How this property investor saved up for his first deposit
This property investor admits that the first deposit is the most difficult to save—his first property is “a 10 sq m three-bedroom brick veneer in Bayswater, Victoria on a 900 sq m block”—but the simple advice that got him to continue his journey is “think outside the box”.
According to OpenCorp’s Cam McLellan, he had to make sacrifices in order to complete the deposit he needed for his first investment property. He sold his Holden HQ Premier car for $3,500, which was big money back then, 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.
“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.
Cam described his first property as “a brick box in the ugliest color imaginable with an inside paint job that looked like it belonged in a kindergarten,” so he spent around $5,000 for renovation. Before he knew it, he was earning capital gains and the value of the property suddenly increase by over 40 per cent.
He said: “It was like a slap in the face. I could never have saved money that fast. I was hooked.”
The property investor shares two tips for people who are looking into starting their wealth creation efforts through property investment:
1. Don’t be afraid to borrow money
This is one of the most important investment lessons that Cam wants his children to learn.
“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 the time comes, 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.”
One of the ways to prove that you can be trusted by the lender is by offering to pay back a higher interest rate once the investment is refinanced and the borrowed money is repaid.
According to Cam, there is nothing wrong with using other people’s money as long as an 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,” he said.
2. Buy with someone else
Find someone who understands your capabilities, limitations, and goals as a property investor and someone who is willing to go through the same journey with you. However, it will be wise to avoid long-term investment with friends, no matter how safe it may feel.
Cam believes that this type of venture could be complicated after some time because of contradicting opinions on strategy and other important decisions.
He explained: “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.”
At the end of the day, as in most circumstances, the most important step to take is the first one. After a good amount of education and mentorship, don’t hesitate to jump onboard and start your property investment journey—after all, time can resolve almost anything naturally in the business of wealth creation through real estate.
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