise.

//

risky.....

 

[Aargh!]

Ah, it will all go down hill for him when he loses his virginity

 

[data]

Good pick Timmy. I bought my first in my early twenties and I still have it in my portfolio which I now rent back to myself with a positive gearing. I now balance the positive gearing with some negative geared property.

leverage works in the property market too. . As I bought my first place for an expensive at the time 128k I have since refinanced 4 times and bought 3 other homes. With a current book value of 1.5mil on a 600k fixed mortgage. I have plenty of equity.

Financial diversification is more necessary as a risk management tool. Asset management is key when building a strong portfolio.

 

[matty2.0]

What negativity! I reckon if he's done as well as this by age 18, if he were to lose his job, he'd very quickly have another.
Most employers will be keen to have a kid with that sort of initiative.

Seems like the sort of boy who will set his targets and just find a way to reach them. Wish there were more like him.

That's what they said during the height of the housing bubble in the US, when people were lending to the low-income earning latino or african american in the south. "Home ownership is great ... wonderful!" they said. Then what happened?? The property market crashed, and all the equity turned into negative equity ... and now those very homeowners who were duped are blaming the banks for their predatory lending and the government for not helping them.

That sort of lending and buying was the very cause of the GFC.

Seems like an all too familiar story. Seriously, the FHB grant by the govt. has got many people, especially those who are vulnerable, in a bubble like mentality ... that "quick buy now, before it's too late, we'll miss out!!!" mentality .... whenever someone invests with that sort of mentality it is always dangerous.

Let's hope the markets here don't crash as bad as it has in every western country. UK, USA, Spain, Canada ... almost every country that has had low interest rates and a run up in asset prices has seen a resulting fall in property prices. I'm not saying that our market is exactly the same, however ... ours hasn't fallen at all!! Something's gotta give.

 

[Mr J]

Seems like the sort of boy who will set his targets and just find a way to reach them.

The real world doesn't care about character or determination. He's an 18 year old construction worker who took out a $430k loan, and he's already maxed out hours-wise.

I reckon if he's done as well as this by age 18, if he were to lose his job, he'd very quickly have another.

He hasn't really done well. The difference is that he's going to build a house rather than buy and modify a car. Yes, the house is an investment and the car a depreciating asset, but he is still likely very overstretched. You say he'll quickly find another job - what if the construction industry slumps? He may find work elsewhere, but 56 hours worth? I'm going to guess that he's reasonably stretched and that working lesser hours will see him struggle or fall behind.

It seems he's relying on the future not to throw him a curveball, and in my opinion that is unwise. Many seem to think that one must take great risk for great returns, but I say that is rubbish. He's young and likely has plenty of time. No reason to jump into the deep end.

 

[Knobby22]

Maybe he has a backup plan Mr J.

The other good thing is that he is young and he goes bankrupt he has plenty of time to start again.

 

[Mr J]

He may, but nobody here seems to care. He's getting a slap on the back and promoted as an example to others. Seems we've already forgotten the US housing market situation.

 

[warezwana]

It seems he's relying on the future not to throw him a curveball, and in my opinion that is unwise.

I work in the construction industry and YES it is/has slowed, up till xmas 08' I was working 52-56 hr weeks.. now, well lets just say now my typical week has gone from spending 50+hours at work and about 40hours or so a week on trading/learning to now sometimes NO hours at work in a single week and 80+ hours playing trader student.

What am I doing tomorrow? Standing by the mailbox reading my 'Trend Trading' book while I wait for my AmiBroker book to arrive, will I have work at all next week.... Who knows, but not so far! Construction sucks

So to this young guy!!! , good on him for throwing everything into the wind so young and hoping for the best. I guess it's like the lottery, you have to be in to win. Good luck with it, but maybe just maybe his back up plan includes his parents wallet, it can always be rented while he lives at home... but I hope he also allows for the x factors... work slowing and most guys know this one. Its the one that strolls into your life and takes all you have worked your ass to the bone for and age has no limits on this one. Well actually I think the more you have early on the more you have to lose

One good thing is he is mature enough or smart enough to just go out to socialise, rather than getting **** faced and getting into fights and or doing dumbassed things that young n dumb kids these days seem to do so commonly... smart kid for that.

 

[theasxgorilla]

What negativity! I reckon if he's done as well as this by age 18, if he were to lose his job, he'd very quickly have another.
Most employers will be keen to have a kid with that sort of initiative.

Seems like the sort of boy who will set his targets and just find a way to reach them. Wish there were more like him.

Exactly, we want more kids who are this determined!

 

[theasxgorilla]

That's what they said during the height of the housing bubble in the US, when people were lending to the low-income earning latino or african american in the south.

Unfortunately, extreme arguments are always the weakest Matty. Besides, this is Australia, aka GFC Safehaven Ltd . And I'm only half joking there.

 

[johnnyg]

Being only reasonably young myself ~ 23, I purchased my first home when I was 20 1/2. Since that time house prices in my town I would say have come down perhaps 10-15% where in this time my own home has risen 30%+ from my initial purchase price. In saying that I picked a house that needed work (18 months renovations in one of the best areas.

What worries me about this young bloke, and as some others have alluded to earlier in the thread is the possible over extension on the amount he has borrowed.

On 450K he'd be looking @ repayments of ~$2650 dollars a month or close to ~$600 dollars a week. What happens if he looses his job? If his hours get cut back? That's a fair sum a week just to meet the repayments.

But goodluck to him, it seems he has a very good work ethic and I've always believed that those who are willing to work, can do very well in life.