Analysis Paralysis!

Hi guys, would love some input on my current situation..

Currently have a budget to buy two properties at approx $550k each (all costs inclusive including reno costs). We are on good incomes, currently have 1 IP and our PPR and strategy is to purchase both properties with an aim to achieve a good capital growth in the short-medium term. One property I want to buy in VIC, where we are based, in order to cosmetically renovate and subdivide. The other I don't mind where it is - it can be anywhere in Australia as long as I can buy it below the median and expect a good capital growth.

Curious if anyone would mind sanity-checking my strategy and offering advice?

1) With the property to buy-renovate-subdivide (and sell subdivided land)-hold in VIC, I've been eyeing up a few areas particularly in regional VIC. The most promising area I've found is Geelong which has areas that seem to have good sized blocks, a healthy market for 3-4br houses (families), and good possibilities for subdivision. Thomson seems to be a good area that is gentrifying, Corio is a bit lower class but has good growth potential being closer to Avalon, and there's a few other areas I've got my eye on too. I've also investigated Bendigo suburbs too but don't see a lot of evidence that there's a market there for subdivided land (in the form of an ex-back yard, anyway) - it's more larger development sites there. The median in all those areas is pretty low though ($250-300k) so on the other hand, I'm also looking at Berwick which has a house median of something like $450 from memory and Thornbury of $660k, areas which I have seen to be showing indicators of performing well in the coming years. Buying a renovator's delight Californian Bungalow in Thorny at well below median with subdivision potential might be a pipedream though :/

2) On the other hand, looking at areas in QLD, WA and NSW for the other property. Not wanting to renovate anything interstate thanks but I'll consider a subdivision move. Inner West in Sydney (Marrickville, Dulwich Hill and areas around that light rail extension) look good.

I guess the good thing is we have plenty of equity to play with and can be flexible with the numbers, for instance buy a regional VIC place for sub $300k and something in Marrickville for $700k, for instance (okay, I can't recall the median OTOH at the moment but you get my point). I guess I'm just a bit over-analysed on the numbers and need to actually make a decision!

Ideas? Thoughts?
 
If you want to do subdivision in NSW you really need to thoroughly understand the council rules and/or align yourself with a Town Planner.

Also just because you can subdivide doesn't mean that it guaranteed CG. Make sure you do the numbers.

Regards

Shahin
 
Sounds like you have done a lot of specific research on a couple of locations. How does either or both purchases fit with your wider goals. Five years, ten years?
 
I need to "work out where I want to buy"? No **** :)

Both properties are meant to be buy-and-hold, the strategy being to just buy in high capital growth and keep adding properties (I've budgeted for two per annum at this stage), eventually paying down some in order to gain passive income.

Interesting point Shahin about the "just because you can" factor of subdivision. As part of my location analysis I'm looking at things like whether there's a market for the subdivided land in the area and whether it is achievable (from the perspective of the council approving it). I figure if an area is gentrifying and is built up, then there'll be a few examples in the area of where people are starting to subdivide. I know in VIC there's a website that shows all council planning permits which is useful. Because I've never done it before, I'm more likely to buy a property closer to where I live and I know, rather than risk trying to do that interstate.

The interstate property, thus, is pretty open - I'ld be just as happy to buy a revampable unit as a 3br house!
 
Not wanting to renovate anything interstate thanks but I'll consider a subdivision move. Inner West in Sydney (Marrickville, Dulwich Hill and areas around that light rail extension) look good.
You will not likely get anything in the Inner West of Sydney that is sub-dividable for your budget of $550K. This is Inner West - blocks are (mostly) already small here. Even for $700K you would be struggling to get a 2-3brm semi that would need a reasonable sized renovation - but it can be done.

The interstate property, thus, is pretty open - I'ld be just as happy to buy a revampable unit as a 3br house!
For $500-550K you could get a 2brm unit that needs a reno. Bear in mind that the maximum kind of reno you can do to a unit is kitchen, bathroom, paint, floor & window treatments - about $25K of costs. This should add at least $50K of end value. But the upside on a unit is capped. i.e. you can take a $550K unit and make it worth $600-650K but that's about it.
With a house, you can take a $700K house and make it $800-850K or if you do a first floor addition you can even make it over $1M.
 
You will not likely get anything in the Inner West of Sydney that is sub-dividable for your budget of $550K.

That's cool, I don't want to subdivide or renovate anything interstate really anyway - too hard basket for now.

But the upside on a unit is capped. i.e. you can take a $550K unit and make it worth $600-650K but that's about it.
With a house, you can take a $700K house and make it $800-850K or if you do a first floor addition you can even make it over $1M.

Yah that's true. Not looking to do any structural reno though - again too hard basket, cosmetic only :)
 
Hi guys, would love some input on my current situation..

Currently have a budget to buy two properties at approx $550k each (all costs inclusive including reno costs). We are on good incomes, currently have 1 IP and our PPR and strategy is to purchase both properties with an aim to achieve a good capital growth in the short-medium term. One property I want to buy in VIC, where we are based, in order to cosmetically renovate and subdivide. The other I don't mind where it is - it can be anywhere in Australia as long as I can buy it below the median and expect a good capital growth.

Curious if anyone would mind sanity-checking my strategy and offering advice?

1) With the property to buy-renovate-subdivide (and sell subdivided land)-hold in VIC, I've been eyeing up a few areas particularly in regional VIC. The most promising area I've found is Geelong which has areas that seem to have good sized blocks, a healthy market for 3-4br houses (families), and good possibilities for subdivision. Thomson seems to be a good area that is gentrifying, Corio is a bit lower class but has good growth potential being closer to Avalon, and there's a few other areas I've got my eye on too. I've also investigated Bendigo suburbs too but don't see a lot of evidence that there's a market there for subdivided land (in the form of an ex-back yard, anyway) - it's more larger development sites there. The median in all those areas is pretty low though ($250-300k) so on the other hand, I'm also looking at Berwick which has a house median of something like $450 from memory and Thornbury of $660k, areas which I have seen to be showing indicators of performing well in the coming years. Buying a renovator's delight Californian Bungalow in Thorny at well below median with subdivision potential might be a pipedream though :/

2) On the other hand, looking at areas in QLD, WA and NSW for the other property. Not wanting to renovate anything interstate thanks but I'll consider a subdivision move. Inner West in Sydney (Marrickville, Dulwich Hill and areas around that light rail extension) look good.

I guess the good thing is we have plenty of equity to play with and can be flexible with the numbers, for instance buy a regional VIC place for sub $300k and something in Marrickville for $700k, for instance (okay, I can't recall the median OTOH at the moment but you get my point). I guess I'm just a bit over-analysed on the numbers and need to actually make a decision!

Ideas? Thoughts?

If you want to subdivide - say reno and retain the front and build one at the back or sell the backyard - I would look at Croydon, Ringwood/Ringwood East and Moroolbark. This strategy works there and there is money to be made.

You might also do a reno for now and think of subdividing later, or develop. Many options thats for sure.

Good luck.
Oscar
 
I need to "work out where I want to buy"? No **** :)

Both properties are meant to be buy-and-hold, the strategy being to just buy in high capital growth and keep adding properties (I've budgeted for two per annum at this stage), eventually paying down some in order to gain passive income.

Interesting point Shahin about the "just because you can" factor of subdivision. As part of my location analysis I'm looking at things like whether there's a market for the subdivided land in the area and whether it is achievable (from the perspective of the council approving it). I figure if an area is gentrifying and is built up, then there'll be a few examples in the area of where people are starting to subdivide. I know in VIC there's a website that shows all council planning permits which is useful. Because I've never done it before, I'm more likely to buy a property closer to where I live and I know, rather than risk trying to do that interstate.

The interstate property, thus, is pretty open - I'ld be just as happy to buy a revampable unit as a 3br house!

Good idea. Sydney Council policies are so different its not funny and you really need a PHD in Aerodynamic Engineering to try and understand the rules and restrictions of each council. Perhaps im exaggerating a little but you do need to understand the restrictions applicable for the type of development you are looking to achieve. I find with this types of things its best to stick to what you know best.

Regards

Shahin
 
If you want to subdivide - say reno and retain the front and build one at the back or sell the backyard - I would look at Croydon, Ringwood/Ringwood East and Moroolbark. This strategy works there and there is money to be made.

You might also do a reno for now and think of subdividing later, or develop. Many options thats for sure.

Good luck.
Oscar

This sounds like the sort of thing I want to do. Thansk for the tips. What about Berwick, do you think that strategy works there? I'm attracted to that area because of capital growth drivers (university campuses there, monash freeway upgrades etc)..

I'll crunch the numbers and analyse those suburbs in some more detail. I was interested in Thornbury because of its gentrification potential, I have a townhouse in Preston that has gone up considerably since 2007 and I think certain houses, if there are any that can be renovated and subdivided, would be gold up there.

The reason I'm looking for a property interstate for the 'other' one is because, well, all over the news we are seeing doom and gloom for melbourne's property market. Obviously that's an average (certain dwellings will suffer more than others) but all the good news stories about QLD, Sydney and Perth are all over the place, not to mention the stupid "HOT 100 SUBURBS" style articles in the mags every month (they never cease do they!) It makes analysis of locations very difficult..
 
I think the doom and gloom in Melbourne is oversold, seriously. The only markets which are struggling in Melbourne are the following:
High Rise CBD - due to oversupply. Foreigners were sold these en-masse, they paid top dollar of $10,000 per sqm for little dog boxes with NO CAR PARK. Since the apartments are now no longer new, these foreigners flood the local market. Supply rises, demand is pretty stagnant so the price falls. Hardly surprising.
Apartments in suburbs - same issue with CBD. This is coupled with the fact that there is even less demand for people to live in apartments in the suburbs. People just don't accept apartment living in Doncaster right now compared to living in an apartment in the middle of the CBD. Why would you pay $500,000 for a 2-3 bedroom apartment when you can buy a house for a bit extra?
New houses in the new developments (Point Cook, Cranbourne) - these areas were fuelled by the large FHOGs ($32,000 for a new house etc) so now with those incentives gone of course it is going to fall back as the FHOBs can never afford the deposits without these grants. It's not rocket science.
 
This sounds like the sort of thing I want to do. Thansk for the tips. What about Berwick, do you think that strategy works there? I'm attracted to that area because of capital growth drivers (university campuses there, monash freeway upgrades etc)..

I'll crunch the numbers and analyse those suburbs in some more detail. I was interested in Thornbury because of its gentrification potential, I have a townhouse in Preston that has gone up considerably since 2007 and I think certain houses, if there are any that can be renovated and subdivided, would be gold up there.

The reason I'm looking for a property interstate for the 'other' one is because, well, all over the news we are seeing doom and gloom for melbourne's property market. Obviously that's an average (certain dwellings will suffer more than others) but all the good news stories about QLD, Sydney and Perth are all over the place, not to mention the stupid "HOT 100 SUBURBS" style articles in the mags every month (they never cease do they!) It makes analysis of locations very difficult..

I would stick to areas where there is a demand for what you want to do. I don't believe Berwick fits your model.

Do some more research and you will get the answer. ;)

Oscar
 
I would stick to areas where there is a demand for what you want to do. I don't believe Berwick fits your model.

Do some more research and you will get the answer. ;)

Oscar

I'm only going on the latest Hotspotting report for Berwick (the only suburb of greater Melbourne that Ryder's included, everything else is regional). Why don't you believe Berwick fits my strategy out of interest? The population is predominately young families and students, houses are the 'standard' dwelling there and it seems there are some big-enough blocks out there.

I'ld have to go well beyond the hotspotting reports and see what capital growth DRIVERS are in Croydon/Ringwood/etc.

Cheers :)
 
I'm only going on the latest Hotspotting report for Berwick (the only suburb of greater Melbourne that Ryder's included, everything else is regional). Why don't you believe Berwick fits my strategy out of interest? The population is predominately young families and students, houses are the 'standard' dwelling there and it seems there are some big-enough blocks out there.

I'ld have to go well beyond the hotspotting reports and see what capital growth DRIVERS are in Croydon/Ringwood/etc.

Cheers :)

Berwick has MASSES of land around it. Old Berwick centre is nice, but anything in the new estates is hard to shift. It took us a year to sell our new build in Berwick, and the people that bought it were "flippers", (and not very good ones as it took them two years to on-sell it, at a loss).

Driving to the city from Berwick on the Monash would be a joke. Emma used to park at the station at train it in but she had to be at the station before 6:15am just to have a chance at a parking spot, (this was almost 3 years ago)

Take a drive from Berwick High Street along Clyde Road to Cranbourne, there is so much new stock coming online it's quite unbelievable.

EDITED to add part of the problem with the new estates is there is very little to service them as they are building houses quiker that they are building supermarkets etc. Go to Eden Rise Coles/Aldi one evening or Saturday. The place is mobbed, we used to have to park in the houseing estate next door and walk in as you couldnt get a parking spot. Too many houses and not enough facilities at the moment.

Berwick centre might be a different story though, but I can't see the new outer estates doing much in the next few years with so many houses getting built.
 
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