How to Buy a House in your 20s
We’re going to talk about how you are still able to invest in property in the UK, in your 20s. We’ll be making a few assumptions – that you’re a young person in their early 20s, you’ve got a full-time job, you’ve just started your career, and you’re living at home or you’ve got the opportunity live at home home. You’re able to leverage off the position you’re in to go ahead and start your investing career.
Step 1 – Expenses
You need to analyse and reduce your expenses. One of the great ways that you can have your expenses reduced is changing your living situation. If you’re currently living at home with your parents, for instance, then that’s a great way to save money because generally, you don’t have to pay a lot of money to the household if you’re living at home.
There are a few people who are fortunate enough to not have to pay anything at all whilst they’re living at home. That means your expenses are very low, or near nothing whilst you’re living at home. It’s a great way to really use that opportunity to save money.
Another thing is: don’t get a car on finance. Instead, use that money that you’d ordinarily use to spend on car finance, and put it towards saving towards your deposit. Try and avoid things like expensive mobile phone contracts. Enjoy yourself, but it’s not about living in excess.
Step 2 – Plan
If you’re serious about investing, set out a plan for how much you’re going to save, and how much your expenses are, and how much your income is. You always want to pay yourself first, and by that we mean you prioritise; once you get paid, you must set aside how much you’re going to save FIRST.
Prioritise your payment over any other payment, for instance: your water bill. If you owe money on your water bill, they can wait another couple of weeks for payment maybe, as opposed to you paying yourself so that you can invest.
Step 3 – Be Humble
If you’re really serious about investing then you want to humble yourself.
You’re probably in a job that you don’t like, and working for a boss that you don’t like, doing extra hours at work, working with people you don’t necessarily like. But that job is paying you money. You may be frustrated that you’re living at home and your friends are maybe living in their own place, or they’ve even bought places, and you’re still at home with your parents and it’s uncomfortable, because it doesn’t feel good.
You feel like maybe you’re not achieving. Once you’ve got your long term strategy and your goal in mind, then all these other little things, like being frustrated at home, become irrelevant. It’s not going to be easy, but you’re setting yourself up.
Step 4 – Extra Income
You’ve done all the previous steps – you’ve reduced your expenses, but how do you actually get to the position where you’re scaling up the amount of deposit you have? ou’re in a position right now to leverage off your current skills and your current experience to provide service to somebody so you can earn additional income. If you’re good at drawing or you’re a designer, you can reach out to business people or put an advert out on, say, Upwork or Fiverr, and earn additional income.
You may be someone that’s pretty hands-on so you could put yourself on Gumtree, and advertise yourself as somebody that can do odd jobs, or garden clearances or something pretty basic. It’s all about getting active. Is there a local business you can go to, and ask if they need an extra pair of hands on the weekend? Can you set up an online business?
Go to Shopify and create a website where people can transact with you. Do the extra things to produce additional income for yourself, so you’ve then got that money to invest.
Get an extra bank accout that you can’t readily access – something that doesn’t have access to online banking, doesn’t have a card you can readily access and withdraw the funds, and put the extra money money into that account. You’ll quickly build up this pot and have something there to invest at a later date.
Step 5 – Education
The next step is to get educated. Educate yourself on property, read as many books as you can, listen to as many podcast as you can, articles, blogs, etc.
Get to grips with the basics of property and learn as much as you can; there’s plenty of content out there. Then, try to get yourself out a bit more, go to some property networking events, and eventually try and find yourself a mentor in property, and if possible go and work for them.
Even if it means working for free, you’re then able to leverage that experience and that exposure to that person who’s successful in property, and eventually go and implement that on your own. It’s a lot safer because you’ve got the direct, hands-on experience.
Just a caveat, a mentor isn’t a necessity in order to go ahead and start investing in property. Don’t use it as an excuse for not investing and a mentor doesn’t need to be someone in an official capacity. Just find someone you can ask advice from every now and again and then, eventually, get a meeting with them. If that person is giving you advice and they’re giving you help, and maybe a few contacts, then in effect they’re becoming your mentor, especially if they’ve got a lot more experience than you.
Number 6 – Get Started
Completed steps 1-5? Reduce your expenses, planned, humble yourself, got some additional income, educate yourself.
Now, you’re ready to start to invest this money into a property deal. This isn’t going to be something that’s going to take you two or three months to do, spend 12 to 18 months on the planning side, and the earning side, and the income side, and sorting your financial situation out, before you then start investing.
A great way to start investing and getting yourself on the property ladder is to try and find a house where you can then rent out the additional rooms. You can get mortgages that requires as little as a 5% deposit. You’ve got a check out lenders because some won’t accept the fact that you’re going to be renting out rooms in your house.
You’d potentially be classed a landlord to them, so just make sure you speak to your mortgage broker to get the right advice and you’ve got the right mortgage product, and the lender allows you to rent out the other rooms, especially as a first time buyer.
Find the Right House
If you can find a three-bed house that’s worth £150k and put down the 5% deposit, that 5% deposit would be £7.500, then you deduct another £1,000 legal fees in order to purchase the property, and that’s it. There’s no stamp duty to pay, because that’s being removed for houses for first-time buyers up to £300,000.
Your mortgage payment may come out in the region of £400-500. If you can turn two of the spare rooms, plus hopefully a dining room that you’ve got, into three bedrooms then you’ve got a great way to earn additional income.
If each of those rooms generated you £350 a month in rent each, that’d be £1050, that money can be used to pay for your five hundred pound mortgage then pay your council tax, maybe £100 out of that. Deduct your utilities of say £250 and you might actually have a bit of money left.
A Good Start
It’s a great way to start, and you can start this young. If you’re only 17 or 18 and reading this you could be in the perfect position by the time you’re 20 or 21. You could save up £5-10,000 in 3 or 4 years if you really graft. You could definitely save a couple of hundred pounds a month.
If you really want this, go ahead and do work at it. We’ve only got one life, it’s up to you to wrok hard and go out there and earn what you want in life.