Advice please - Inner suburban Melbourne

[pikla]

Hi all,

New to the forums, and a noob in regards to property investment lol.

Just needing some advice or to be pointed in the right direction as to where I can do some homework. My partner and I are 29 and are finally in a poisition to enter the market. We are looking to purchase an apartment as a PPOR in inner suburbs of Melbourne (South Yarra, Prahran, St Kilda East or Toorak) but are not sure which suburb would be best to purchase in based on what stage of the cycle they're in, which will be best for long term captial growth, and best yields.

The apartment will be our PPOR for 2-3 years then a long term IP after I finish my studies and we are able to purchase something with more space.

Just wanting some thoughts on these areas? Is it a good/bad time for particular suburbs and where is the best place/resource I could use to help make the right decision.

Thanks for the help!

 

[Jake Milne]

Congrats on getting yourself into a position where you're able to enter the market. Before you start looking at areas and the like please let me point out the quandary in your post.

"POR for 2-3 years then a long term IP after..."

The issue I take with this approach is that you'll most likely put your wish list and emotions above the importance of the property's performance even though you're asking about growth right now. Real Estate investing is a long term game and 2 years is nothing in the grand scheme of things.

I've witnessed many people falling into the trap where they buy something that suits them but it's not the type of property that stacks up financially and holds them back later on.

So before you start looking at areas. Sit down and think long term. Ask quantifiable questions like:

- How much am I willing to invest?
- How much am I willing to pay for upkeep?
- How long am I willing to hold onto this property?
- How much equity do I want to accrue by the end of my holding period?
- How long am I willing to hold a negative cash flow position?
- How much return do I want by the end of the holding period.

These questions should be answered along with a whole host of others so you can start devising an investment strategy. That way, you'll be able to find somewhere that stacks up as an investment first and doubles as a home you'd like to live in too.

After a strategy is in place you'll be able to focus on suburbs and the type of property that best fits your goals in those areas thereafter.

 

[DavidMc]

Well, I can tell you I've had an nice $650-700k ish apartment in Toorak that has barely grown at all since 2007 - 7 years! (paid $592k).

Perhaps it's time for some growth there now? To live in it's very nice.

 

[pikla]

Thanks for the reply Jake,

I should have mentioned that when we eventually look a our second investment we plan to hold onto this one and rent it out. We are looking at spending no more than $460k at the moment which will only get us a 1 bed in the blue chip areas like SY, Prahran or Toorak and perhaps a small 2 bed in St Kilda East.

Because we know that it will not be our PPOR for too long we will be making a decision around what we think/hope would be the best IP preferring apartments that are run down/need work as we have a lot of trades in the family that could help us increase the value of the property at minimal cost

- How much equity do I want to accrue by the end of my holding period?
- How long am I willing to hold a negative cash flow position?
- How much return do I want by the end of the holding period?

These are the questions I find harder to answer. I guess being new to this will mean these questions become easier to answer with experience, no?