HOW DO YOU BUY YOUR FIRST HOME IN 2021?
THESE CRUEL HOUSE PRICES
by Neil Jenman
Article written and provided by Neil Jenman from Jenman.com.au . To see the original source of this article please click here. https://jenman.com.au/how-do-you-buy-your-first-home-in-2021/. Neil Jenman is Australia’s trusted consumer crusader. He can support you, all the way, from choosing an agent who will get you the highest price guaranteed to when your removalist comes! You get an unprecedented level of total support. All for free. To find out more visit jenman.com.au
READING TIME: 15 mins apx
In 1976 I bought my first property. It was a new one-bedroom unit opposite the big Catholic Church in Tranmere Street, Drummoyne.
The price was $28,750. I was 21 years old.
Always a saver, I had scratched together a deposit of $5,000.
I got a loan for the balance through a solicitor, a lovely old gentleman called William Patterson. He reminded me of Rumpole.
As he puffed his way up the stairs to inspect my top-floor unit, Mr Patterson chatted about a book that was all the rage – Future Shock by Alvin Tofler. Tofler predicted the coming of the Internet, the acceptance of gay marriage and so much else that has come true today.
But he didn’t predict property prices climbing so high.
Alvin Tofler – who along with dear old Mr Patterson – is now dead, would have got a huge future shock at today’s property prices.
Even back then, I was luckier than most. In 1976, I was earning about $30,000 a year, about the same cost of the unit I bought.
I sold that unit in 1980 for $60,000 and thought I’d got a whopping price. Today its estimated value is $800,000.
So, today, for a 21-year-old to be in the same position I was in back in 1976, they’d have to be earning at least $800,000 a year.
That’s if they wanted a one-bedroom unit in Drummoyne.
How many 21-year-olds are earning $800,000 a year today? None.
Three years after I bought that unit, in 1979, I decided to buy a house.
There was a rundown semi-detached home for auction at 185 Lyons Road in Drummoyne. I worked out that I could afford $40,000. The agent was Warwick Williams, one of the most decent agents I would ever meet. He is still trading today in Drummoyne. I went to the auction and did what many auction bidders do, bought below my maximum.
I got the house for $37,000.
At the time, my annual income had risen to about the same price as the house – $37,000.
I sold it a few years later for $70,000.
It last traded in late 2017 when it was sold for $1,550,000. Today, it’s probably worth close to $2 million. Not just hard to believe, incomprehensible.
For someone in their mid-twenties to be in the same position I was in when I was in my mid-twenties, they’d have to be earning an annual income of $2 million.
And how many 25-year-olds earn $2 million a year? None.
THIS IS CRUEL
After reading an article in last Saturday’s Sydney Morning Herald about the gap between those who own homes and those who can’t own homes, there is only one word I feel describes today’s house prices – cruel.
Oh sure, everything’s great for ageing baby-boomers like myself.
Many of us have got rich doing nothing except buying a family home.
But the price of our wealth, at least in a property sense, has come at a cruel cost to young people in 2021. It’s so sad. Why did I get the chance and yet so many others – whose only ‘mistake’ is to be born decades after me – are missing out?
I don’t know who to blame. I don’t understand why prices are so high. I never predicted this; despite all the books I’ve read.
It makes no sense to me. I am not an economist.
But I am a humanist. And I care about my fellow citizens, especially today’s young folk many of whom are sick with despair as they see house prices soaring. What would make them feel even sicker – and I know I would feel this way – is to see rising property prices constantly described as “good news”.
Good news for whom?
For me, Neil Jenman? Yea right, well sure it’s good to be financially secure but not at the cost of depriving the younger generation of a home. Although it’ll probably never happen, I’d be happy to see real estate prices crash. That would be bad news for us boomers but great news for the young folk.
The question occurred to me: What would I do if I was young and wanting to buy my home in today’s property world?
In my day, the price of a home equated to one year of my income. Today, the average price of a home in Sydney or Melbourne is around 12 years’ income. Sure, interest rates are lower. But I’d rather pay 12 per cent on a price of $30,000, than pay 2 per cent on a price of $1 million.
If you are a young person reading these words, please do not get cross with me. What I am going to suggest is what I would do if I were your age today. I am not saying you must (or should) do what I suggest.
I am only saying what I would do – that’s it. If some of this helps you – and one day you have the joy of buying a home – I will be so pleased for you. If I can help you in some way, no matter how small, that’s all I want to do.
DON’T COMPLAIN AND DON’T GIVE UP
It’s one of today’s modern sayings – “It is what it is.”
A long-time ago, a wise man told me that if you don’t like something and you can’t change it, there are only two things you can do: Accept it or leave.
With real estate prices, “leave” means giving up. Renting the rest of your life.
There is no way I would give up. Home-ownership is one of the great feelings in life. I urge everyone to at least try it. If you don’t like it, then leave.
But please try it.
Believe me, it’s a feeling like few others.
Home-ownership, like finding a great partner, is worth striving for. It’s worth waiting for. It’s worth fighting for. Please don’t give up. Find a way, somehow.
The first thing I would do, therefore, is become determined to buy my own home. Along with a family and my personal happiness, home-ownership would be the goal of my life. I know that home-ownership and happiness go together.
Don’t complain and don’t give up.
Okay, maybe it’s not so fashionable these days. But hard work works. I was both lucky and unlucky in that my father spent my childhood telling me I was stupid.
And, of course, what we repeatedly hear, we believe.
Once I left school, I worked extra hard to compensate for my believed stupidity. By the time I realised I wasn’t as stupid as my father claimed, I was experiencing the positive impact of HWMDCT – Hard Work Makes Dreams Come True.
When we are young, our bodies allow us to do so much more. This is the time to put in long hours – yes, maybe on several jobs – and save, save, save. I have always been a huge saver. It adds up so quickly.
Search for ways to earn the most amount of money.
If I had to go work in the mines for a year or more, I’d do it. A friend of mine has four daughters, all in their 20s, two of whom are earning close to $200,000 a year driving dump trucks in the mines. They save like mad. One of them has just bought a lovely home. Sure, it’s in a regional centre – Rockhampton – but a home is a home.
The important point is to get started. Working hard gives you the means to get started.
The trouble is that these days, not only house prices but the deposit to buy these houses is going up faster than some people can save. If that had happened to me, I’d consider these next steps.
APPROACH YOUR ELDERS
Unfortunately, I could never have approached my father for financial help. The interest – in the form of belittlement – would have been too much.
All my life, I have envied people with loving parents. And if there is one idea (maybe the only thing) I have taken from property spruikers, it is this: Ask your parents to let you have some (or all) of your inheritance early. I know this may sound crass, but stay with me, a moment or so longer.
A childhood friend of mine is now a farmer in his 60s. When he left school, his father asked him to stay on the family farm. My friend was told, “All this will be yours one day.”
But the days turned into years and the years turned into decades. My friend – and his dad – were growing older. There was no transfer of the family farm.
My friend was in his forties when his patience ran out. He was still a farm-hand but he longed to be a farm-owner, as his dad had promised.
He went to his father and said: “Dad, you told me if I stayed on the family farm you would transfer it to me one day. That was 30 years ago. You are now in your 80s and I am pushing 50. I love you Dad and I have loved working with you. I know I am your main beneficiary and that when you die, this farm will be mine. But I don’t want your passing to be a time of happiness. Why don’t you retire – as you should have years ago – and transfer the farm to me now?”
Whatever the reason – maybe the thought of his son wishing him gone or celebrating when it happened – the father agreed. He even apologised for not thinking more about the desires of his son. Within weeks my friend became a farmer with his own farm. His dad is now ninety-plus and the two get along famously.
Don’t let your parents’ passing be a time of rejoicing because you inherit their wealth. If they can help you now, ask them, nicely, to help you now.
So often in life – especially with difficult topics – people don’t say what should be said. If you have parents – or elders who love you – and they have plenty of assets and you are a beneficiary of their will, surely it makes sense, provided they will not suffer, for them to help you now.
I have six children, all of whom have had my help (or are soon to receive it) when buying a home. Of course, as with all families, some are more appreciative than others and some want more than others. No matter what they think, it’s what I feel that matters. I feel good helping my children become home-owners. I am proud of those children who work hard, save diligently, and invest wisely.
FIND A MISTER SHEV.
It’s against the law for me to do what I nearly did in the above paragraph – make suggestions on how to invest so that your money grows faster.
My children – and the children of some close friends – often chat with me about money aspects of life. They have now invested in real estate, the stock-market, their own business and (for three of them) cattle.
My son Alec laughs at how each of his cows give him a calf every year which he sells for around a thousand dollars. Soon, he plans to have enough cows to equal his annual income ($70,000) in calf sales.
He’s a great saver. In his first year out of school, his annual salary was $35,000. He saved $27,000.
Surely, you know someone who knows an older person who has done well in life.
When I was in my early thirties, I met a man called Mr Shev. He was a success in all ways – character and financially. I learned more from Mr Shev about wealth than from any of the financial books I have read. If you have read my book, Success Takes Character, you will know what a great help Mr Shev was to me.
Find your own Mr Shev.
If you are young and you haven’t read ‘Success Takes Character’ contact me today. I will gift you a copy. But on two conditions: First that you read it and, second, that you promise never to sell real estate by auction when you first sell a home (contrary to mythology, auctions get lower prices).
LEARN ABOUT REAL ESTATE
My first and most important advice to you here is this: If anyone offers to be your role model or wants to charge you to be your property mentor – RUN!!
People who want to help you do not demand thousands of dollars in advance before they teach you.
The statement you hear from so-called multi-millionaires saying they “want to give something back” doesn’t make sense. They say they want to give and yet they “take” millions from desperate and inexperienced suckers.
If someone wants truly wants to “give back” then, at most, they may sell a book. But, under no circumstances, should you pay big money to people to learn how to earn money.
That said, there are many ways you can earn money from real estate. I could write a book on the subject; but for now, here are three ideas I would be considering if I was a young person wanting to increase my wealth.
1. Get a part-time property-finding job – choosing your own hours – in real estate. Find properties for sale. For each property you find, you receive a fee when it sells, probably around a thousand dollars (I used to get about $200 ). Working ten hours a week, maximum, you could easily find one property that sold each week. If you’re good, you’ll find at least two every ten hours, maybe three. That’s two or three thousand dollars a week. I am sure that will help you.
2. Buy, renovate and re-sell. Search for properties – preferably in cheaper or less popular areas – that need work. Buy them, do the work, then re-sell them.
Sure, it’s hard (by the way, every time you hear that statement – “it’s hard” – tell yourself, “that’s why most people don’t do it”). Read a book called ‘The Obstacle is the Way’ by a young man called Ryan Holiday. It will change your life for the better.
If you haven’t got the money to buy now, find older baby-boomers who can advance the money – or do a joint-venture with them.
Think; take your time to make sure you get everything right.
In my mid-twenties, I bought, renovated and re-sold dozens of properties. First, I lined up the finance. Second, I found properties. Third, I planned. Fourth, I decided. Fifth, I bought and renovated. Sixth, I re-sold. Seventh, I went around again.
The best bargains were at auctions. Auctions can be great places to buy but you must never sell by auction.
1. Buy and sub-divide or build a second or third property. This is exactly how it sounds. Find a property where the land can be cut-up or another property built upon it. This can reap big rewards.
One formula I followed – and, again, I know this is not easy – is to try to make the return from the development such that, when it’s all sold and done, you effectively bought the original property for nothing.
In the bush, people have bought cattle properties then mustered-up and sold the wild cattle which paid for the cost of the property. Effectively, they got a free cattle station. Can’t be done? A savvy bloke in our area did it recently. I am not saying you can become the next Kidman; I am just demonstrating the power in maximising all property for its most profitable use and return.
If you set your mind to learning about real estate, you will soon discover wonderful ways to find or create opportunities.
A warning, however: Never take advantage of property owners (usually elderly) who are unaware of the true value of their properties. This is dastardly behaviour. When you meet sellers who are unaware of the value of their properties, pass them to a good agent and make sure they get the right price. See point 1 – and earn yourself a thousand dollars. And feel good.
Reading biographies of great women and men who overcame seemingly insurmountable odds is like mixing with them. As the old saying goes, “Show me who your friends are, and I will show you who you are.” Mixing with the likes of Florence Nightingale, Ernest Shackleton and Emma Pankhurst will put you in good company. If they overcame their obstacles, you can find a way to buy a home. Nothing has done more for my life than reading biographies and learning from others who have faced problems – and beaten them. If they can do it, you can do it.
BECOME A ‘RENTVESTOR’
This is a must-do. Rent where you want to live then buy elsewhere and rent that property.
The property market is like a ladder. You must get your foot on the bottom rung; even though it’s getting like you need a ladder to even reach the bottom rung today.
I loved living in Drummoyne in my twenties.
If I was in my twenties today, here’s what I would try and do – rent in Drummoyne and save enough to buy a property in a cheaper area with growth prospects. Either an outer-suburb of a major city or a regional centre, somewhere such as Ballarat in Victoria, Bathurst in New South Wales, or Bundaberg in Queensland.
Here’s something most people don’t know about real estate: Regional centres – over the long-term – usually have higher capital appreciation than popular inner-city suburbs; yes, including my beloved Drummoyne.
Start looking around now. Start doing some serious research. Look for areas with good future infrastructure plans, high-employment, a diversity of industries and where the market is stagnant. It takes courage and foresight to buy in such areas. I have been doing it all my life. I have also shown friends and family how (and where) to buy. All of us have done well. We are still doing well.
If we can do it, you can do it.
Here’s two final warnings:
First warning: Don’t stop with one property. Try and buy two properties in regional centres. If one is good, two is better, three is better still.
And please, always buy nice properties, homes you would be happy to live in yourself. Buy normal family homes from local agents. Avoid cookie-cutter properties – those that are like many others.
Second warning: Never, under any circumstances buy from wealth creation companies or dodgy buyers’ agents (especially those who double-dip on commissions). You must adhere to this rule as if your life depends on it – because it does, your financial life, at least. And watch out for ‘trusted’ property people who recommend that you can “trust” other people. Most of these dudes are ‘on the take’. Honestly, if you knew the extent of the corruption and cronyism in real estate, you’d probably never go near it.
But we must strive to own our own homes, no matter how hard or how long it takes.
If you follow some suggestions I’ve shared with you, then I am sure you will one day be able to buy a home of your own in an area of your choice. Granted, it may not happen in your twenties; it may take ten or more years. Don’t say that’s too long and not worth it. As I said in ‘Success Takes Character’, if a goal will take you ten years to reach, instead of giving up on it, ask this question: How old will I be ten years from now? Gee, I will be the same age in ten years whether I pursue my goal or not. So, pursue your goal now, while you are young.
Two of the greatest fears in life are being old and poor. Too many people are both – and that’s sad. Too many dodgy people prey on those with such fears – and that’s wicked.
Don’t trust anyone who’s asking you for money.
Trust yourself. Trust those who help you with no request for anything in return.
And that means you can trust me, I suppose.
If you have a real estate question or need help, either me or one of our people at Jenman Support will always do our best to help. We will never ask you for money. We will never ask you to sign anything. And we will always put your interests first.
If you’re trying to buy your first home today, don’t give up. This crazy market will not last forever. One day those who seem cocky today may be pleading with you to buy their properties.
When that day comes – which it will – be ready.
Get started on your journey to home-ownership today. Right now. Resolve that you are going to do whatever it takes to experience one of the most wonderful feelings of your life – buying your first home.
It’s hard but it’s not impossible.
Good luck to you. And thank you for reading all these words.
I am here if you need me.
Please note: We do not charge sellers for our support. Nor do we ever ask you to sign any agreements. Our entire focus is to protect your interests.