Teenager Toby has ... Bright prospects

Q I’m 19 and work full-time. I earn a little over $50,000 and have a company ute. I have $24,500 in a three-month term deposit, $14,000 in Australian shares and $3700 in an online savings account waiting to add to my term deposit. I save $700 a week as I live at home and have few expenses. I am looking at saving $40,000 in the next 12 months to either put down a house deposit or save to buy one outright in my early 20s.

I am looking at positively geared property in Rockhampton, the Hunter Valley or regional Victoria as that’s where we are looking at expanding our business. I am sceptical whether banks would lend to someone my age, even considering the equity I have built up. Is it unwise to buy property at my age? Should I just be happy getting the 4%-5% in the relative security of term deposits?

A I have to say it’s fantastic work managing to save $700 a week on a salary of a little over $50,000. It shows a real commitment to saving and budgeting – you’ll have a substantial deposit saved up in no time at all. Just don’t forget to say thanks to the folks for giving you the opportunity to live at home and save, although I’m sure they’re happy to have you around.

I can understand why you’d think the banks would be reluctant to give a young guy a loan. But if you have a solid deposit of at least 20%, a strong savings track record and a stable job, I think you’ll be approved without too much trouble. Considering you’re looking at buying a house in the next year or two, it really is a short investment window, so I’d stick to high-interest accounts and term deposits for the time being. For the short time frame, I’d be more than happy with a government-guaranteed account paying 4%-5%.

I can’t see any problem with a young person buying a property. However, I would be very careful buying in a small country town. If you’re unsure how long you’ll be working there, it may be better to buy close to home and rent if you need to work in another area short term. The real trick with property is to buy in an area with strong population growth, good rental prospects and good access to education and medical facilities, restaurants, public transport and so on.

Don’t forget you’ll always have the option of renting out the property to generate income if the budget gets tight in years to come.

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