Jim’s Mowing, Mirvac bosses and other business leaders share their property advice for Millennials

Some of Australia’s best known entrepreneurs and business leaders have revealed their tips to getting a foot on the property ladder

Millennials looking to buy their first home need to halt extravagant spending and live with parents if possible to save for their deposit, and manage their expectations on where they can afford to live.

Government help is also available including the federal government‘s First Home Loan Deposit Scheme, which enables first home buyers to buy with a five per cent deposit, plus states and territories have assistance schemes.

With the national property market up nearly 14 cent over the past year, we asked some well known bosses what advice they would give to Millennials looking to jump on to the property ladder.

Based on her experience two decades ago, PR maven Roxy Jacenko says Millennials should buy their first home as soon as possible and give up non-essential spending.

DON’T WAIT FOR PROPERTY ‘CRASH’

“Do it as soon as you can, forgo other lifestyle extravagances in order to make a property purchase a reality - it’s not going to get cheaper and waiting for a ‘crash’ is no way of looking at getting in,” Jacenko says.

“I recall my parents nagging me non-stop to stop spending my part-time job wages (even to the point of making returns when I did) to save for a deposit, at the time I couldn’t see the sense or the importance of it, now I thank my lucky stars as it set me up and been a huge contributing factor in my ability to still be in the property market.”

Jacenko’s first property purchase was a flat in Sydney’s affluent Double Bay for $337,000 some twenty years ago, and still remembers the advice she got to pay more than just the interest.

PR maven Roxy Jacenko. Picture: Britta Campion/The Australian

“Any extra money you get, put it toward paying down your loan – just because you have X amount of time doesn’t mean you need to use it! Simple but helpful.”

Jacenko says she wouldn‘t change a thing as an investor bought the other five flats in the building to redevelop and she ended up selling last for more than $850,000.

“No, it was the best investment and put me in the position I am in today – so many think it’s purely my businesses that have afforded me such a fortunate lifestyle but in part it’s in fact smart property moves.”

PLAN FOR RATE RISES

Entrepreneur Simon Hill says Millennials shouldn’t over extend themselves based on low interest rates now.

“Plan for them increasing and be sure you have the means to manage your repayments, says Hill, who recently added to his property portfolio with the purchase of a Bondi Beach penthouse for $3.1m.

Hill, who features in actor Chris Hemsworth’s fitness and wellness app Centr, bought his first house in Richmond, Melbourne in 2010 and has had a 5 per cent rental return every year since.

Nutritionist Simon Hill.

“That’s a pretty good rental return but the capital growth of this property has been much less compared to other properties in the same suburb. Rather than buying a new townhouse I would have been better off buying something older on a larger block that would have provided slightly less rental income but much greater capital growth,” he says.

When Hill bought the property, he was told to not get emotionally tied if it’s purely an investment.

“More opportunities will arise. You want to get into the market at a fair price. If it’s more of a lifestyle purchase, and you have fallen in love with the property, you may be happy spending above market rate. (It) comes back to your goals,” he says.

SET GOAL AND STICK TO BUDGET

Stuart Penklis, head of residential at property developer Mirvac, says breaking into the market isn‘t easy for first home buyers but it can be done, citing strong demand for its new releases.

“One thing that most of these first home buyers have in common is a clear goal and a willingness to make sacrifices to save towards owning their own home.

“When you see young couples in their early 20s, who’ve been saving since they were teenagers and have the deposit and a steady income to support a mortgage, it gives encouragement to others trying to take the first step on the property ladder,” he says.

Penklis says the first and often biggest challenge is amassing a deposit and the higher the better to avoid the additional costs of mortgage lenders insurance, required if you are seeking a loan of more than 80 per cent of the purchase price.

Mirvac's head of residential Stuart Penklis.

“Setting a goal and sticking to a budget is the best way to encourage good saving habits to build a deposit. Living at home with parents if you can, rather than renting your own place, and cutting back on discretionary spending can add up to significant savings at a time when every little bit helps.”

Penklis says knowing how much you can borrow allows you to zero in on what you can buy and where, with less time wasted on researching unaffordable homes.

SAVING FOR A HOME LIKE RUNNING A BUSINESS

Drinks boss Robert Iervasi’s advice to Millennials is to be “clear about why you are buying a house”.

“Is it to fulfil the Great Australian Dream? Is it simply to live in for a few years as you move up the property ladder or is it only to create a new source of income? Once you’re clear on this you start thinking with your head, and not your heart.

“And saving for a home, and then running it, is not that different from running a big business. Budgeting is at the foundation of both, as is planning for the unexpected.”

Iervasi, who runs Asahi Beverages Group which produces Victoria Bitter and Great Northern beer, says “the biggest mistake is not appreciating that your first home purchase is likely a long term-investment (matched by long term debt,) and not necessarily liquid”.

“And importantly, what seems manageable today can change when market conditions or interest rates change.”

Asahi Australia CEO Rovert Iervasi. Picture: Aaron Francis/The Australian

He also says people don’t appreciate it’s not just the purchase price they’re paying, noting there’s also stamp duty and a range of other costs that need to be factored including maintenance when things go wrong.

“The sooner people are honest with themselves about that the more realistic they can be.

“Also, people should do their due diligence on properties. Your first home is probably the biggest purchase you’ve ever made at that point in your life. It’s not something to cut corners on so get advice and speak to the experts,” says Iervasi, who bought his first home in Melbourne‘s inner-west when he was 24 in 2000.

KEEP TIGHT LID ON SPENDING

Jim’s Mowing founder Jim Penman bought his first house while a university student with a “small inheritance but mostly from lawn mowing income”.

“My biggest advantage, then and while building my business, is that I kept a very tight limit on spending. I drove old cars till they wore out, bought shop brands at the supermarket, ate out never more than an occasional pizza or the like, basic clothes with no idea of fashion,” he says.

“Still not all that different today.”

Jim’s Mowing founder Jim Penman.

Like many others, Penman also recommends keeping a tight rein on spending and buying a property as soon as possible.

“My advice to anyone is to limit spending and invest in property as soon as possible, paying down the mortgage fast and then borrowing again to buy more property or to invest in a business,” he says.

Penman says he had a friend at school who never earned more than the average wage in his life and is now an independently wealthy investor.

“I‘ve seen new immigrants in basic jobs coming to own several houses. Housing prices are high but interest rates are low. Anyone can become financially secure if they work at it,” he says.

Originally published as Jim’s Mowing, Mirvac bosses and other business leaders share their property advice for Millennials