I am a 23 year old Australian man with a degree in computer science and a steady job from home working as a web developer.

After expenses I have about $1000 a month spare cash if I am careful with my money. I have about $10,000 dollars saved up and would love to invest in property but my family is advising me against it.

I have found a home on a Real Estate website in a relatively bad neighbourhood for $150,000 that has 3 decent sized bedrooms, 1 reasonable bathroom and 2 car parking spots. Additionally there is a large back garden.

I can find a home loan for the property (30 year term, weekly payments, not interest-only) for $137 per week. Medium rent for a 3 bedroom in this area is $235 per week with an average house price of $180,000.

Are these figures reasonable for someone with my income to start investing in property? There are a number of factors I am sure that I am not taking into account such as council fees, water, etc.

  • I think just go for it. The overwhelming factor is (A) you're so young and (B) it's surely the case your income will grow.
    – Fattie
    Nov 10, 2016 at 12:10
  • Do you have emergency savings in addition to the deposit money? One mistake people often make is not factoring in how they will cover the costs of their rental property if their personal income or expenses change while they are between tenants. Consider such scenarios and plan accordingly. Nov 10, 2016 at 12:53
  • 1
    Take a look at this answer of mine to a question which is a lot like yours. Starting out investing only in real estate (to the exclusion of all other investments or even savings for emergency expenses) is a very bad idea, no matter what JoeBlow thinks. Nov 10, 2016 at 16:12
  • Investing in real estate especially rental property on a small scale has more similarities with starting a small business than making an investment. Here is another similar question with answers Is being a landlord risky? If you are going to do this do it with eyes open know the risks and weigh them against the benefits. Nov 11, 2016 at 17:33
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    Degree in computer science... and earning $35k year? If you want money, that's the problem. You could easily double that maybe even triple it... far better returns than any property you could buy.
    – NPSF3000
    Feb 8, 2017 at 18:52

4 Answers 4


You want to buy a house for $150,000. It may be possible to do this with $10,000 and a 3.5% downpayment, but it would be a lot better to have $40,000 and make a 20% downpayment. That would give you a cushion in case house prices fall, and there are often advantages to a 20% downpayment (lower rate; less mandatory insurance).

You have an income of $35,000 and expenses of $23,000 (if you are careful with the money--what if you aren't?). You should have savings of either $17,500 or $11,500 in case of emergencies. Perhaps you simply weren't mentioning that. Note that you also need at least $137 * 26 = $3562 more to cover mortgage payments, so $15,062 by the expenses standard. This is in addition to the $40,000 for downpayment and closing costs.

What do you plan to do if there is a problem with the new house, e.g. you need a new roof? Or smaller expenses like a new furnace or appliance? A plumbing problem? Damages from a storm? What if the tenants' teenage child has a party and trashes the place? What if your tenants stop paying rent but refuse to move out, trashing the place while being evicted? Your emergency savings need to be able to cover those situations.

You checked comps (comparable properties). Great! But notice that you are looking at a one bathroom property for $150,000 and comparing to $180,000 houses. Consider that you may not get the $235 for that house, which is cheaper. Perhaps the rent for that house will only be $195 or less, because one bathroom doesn't really support three bedrooms of people.

While real estate can be part of a portfolio, balance would suggest that much more of your portfolio be in things like stocks and bonds. What are you doing for retirement? Are you maxing out any tax-advantaged options that you have available? It might be better to do that before entering the real estate market.

I am a 23 year old Australian man with a degree in computer science and a steady job from home working as a web developer.

I'm a bit unclear on this. What makes the job steady? Is it employment with a large company? Are you self-employed with what has been a steady flow of customers? Regardless of which it is, consider the possibility of a recession. The company can lay you off (presumably you are at the bottom of the seniority). The new customers may be reluctant to start new projects while their cash flow is restrained. And your tenants may move out. At the same time. What will you do then?

A mortgage is an obligation. You have to pay it regardless. While currently flush, are you the kind of flush that can weather a major setback? I would feel a lot better about an investment like this if you had $600,000 in savings and were using this as a complementary investment to broaden your portfolio. Even if you had $60,000 in savings and would still have substantial savings after the purchase. This feels more like you are trying to maximize your purchase. Money burning a hole in your pocket and trying to escape.

It would be a lot safer to stick to securities. The worst that happens there is that you lose your investment (and it's more likely that the value will be reduced but recover). With mortgages, you can lose your entire investment and then some. Yes, the price may recover, but it may do so after the bank forecloses on the mortgage.


In general people make a few key mistakes with property:

1) Not factoring in depreciation properly. Houses are perpetually falling down, and if you are renting them perpetually being trashed by the tenants as well - particularly in bad areas. Accurate depreciation costs can often run in the 5-20% range per year depending on the property/area. Add insurance to this as well.

2) Related to 1), they take the index price of house price rises as something they can achieve, when in reality a lot of the house price 'rise' is just everyone having to spend a lot of money keeping them standing up. No investor can actually track a house price graph due to 1) so be careful to make reasonable assumptions about actual achievable future growth.

3) Failure to price in the huge transaction costs (often 5%+ per sale) and capital gains/other taxes (depends on the exact tax structure where you are). These add up very fast if you are buying and selling at all frequently.

4) Costs in either time or fees to real estate rental agents. Having to fill, check, evict, fix and maintain rental properties is a lot more work than most people realise, and you either have to pay this in your own time or someone else’s. Again, has to be factored in.

5) Liquidity issues. Selling houses in down markets is very, very hard. They are not like stocks where they can be moved quickly. Houses can often sit on the market for years before sale if you are not prepared to take low prices. As the bank owns your house if you fail to pay the mortgage (rents collapse, loss of job etc) they can force you to fire sale it leaving you in a whole world of pain depending on the exact legal system (negative equity etc). These factors are generally correlated if you work in the same cities you are buying in so quite a lot of potential long tail risk if the regional economy collapses.

6) Finally, if you’re young they can tie you to areas where your earnings potential is limited. Renting can be immensely beneficial early on in a career as it gives you huge freedom to up sticks and leave fast when new opportunities arise. Locking yourself into 20yr+ contracts/activities when young can be hugely inhibiting to your earnings potential – particularly in fast moving jobs like software development.

Without more details on the exact legal framework, area, house type etc it’s hard to give more specific advise, but in general you need a very large margin of safety with property due to all of the above, so if the numbers you’re running are coming out close, it’s probably not worth it, and you’re better of sticking with more hands off investments like stocks and bonds.


I would strongly, strongly advise against it. Others here are answering the question of, having decided to invest in property, how one ought to ensure that one invests in the right property.

What has not really been discussed here is the issue of diversification. There are a number of serious risks to property investment. In fact, it is one of the riskiest types of investment. You face more of almost every type of risk in property than maybe any other asset class.

It is one thing to take on those risks as part of a diverse portfolio including other asset classes. It is quite another - extremely irresponsible - thing to take on those risks as your sole investment, when your portfolio is in its infancy.

So no, do not invest in property when you lack any other investments. Absolutely not.


I want to caveat that I am not an active investor in Australia, you most likely should seek out other investors in your market and ask them for advice/mentorship, but since you came here I can give you some generalized advice.

When investing in real estate there are a two main rules of thumb to quickly determine if the property will be a good investment. The 50% rule and the 2% (or 1%) rule.

The 50% rules says that in general 50% if the income from the property will go to expenses not including debt service. If you are bringing in $1000 a month 500 of that will go to utilities, taxes, repair, capital expenditures, advertising, lawn care, etc. That leave you with 500 to pay the mortgage and if anything is left that can be cash flow. As this is your first property and it is in " a relatively bad neighbourhood" you might consider bumping that up to 60% just to make sure you have padding.

The 1 or 2% rules says that the monthly rent should be 1(or 2) percent of the purchase price in this case the home is bought at 150,000. If the rent is 1,500 a month it might be a good investment but if it rents for 3,000 a month it probably is a good investment. There are other factors to consider if a home meets the 2% rule it might be in a rough neighborhood which increases turnover which in general is the biggest expense in an investment property.

If a property meets one or both of these rules you should take a closer look at it and with proper due diligence determine that it is a deal. These rules are just hard and fast guidelines to property analysis, they may need to be adapted to you market. For example these rules will not hold in most (all?) big cities.

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