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Would This Investment Be good?

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Author Topic: Would This Investment Be good?  (Read 189 times)
Nick_Maka
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« on: August 08, 2011, 11:13:54 AM »
Alright so i'm 14, i live in australia, and i love talking about business, investing, making money, etc. Ever since I was 9 i have been reading books and reading stuff on the internet about how to make money.

I have an idea.. That could work. When i leave school i am going to the mines to clean dishes (I know not the ideal job) which will get me around $70,000 - $80,000 a year. Then after around 4 years of working and saving it all, I will buy a block of land.  with that 4 years of savings, i will be 22 and have around $300,000. I will then buy the land, $150,000. Leaving me with $150,000. my plan is to build 5 small Apartments on this land. Each Apartment costing $150,000. With the $150,000 left i will build the first apartment. I will then rent it out at $350 a week. For the next 8 years i will then save all of my money, if i am still in the same job, roughly earning $75,000 a year, that equals $600,000. By the time i was 30 i would have built 5 Apartments and have landscape the land to look nice, which would bring people in.

Alright so i have 5 apartments, all earning me $350 a week =$1750. which means that i have $750,000 in debt. $750,000 Divided by $1750 = 8 years it would take me to pay them off, with the rent that i am earning from them. But in that 8 years, $75000 x 8 = $600,000 again. I will would have paid them off in around 5 years im hoping. If these 5 apartments get paid off, that will leave me with $91,000 a year.

Please tell me if this would be good. Dont just give me a website. Please say your opinion
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MVD34
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« Reply #1 on: August 08, 2011, 03:00:59 PM »
I like the idea that you are thinking and planning at your age.  That is very good.

However, as a business plan your numbers are completely unrealistic.

I'll give you just a few highlights from the real world 101.

(A) the salary of a dish washer isn't going to be anywhere near $70k.  More like $25,000 a year.

(b) Taxes.  You cannot ever save all of your money.  It costs money to live and the higher up the income ladder you are ($75,000 a year is relatively high) the more money you will pay every year in taxes and other living expenses.  In general, it is very difficult for the average person to save more than 25% of their gross income year over year.  Most don't save more than 10%.

(c) the cost of money.  You cannot borrow money just because you want to and it costs money to borrow money.  Sometimes a lot of money.  The cost of building and running those apartments, including interest expense, are likely to be high.  10% to 20% to start with.  40% as the buildings get older.  Real Estate is very tough business unless you have a lot of cash.  In most cases, you will only be able to borrow 50% of the cost.  If you need $150,000, the bank will only loan you $75,000.
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