2nd IP and Melbourne Areas

Hey, we have no real experience but we are beginning to think about this whole investing thing. For what its worth we're looking at Coburg- close to the city and just north of brunswick (which seems to be in the process of becoming very expensive) but a lot cheaper- lots of public transport, good shops and so on.
 
How do you calculate land content for an apartment?.

As a rough indication the information is on the rates notice. Land value is given as is the capital improved value.

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

Although the body corporate (owners corporation) levy is less in a low rise block than a high rise, this is not my main reason for buying. Older styles flats (ie 60,70, 80's style) in a low rise building (ie no more than 3 stories) achieve very good capital growth.

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.

Less flats on a block mean that each flat has a higher land content.


Regards Jason.
 
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.

thank jason.
How much you renting yours per week? and that valuation. how long ago?
 
Hello cosy

Congratulations on being ready to tackle another investment, only two years after buying your first investment property.

Given that you have stated a price range, you are then asking two basic questions:

The area in Melbourne, and
The type of property.

Melbourne population and housing spread is growing at a steady rate.

The traditional preferred suburbs, which are generally in undulating land, have become quite expensive relative to income for both buying and renting.

This means that the areas set aside for development, in flatter corridors, are now being taken up for new housing stock.

A lot of this is ‘second’ home rather than ‘first’ or ‘last’ home stock. Many of these areas offer very limited housing options. The established areas offer more diversity in housing from single family free standing homes on traditional blocks, free standing homes on smaller blocks (whether by design or by dual occupancy), units, townhouses, flats and other types of accommodation.

Each of these types has a benchmark for capital growth and a benchmark for rental growth.

Generally speaking, units and houses grow at different rates which taken over a full cycle, deemed to be ten years, show remarkable similarity.

So it comes down to what we are all here for, which is property as an investment vehicle.

If you are wanting capital growth and are willing and can afford to contribute onging financial supplement to the rent over perhaps an extended period of time, then the inner ring established area, or speciality established areas, can provide one investment model.

If you are wanting to minimise your ongoing contribution, or trickle feed the investment, and are not too concerned about the rate and cycle of capital growth, then you will have a much wider choice.

Statistically, Melbourne has 4.5% gross rental yield

In the fringe areas this yield may be higher and in regional areas it will be higher again

A simple model may be to look at the ten year expectation of growth:

If you buy a property with a high capital growth potential and a low yield, let’s say a potential for 10% capital growth each year with a 5% yield, then ergo over ten years the property will have produced 150% benefit.

If you buy a property with a low expectation of capital growth and a high yield, let’s say 5% growth and 10% yield, then over ten years the property has also produced 150% benefit.

A person with a high disposable income may prefer and be able to service the first property as they can afford to pay the running expenses and shortfall between rent income and interest expense

A person with a low disposable may prefer the property with minimal ongoing contribution.

The second scenario, if structured appropriately, will produce a much higher Internal Rate of Return than the first property

So a close examination of each deal and situation may find that the lower income investor, by investing in areas of higher yield, may be in a stronger long term position than the investor who looks for capital growth only.

However, this is not to say that eg buying vacant land would not be an appropriate investment or buying a serviced apartment or buying in the regionals etc

So your question, as with all simple questions, invokes a complex answer.

Essentially, as you are the investor, you should start with your financial model and work outwards from there.

Your benchmark will not be relevant to anyone else except yourself and your ideal investment will be another person’s impossible dream or dead duck.

But for what it’s worth:

You have so far had success with basic family homes in established areas with good infrastructure (schools, transport, shopping, recreation).

You have done some renovation work on the first investment property and this has been successful for you.

While it is important to have a range of property in your portfolio to me that means a range of properties. I would have no objection to eg owning all the units in one development or all the houses in one street, or to have all my investments as free standing family homes in the one suburb.

Whatever suits you and whatever works best for you.

Most of our stock is within fifteen minutes drive from home. In the early days this is vital as you can attend to the property in-between tenants.

As the portfolio grows, this also means that you can use the same plumber, electrician etc and you all get to know each other

If you have one property here and one there you will have to be paying people to do the small jobs. We have one property an hour away and just got the bill for $250 for some very small maintenance items – but that one hour each way travel plus time doing the job is just too much hassle so there goes another $250 which if this was a local property Mike could have done the job on the way home from work.

However, one of the most successful investors on the Forum has property one hour’s flying time away. She therefore has no interest whatsoever in herself doing anything with the property, it is all strictly business and the property manager attends to everything including getting in painters, recarpeting etc. It’s all just part of the overall strategy and leaves her free to get on with what she does best and leaves the investments to be investments, not part time jobs.

So when it comes down to it, it will be all about the deal, and your own priorities, and not necessarily about the property class, type, or location.

However, if Wantirna has been good for you, why not start there? Someone else, right now, is looking at Wantirna as an investment – we can often overlook the diamonds in our own backyards.

Hope this helps
Kristine
 
Very well said - it all depends on the individual's circumstances, financial position, age.

Different people have different strategies. A lot of people ask me why i sold my properties but i also said i prefer some liquidity in case of emergencies as a solid cash offer is always something that must be considered. It really depends. As for now i'm adopting a hold strategy to reduce capital gains tax.
 
HI All,

I'm really appriciate all your comments and recomendations. Kristine, as you said we are also looking something in south East Now.

Thanks,

Cosy
 
Golf Links Road, Berwick

HI all,

Thanks for all the information and now I found the House and Land in GOLF LINKS ROAD, BERWICK ( Land 220K + 170K for 4 Bed House) So i thought of signing the contract with the Builder. So any recommendation please?

Thanks,

Cosy
 
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
We have a 2 bedder in Brunswick West, block of 6 which we purchased for $320K 2 years ago. I know prices have gone up in the area but you may still be able to get something for under 400. We gave ours a quick paint and put in a new kitchen, it it rents really well for $340 per week.

My one bit of advice would be to make sure you get a building inspection done if you are buying into an older block. We have had a few issues with rising damp!

Good luck :)
 
HI all,

Thanks for all the information and now I found the House and Land in GOLF LINKS ROAD, BERWICK ( Land 220K + 170K for 4 Bed House) So i thought of signing the contract with the Builder. So any recommendation please?

Thanks,

Cosy

Any Ideas for this?
 
HI,

Thanks again, I just check this http://www.aca.ninemsn.com.au/article.aspx?id=660596

Found top suburbs to invest are

Melbourne: Abbotsford, Braybrook, Brunswick, Brunswick east, Carrum, Chelsea, Coburg, Collingwood, Cremorne, Flemington, Footscray, Frankston, Geelong, Kensington, Maidstone, Mordialloc, Seaford, Seddon, West Footscray, Yarraville

But Berwick is not there, lol

Anyway after reading those links i have change my mind and now looking for a house with sub dividable land with CG


Cosy
 
This is published on 05/11/08. Things may have changed since then.

HI,

Thanks again, I just check this http://www.aca.ninemsn.com.au/article.aspx?id=660596

Found top suburbs to invest are

Melbourne: Abbotsford, Braybrook, Brunswick, Brunswick east, Carrum, Chelsea, Coburg, Collingwood, Cremorne, Flemington, Footscray, Frankston, Geelong, Kensington, Maidstone, Mordialloc, Seaford, Seddon, West Footscray, Yarraville

But Berwick is not there, lol

Anyway after reading those links i have change my mind and now looking for a house with sub dividable land with CG


Cosy
 
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