It’s time to rethink the great Australian dream of property ownership, not give up on it, Cronulla-based real estate expert Phillip King said.
Fed-up with seeing a generation of young Australians locked out of joining the ranks of home owners, Mr King has used his own experience to write a book on how to get into the property market.
It it as simple as rethinking what property market you want to get into, he said.
And it does not require buying in another city or country town.
Instead, they should think about investing in commercial property rather than residential real estate.
“When I speak to people in their 20s about owning their home, I see the despair on their faces,” Mr King said.
“The deposit they require today is what an entire house cost when their parents were their age.
“In 1990 you needed four times the average salary to secure a two-bedroom unit in Sydney. Today the Millennials require 12 times the average salary to purchase that same unit. In one generation the dream of home ownership has been lost.
“With average prices in Sydney topping $1,100,000 and prices in Melbourne only slightly less, the situation is dire and not expected to change.”
Mr King has used his experience as an investor in commercial retail property to co-author the book Engines of Wealth - Commercial Retail Shops.
“Retail shops have a much lower price point or barrier to entry and can be procured more readily than a residential property,” he said.
“Once positioned in the market buyers will be generating a positive income stream and enjoying capital growth, equity will now accumulate much faster.
“Using retail shops as a stepping stone to home ownership could be called ‘Redefining the Australian Dream.’
“Taking on a smaller mortgage for a shop and paying it down is similar to the approach our parents took buying a unit before upgrading to a house, only in this case the tenant in the retail shop is helping with the loan repayments.”
And to prove his argument, Mr King recently assisted his nephew purchase a Sunshine Coast hairdressing salon in a retail strata complex for $135,000.
“The rent delivered a positive annual income of $10,125 (7.5 per cent) after expenses,” he said.
“The deposit required to buy this salon was $40,500 (30 per cent), a very achievable savings target. After allowing $4,200 per annum for interest on the bank loan the net profit was $5,925 per year.
“Add to this a five per cent conservative capital growth and this small shop produces $12,000 per year of additional equity.”
Mr King said that Engines of Wealth lays out a straight-forward strategy anyone can follow to procure retail shops and position themselves in the property market.
Engines of Wealth provides readers a step by step plan that Mr King deployed to create wealth and generate an income that will continue to sustain him long after his retirement.
Phillip wrote Engines of Wealth to share his knowledge and provide people of all ages a roadmap to wealth.
After switching his investment focus from residential to commercial property investing, he created a property portfolio of 51 positively-geared shops and is well placed to share his knowledge.
He now wants to share his knowledge and provide people of all ages a roadmap to wealth through investing in commercial property.
Engines of Wealth takes readers through the entire process from selecting the right investment vehicle, finding the right shop, valuing the shop, negotiating with real estate agent, securing the loan, dealing with contracts and the requirements of managing the shop and tenant.
“There are many books on the market about residential property investment however there is very little on retail commercial property. I believe there will be significant community and investor interest in retail shops and my book will fill a gap in the market,” Mr King said.
It’s a different pathway for those looking to build a deposit for home ownership, he said.
Engines of Wealth by Phillip King and co-authored with Stephen Hains is published by InHouse Publishing.