This article was originally publised via The Herald Sun (Print Only) and realestate.com.au.
Pascal Butler and partner Georgia spent years saving a house deposit before their daughter was born, but “weren’t getting anywhere” as rent and home prices surged.
However, after the financial services worker and teacher became parents to Mimi, now 21-months old, Mr Butler’s father read a book about using equity – the difference between a house’s market value and how much is owed on a mortgage – to help his adult children into a home.
After seeking advice from the Melbourne-based property investment group OpenCorp’s founder and co-chief executive Cam McLellan, who wrote the book, Mr Butler’s dad assisted his son and Georgia to buy an investment property about 18 months ago.
They looked for a residence which had good prospects for growing in value and future rental returns.
Now, the couple plan to continue renting in Melbourne’s inner east for a few years, then put their investment property’s equity and earnings towards purchasing a family home, plus paying back their family.
Mr Butler estimated that without his father’s help, it would have taken them another five years to put together a deposit – all while prices were likely to keep rising.
He said it was difficult for many people to save for a home while paying rent, and that increasing government assistance for first-home buyers would aid in addressing the issue.
“I do think for people in their 20s and 30s, even if they do live at home, to be able to buy in your family’s area is going to be tough,” he said.
“Dad bought his house in Berwick 20 years ago when Berwick was considered in the sticks, now it’s even hard to buy a house in Berwick.”
But it’s all worked out well for their family, with his Dad even purchasing his own investment property and also assisting Pascal’s sister to acquire an abode.
Mr McLellan said out of the 30 to 40 parents wanting to help children that he meets every month, few were mortgage-free, and hope to help their sons and daughters out without compromising their own retirement plans.
“But if they spent about $550,000-$700,000 on a home, as long it’s gone up in a value about $120,000, they can use this equity as a starting point to help their children,” Mr McLellan said.
He and his wife Felicity have their own substantial property portfolio, including an investment property held in a family trust for their four children who are aged eight through to 17.
Mr McLellan said that growing up, he and his parents lived in a tin shed on his grandparents’ farm.
At a young age, he realised he wanted his own home and the security that provided.
While aged in his 20s, Mr McLellan learned about property investment from a friend’s father.
Mr McLellan and Felicity both worked two to three jobs as they saved to buy their first place in Melbourne – he worked in a call centre, drove forklifts and stacked roof tiles.
He also sold his car and rode a bicycle for nine months, and made all his meals at home.
“I didn’t go to a cafe until I was 25,” he said.
These efforts turned into a recipe for success when Mr McLellan and Felicity bought their first investment property and then another in Queensland.
By the time their first daughter was born, they had more than 20 investment homes to their name.
Mr McLellan said that although young people still were willing to work hard, skyrocketing house prices made it difficult for some to buy their first home without help from older relatives.
“In the 1980s, the average property cost four times the average income, now it’s 12 times the average income,” he said.
“Young people are doing it much harder now then in the 1980s and 1990s.”
