2nd IP and Melbourne Areas

Hi All,

I'm looking to buy my 2nd IP and we can afford up to 350-400K. So which area should i look? Also House with land or new house and land pkg or apartments?

1st IP in Wantirna South

Cosy
 
A one bedroom flat in inner ring suburbs or a house and land in Melton/Berwick? Good question. You'll get many opinions as to which is the best option, but I think the most consistent long term capital growth will come from a well positioned one bedroom flat in the suburbs many people choose to live in; that is, inner city (Richmond, Collingwood, South Yarra, Armadale, Hawthorn, Elwood).
Outer suburbs with employment and train to CBD will be a good bet also, but
inner-ring flats close to train and shops with off street parking is the way I'd go.
 
I think its important to have a balanced property portfolio ie different property types, even different locations. So I suggest close to the city to balance the Wantirna South property but then again I am a proponent of being close to the CBD. You don't say what property type is your other IP. If its a flat (although I doubt it given the location), then disregard my advice below.

Unrenovated older style 1 bedroom (or maybe 2 bd depending on area) strata titled flat/apartment in inner city (up to 8-10km's from CBD - just draw a line north, east west, or south east it doesn't really matter to be brutally honest) with laundry facilities, preferably no lifts, no more than 12 but preferably 6-8 flats in the same block, car park on title, minimum 35 sqm in size, separate kitchen and common areas in good condition. Walking distance to train/tram. No flat roofs if you are on the top floor (hot in summer), so I would avoid top floor, as well as as real hassle for tenants if bringing their furntiture.

Will always be rented, low cost to update, maintain and owner's corp should be reasonable. Recent price escalations may make them negativey geared however even at 80% LVR.

Areas: East/SE - SYarra, Prahran, Hawthorn, Richmond, Windsor, Elwood
North: Carlton, Brunswick, Kensington, Flemington, Ascot Vale, Moonee Ponds, Essendon
West: Seddon, Newport, Altona North, Yarraville, Kingsville, West Footscray
 
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Price range is only one factor - what are you looking for?
For example:

All cg no cashflow or high CF moderate CG etc?

Vacancy risk you are willing to accept

LVR you are able to handle - can you sleep with 95%, or conversely, have you got enough cash to do 60%?

Cheers,

The Y-man
 
Well a land+home package for $300-400k would probably only yield you a place in Melton (as was mentioned by Wolfgang). I don't really see the point buying there since there's so much empty land when you're that far away that you lose that scarcity premium/value for future growth. All you'll get is CPI growth because of housing construction costs going up each year (costing more to rebuild the house for a prospective buyer).

Perhaps better to get an inner city apartment, as they've had better growth recently (and you can get ~5% yield on it as well)
 
350-400K can only get you a 1 bedder in inner city apartment.

I would think it would depend on what your objectives are. If you're going to buy and rent it out. it shouldn't be a problem.

But you best research which areas.

I've been passing for the last couple of weeks on the new "southbank One" building on city Rd, southbank and basically 70% have lights off at around 7-8:30pm. Suggests that lots of vacancies and was overpriced sold off the plan.
 
Yes Southbank's apartments have been awful investments. People who bought 5 years ago still just barely broke even. But you can get low-rise apartments inner city for around $350-400k, like Richmond/Hawthorn etc.
 
yeah.. off the plan.

However those who bought in 2nd hand ones in 2005/06 have seen appreciation. a 2 bedder was around 330-350K back then now close to 500K

Then again, there are new towers coming up especially closer to city rd. The other ones on dodd st, sturt st, and wells st are not that bad especially since they are close to the st kilda rd.
 
Yes Southbank's apartments have been awful investments. People who bought 5 years ago still just barely broke even. But you can get low-rise apartments inner city for around $350-400k, like Richmond/Hawthorn etc.

Yes, I prefer flats/apartments in low rise blocks - ie no more than 3 stories high. The land content is acceptable and it is possible to still buy a 2 bedder for around $400,000 in some suburbs. You may need to pay slightly more than $400,000 to get a carport/carspace on an accessory title.

I like North Melbourne as the yields are not too bad for inner city and the prices of flats/apartments are still slightly below those in other inner areas.

Regards Jason.
 
Yes, I prefer flats/apartments in low rise blocks - ie no more than 3 stories high. The land content is acceptable and it is possible to still buy a 2 bedder for around $400,000 in some suburbs. You may need to pay slightly more than $400,000 to get a carport/carspace on an accessory title.

I like North Melbourne as the yields are not too bad for inner city and the prices of flats/apartments are still slightly below those in other inner areas.

Regards Jason.

what's the rentals like for 1 bedders and 2 bedders in North melbourne. I presume close to Melbourne Uni, the higher the rentals?
 
what's the rentals like for 1 bedders and 2 bedders in North melbourne. I presume close to Melbourne Uni, the higher the rentals?

Not sure about a one bedder, but a two would achieve close to 5% return.

I own some property in North Melbourne and have found the demand comes from students, professionals working in the city and people working in the hospitals. The area is highly transient though - so it is not uncommon for the IP's to have new tenants each year!! :eek: The capital growth has been good and this compensates for the movement with tenants.

Regards Jason.
 
They keep building new flats and apartments in that area. Just driving down the 7-Eleven corner the other day I was reminded of another 2 reasonable larger developments that some acquitances (not friends) are involved in.

A close real estate agent friend of mine who works in that area was just saying people should buy houses/terraces, not so much the apartments - and no, it was just casual chit-chat she wasn't trying to sell me anything as most of her stock are actually apartments. The houses/terraces are still cheap.
 
Yes, I prefer flats/apartments in low rise blocks - ie no more than 3 stories high. The land content is acceptable
How do you calculate land content for an apartment?

Is a lower body corporate fee the main reason for preferring a low rise block?

10 apartments versus 50 apartments (both occupying same land area)
It is not as though more land can be extracted from the 10 apartments block.
So why will a 10-apartments block be more advantageous? I can only envisage it as an advantage if there is an en-block sale, the existing block is pulled down and rebuilt to a higher density.
 
Not sure why. An agent once told me it was because it is rare and no one builds them - (subject to the suburb)Body corporate i believe is slightly lower but not significant enough.

In southbank there is stretch of low rise apartments of southbank boulevard, Wells st, dodd st, coventry st among the high rise apartments. Their selling price is much higher compared to the high rise apartments especially for those with a courtyard. i personally don't like walking stairs.
 
Not sure why. An agent once told me it was because it is rare and no one builds them - (subject to the suburb)Body corporate i believe is slightly lower but not significant enough.

In southbank there is stretch of low rise apartments of southbank boulevard, Wells st, dodd st, coventry st among the high rise apartments. Their selling price is much higher compared to the high rise apartments especially for those with a courtyard. i personally don't like walking stairs.

Presumably, high-rise blocks are newer and low-rise blocks are older, since it is more profitable for developers to build and sell more apartments over the same land area in the land-scarce inner suburbs.

If buildings depreciate and land appreciates over time, why will the older, low-rise blocks appreciate more? (its land is locked unless there is en-bloc sale to redevelop the site). Newer buildings will also come with more facilities and require less maintenance.

Can anyone offer an explanation?
 
Well there could be many reasons.

The new apartments could be overpriced right from the outset and more of a cut is going to subdividers and developers. This could reflect change in industry practice.

Also low-rise means that the occupants per sqm is lower. This could be a redeeming feature. Personally I'd like to choose a place with lower occupancy per sqm. While my opinion does not count for much, if enough people think like me, we're the market and market drives prices.

Another point is, building materials depreciate most in their early years. To take an extreme example, the house I live in which is over 100 years old probably can't depreciate much more. In fact it's reached a stage where such structures (ie the Georgians, Victorians, Edwardian era designs) are considered an art and people pay premiums for them.
 
They keep building new flats and apartments in that area. Just driving down the 7-Eleven corner the other day I was reminded of another 2 reasonable larger developments that some acquitances (not friends) are involved in.

A close real estate agent friend of mine who works in that area was just saying people should buy houses/terraces, not so much the apartments - and no, it was just casual chit-chat she wasn't trying to sell me anything as most of her stock are actually apartments. The houses/terraces are still cheap.

There are some larger developments occuring near the 7 eleven around Flemington Road. These are multi stories/high rise and your agent friend would be correct in saying to try to buy houses/terraces in preference to these.

The older, more established part of North Melbourne is around Hotham Hill (as opposed to the area around 7-eleven in Flemington Road). This area features low rise apartments/flats (60's, 70's, 80's style) together with terrace houses. I would concentrate on buying a low rise flat around this area in preference to a new apartment in a high rise development.

The older low rise blocks (3 stories max) are currently being sought after by first home buyers who are unable to buy a house/terrace as they are just out of their reach. They tend to renovate the flats when they move in and I have noticed when I go for inspections the main reason they sell is due to the arrival of a baby (ie presence of a cot etc) and the need to search for a larger dwelling to accommodate the arrival.

I would agree with your agent friend's sentiments that the houses/terraces are relatively cheap in the northern suburbs (ie North Melbourne, Brunswick and to a lesser extent Brunswick East and Carlton North) when compared with terraces in the inner Eastern and Bayside suburbs. The main problem is that supply of Terrace homes, particularly in North Melbourne, is very low at the moment - so buying one is more easily said than done!

I have been investing in North Melbourne for a while and have noticed that the ripple effect hits a little while after the East rises. (Just my observation as verified by valuations and I am certainly not encouraging people to buy there!)

Regards Jason.
 
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jingo, what do you think of this one? 460K. Seems large enough. I don't know this area that well - so don't really know if it's good. Other than that, nothing else in that area.

http://www.realestate.com.au/cgi-bin/rsearch?a=o&id=106211830&f=0&p=10&t=res&ty=&fmt=&header=&cc=&c=21280287&s=vic&tm=1262661521

Hi jcwc888,

Yes, these older types of flats don't come up all that often in the area. There may have been 10 or so sold throughout the year. (Not a properly researched figure, but just from general observations).

My wife has inspected the flat above. The street is good - tree lined, with two tram lines running within walking distance. The tram on Abbotsford street runs through Errol St (the main street in Nth Melb) past the Vic Market, and then proceeds down Elizabeth street down to Flinder's Street Station. The other tram is situated on Flemington Road and goes past the main hospitals into the city via Elizabeth Street. The flat is well located and would rent well.

Price wise - I think the owner is asking a tadd too much. We have a similar property in the next block and it was recently re-valued by the bank at $440,000. Ours is on the top floor with an accessory unit (carport, as does this flat that is for sale for $460,000).

Hope this helps a little. Please let me know if you would like any other info.

Regards Jason.
 
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