In today’s show we hear a great story of a young person’s journey to property ownership. There is a lot of talk about how difficult it is for your people to get a foot on the property ladder. Nicole Haddow might just have the answer.
Kevin: I want to play you a portion of an interview that I heard Clare Blake from 4BC do just recently where she spoke to a young person who was struggling to get into the market. Her name is Nicole Haddow, and she talks about what she had to do to do just that. There are some great lessons in this. That’s why I wanted to share it with you.
Here’s what she had to say to Claire.
Clare: You decided that you couldn’t really get the job you needed to get the house, so you made a few changes to how you live?
Nicole: Absolutely. I have a great job, but I had to do a couple of extra things to get myself over the line.
Clare: You say that you have a great job. Now according to Joe’s philosophy, you should be able to afford a house.
Nicole: Look, I think you need to be earning an incredible amount of money to comfortably live as a home owner these days, particularly if you’re single.
Clare: If you go off sick for a while, if you have problems… But now you’re talking about Melbourne, aren’t you? You’re talking about the Bayside suburbs, a little bit south of the city.
Nicole: Yes. I’m out of Bayside, Mordialloc.
Clare: Beautiful. On the water, fantastic.
Nicole: It’s a lovely spot.
Clare: It is. It is a fair way from town. Do you work in the city?
Nicole: I do. I work in Richmond, which is just a couple of Ks out of the CBD.
Clare: Tell us how you did it.
Nicole: Well, I moved home with my parents just before I turned 30. I did what I would refer to as a power save, so I gave up a lot of my social life and put away almost everything I earned.
Clare: Good practice for paying that mortgage off.
Nicole: It certainly was. It was really difficult because I have a really active social life, so I had to learn to say no to things.
Clare: Well, that’s one. What else did you do?
Nicole: I guess I had the luxury of being a journalist. I was still writing freelance features and generating an income while also working full time in digital media, so effectively doing two jobs for a while there. I wouldn’t advise that everyone go and get a second job, but having a double income does help.
I also looked in areas where there wasn’t an auction market, so places where you could still buy privately, which made a huge difference, because I found that auction prices were just making it impossible. You have to be a little bit careful.
I was also looking in January when not everybody is looking. I guess when people are selling at that time, you might be able to get something a little bit more affordable.
It was really just about looking in an area that maybe not everybody was thinking about. Not all of my friends were prepared to move 25 Ks out of town. I’m a long way from my family and friends, and initially, that was really difficult and I was quite isolated, but it gets easier.
Clare: The other thing that I know you mentioned in your article is that you bought with your head, not your heart, and that’s something that’s really difficult and encapsulated in your last response.
Nicole: It is. I’ve grown to love where I live. For me, it was an investment. I live in it at the moment, but if in time I want to rent it out and move closer to the city and make my lifestyle a little bit easier, that’s something that I might consider. But it was an investment first. It was not a glamorous decision, but it was one that I felt I had to make.
Clare: Is the feedback from the people who know that area making you feel comfortable that you will get some capital growth out of that over the next ten years or so?
Nicole: I think so. Even in the last year, some really great cafés have opened nearby. I’m really close to the beach. There’s a train station, good schools. I believe I’ve bought in a great area, and there are lots of young people doing what I’ve done. They can’t get in closer to town, so they’re coming to join me.
Clare: Thanks for the tips. I hope that it helps some other people.
Nicole: My pleasure.
Kevin: Yes, some very good lessons there.
Michael Yardney joins me. Michael, I know you’ve heard that interview. Some really great messages there from Nicole, aren’t there?
Michael: There are, and some great inspiration, Kevin.
Kevin: Yes. Let’s have a look at a few things. Michael, what message would you give your kids about what’s holding them back from getting into the market?
Michael: Well, clearly rising prices are one of the factors, and sure, they’re rising faster than wages for many people, so having a good job is important. But the other is having good money habits. Most Australians have got poor money habits. They spend more than they earn.
One of the rules that I’ve been trying to teach my kids is to spend less than you earn, to save some money, to invest it, keep reinvesting until you get a nest egg, a big enough deposit to start buying a property, Kevin.
Kevin: Of course, the temptations are great, Michael, aren’t they, with credit cards? You can just go to any store really and get credit. It’s so easy to get.
Michael: The store cards are a real trap because they say, “I’m not going to charge you interest or maybe not even repayments for two years.” But then all of a sudden, you get lumped with very, very high interest rates. That’s an issue, Kevin.
I think the other one is to have a long-term goal, a long-term vision, which Nicole clearly had also. She was prepared to give up some things in the short term to reach her long-term goals. That happens with entrepreneurs, with business people, with property investors, and also with home owners. Some good lessons from her there.
Kevin: Yes. It’s a great lesson, not just for young people, isn’t it? It’s for any age really.
Michael: That’s right.
Kevin: What else, Michael?
Michael: I guess the other is to have realistic expectations. I think a lot of young people want the property it took their parents 40 years to be able to have in the areas, the suburbs where sometimes even their parents can’t afford to buy, so start with realistic expectations.
The other lesson, I think, is sometimes you may have to share with somebody – a brother or sister, a friend, or a parent – to get into the property market. Having your parents on your side, either as business partners owning the property or guaranteeing the loans, is a way to get going, too, Kevin.
Kevin: What did you think about that idea of Nicole’s there where she looked at a particular area where she felt maybe she could get a bargain?
Michael: Kevin, that comes back to what I said a few moments ago – that she didn’t invest or buy in those areas of Melbourne that are the more expensive ones close to her work. She went out a bit further and had realistic expectations.
Kevin: Michael, you mentioned earlier about credit cards. What about credit history?
Michael: I think an important lesson to learn is you have to keep yourself a clean credit history. It’s too easy to sometimes forget to pay a bill, have it default, and those stay on your name for quite some time.
When you’re going to get a loan, your credit history is checked through an organization called Veda Advantage. We all have a personal credit file, and if you’ve had some black marks against it, that will work against you when you go for a loan.
Kevin: It would be worthwhile checking that credit file, Michael, would it?
Michael: It definitely is. You can go to MyCreditFile.com.au.
Another lesson is not to have too many credit cards, and actually cut back your credit cards a bit if you’re planning to buy a property. When the banks look at your serviceability, they take into account your assets, your income, and also your expenses, and they see a credit card limit – even if you’re disciplined and don’t use it – as a potential expense, and so cutting back your credit card limits or getting rid of a couple of extra cards that you may not need will make you more attractive to the banks.
Kevin: Some great advice there. I want to thank Nicole Haddow, Clare Blake, and also to 4BC for allowing us to use that earlier audio.
Michael Yardney, to you, thank you once again.
Michael: My pleasure, Kevin.