Investor stories: How to save up for first property deposit

“The first deposit is the most difficult to save. Once you’ve started building your portfolio, your appreciating assets will help you fund future deposits and you’re off and running,” the property investor said.

The one simple advice that got him through: “Think outside the box.”

Mr McLellan sold his Holden HQ Premier car for $3,500, which was big money back then, and then added his $3,000 savings and got a couple of friends to move in with him and help him pay the interest with some rent.

Upon acquiring his first property, which he described as “a brick box in the ugliest color imaginable with an inside paint job that looked like it belonged in a kindergarten,” he went on to do a renovation worth $5,000 to maximise its earning potential.

Soon enough, he was earning capital gains, allowing the value of the property to increase by as much as 40 per cent.

“It was like a slap in the face. I could never have saved money that fast. I was hooked,” Mr McLellan highlighted.

Advice for first home buyers

The property investor shared two tips for people who are looking to start creating wealth through property:

1. Don’t be afraid to borrow money

For Mr McLellan, this is one of the most important investment lessons that he intends to impart to his clients, as well as his own children.

“Budget and save to prove that you can stick to a plan. I want my kids to be comfortable enough to ask for my help when it comes time, but they will have to demonstrate sound investment and exit strategies,” he explained.

“Other people’s money doesn’t come easy or at no cost.”

Among the ways to earn a lender’s trust is by offering to pay back a higher interest rate once the investment is refinanced and the borrowed money is repaid, according to him.

Mr McLellan reminded investors that there is nothing wrong with borrowing money for investment as long as the investor understands the basics of systematic investing, and provided that he can maintain a budget and make sacrifices when necessary.

“Try and think of ways to use other people’s money to plant your first apple tree – by the time you save that deposit, property prices could have jumped again.”

2. Buy with other people

While this strategy may not work for every investor, implementing this could be beneficial to those who are running on a tight budget.

Mr McLellan advised aspiring investors to find someone who understands their capabilities, limitations and goals as a property investor and willing to go through the same journey with them.

Further, he encouraged short- to medium-term investments only instead of long-term ones – no matter how safe it may feel.

According to him, this type of financial venture could be complicated after some time because of contradicting opinions on strategy and other important factors that may or may not drive decisions.

“At some point, one of you will wish to leverage the available equity to buy a property individually and this can make things difficult. The situation can also get ugly if one of you wants to sell, which is not advisable because of the tax you will incur,” he said.

3. Seek guidance

Finally, don’t hesitate to start investing after a good amount of education and mentorship.

After all, as property is most lucrative as a long-term investment, getting started and maximising time are most important.

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• Expert advice
• Investor stories

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