Apartment or Unit in Melbourne?

T

tsengyhj

Hi all,

Hope everyone is well :)

So I've got a situation here where my partner and I are planning to find a PPOR for ourselves around the start of 2013. Our budget is only around $400k because thats all we can afford at this stage and we have enough for a 10% deposit. Also the fact that we're both full time students and only working part time means we can't take on more risk by taking out a bigger loan as this will put too much stress on us.

We plan to stay in this place for at least about 3-4 years, so not that long term. We're also very interested in venturing into property investment so we hope to convert this place into an IP after that period.

Thus this brings us to the dilemma of whether to purchase a decent 1 bedroom apartment in somewhere like Carlton or Brunswick, or getting a bigger place like a 2 bdr unit further out in a place such as Mitcham. We're quite adamant on staying in the east as thats where friends and family are, and we both go to uni in the east so we want it to be convenient too. But we realise that CG in an area such as Mitcham would probably not be as strong as an apartment much closer to the CBD. Another factor to take into account is that we may plan to have a baby in the next 2 years too, so obviously we prefer somewhere quieter further out east.

So what do you guys think? In relation to an investment point of view how easy it would be to rent out a unit in Mitcham in the future?

Cheers
 
Hi Tsengy,

It's always difficult when you're looking for a PPOR whilst intending it to be an investment in the future.

Why is that?
Because you'll be inherently conflicted.

On one hand you'll be asking yourself what is going to suit my situation and my future; and on the other you'll be saying what is going to make me money. There has to be compromise, so it's important to ask yourself what is more important?

$400K is quite a good amount to enter into Blue Chip eastern suburbs with a one bedroom apartment, and I could virtually guarantee you if you bought an investment that ticks all the boxes in say Elwood it'd be more likely to out perform Mitcham by as much as 3 fold.

Another option that may suit you is buying a property solely for investment and then renting what you can afford so as your life changes in the next 5 years you can alter your accommodation to suit. Then eventually buying your own PPOR when you're more settled.
 
tsengyhj said:
We're quite adamant on staying in the east as thats where friends and family are, and we both go to uni in the east so we want it to be convenient too. But we realise that CG in an area such as Mitcham would probably not be as strong as an apartment much closer to the CBD. Another factor to take into account is that we may plan to have a baby in the next 2 years too, so obviously we prefer somewhere quieter further out east.

So what do you guys think? In relation to an investment point of view how easy it would be to rent out a unit in Mitcham in the future?
Click to expand...

I would say forget mitcham as an apartment - you're better off buying landed properties in those areas.
 
Thanks for the replies guys.

Yes the dilemma is pretty much tossing up between an apartment in a blue chip area near the CBD, or a landed area in an area around Mitcham. Any landed area before Mitcham in the east is pretty much out of our reach unfortunately.

I understand that I have to make the decision ultimately in regards to the trade off between whats going to make us money and what fits our situation.

And I'll definitely look into the option of using the money solely for investment purposes while renting out for the next 4-5 years.

How are the capital growth prospects of landed areas in Mitcham/Ringwood compared to apartments closer to the CBD like Elwood/St Kilda/Carlton?
 
According to Residex the highest growth suburbs in Melbourne (apartments) for the next 5 years will be:

Elwood - 8%
St Kilda - 8%
Windsor - 6%

Mitcham (houses) are projected at - 3%

Take those in with a pinch of salt, as no-one has a crystal ball... but as stated previously I could virtually guarantee you that an inner city apartment would perform better than a house out in the sticks
 
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tsengyhj said:
Is there any particular reason you say so? We need a place to live in in the coming months and I'm really not keen on throwing my money away in the form of rent payments.
Click to expand...

i'm just assuming your financial position being a student that you do not have a steady income coming - unless you have 200-300K lying in the bank, then go for it? there are some risks without a job as you have lifestyle factors and also loan applications without a job could pose issues to getting approved.
 
We go to uni at Monash Clayton and Deakin Burwood so they aren't too far apart from each other.

I should also mention that we both have part time jobs alongside our full time student positions so there should be a decent flow of cash coming in every week. We also own a fully payed off student accommodation in boxhill which we plan to rent out soon at hopefully around $220 a week.

I estimate that the student accommodation is valued at between $130-150k. Is there anything we can do with that in terms of helping us leverage another place?
 
tsengyhj said:
It's not very big to be honest, around 23m^2 + balcony.
Yes, theres a self contained kitchen and a bathroom as well.
Click to expand...

Hmm maybe possible. Talk to a broker or someone who can help you with that question, as it also depends on the zoning and where it's located.
 
student accommodation in box hill in terms of CG is not going anywhere unfortunately and i know ppl trying to sell that haven't seen an offer put in for close to 2 years. then again rental is good over there.

i see your rationale of staying around those areas but you best determine if you want lifestyle or capital gains factors?
 
It would be advisable to leverage the student accom as much as possible otherwise you'll have all that cash sitting in a property that you're not negatively gearing... bearing in mind if you're only working part time there might not be that much tax to claim anyway.

Also talk to an accountant... James on these forums from houseofwealth is very good.
 
I don't think specific examples will help because I could just pick properties to support my argument...

All I can say is that according to the stats (residex, rp data) units in the inner city suburbs (not the CBD) such as: West Footscray, Yarraville, Williamstown Nth, etc ...Have all out performed houses in suburbs such as: Fawkner, Pascoe Vale, Glenroy and those that are further out of the city, over the last 10 years...

Now that is only an overview of median values for unit vs house within suburbs and does not take into consideration actual specific properties.

When you get down to the nitty gritty if you select the right apartment, within the right street, within the right suburb it will absolutely smash a house beyond 15kms of the city without a doubt.

To be a hypocrite an example is 8/47 Denbigh Road Armadale... an unrenovated 2bed 1960's apartment just sold for $712,500 when it was bought only a few years back for around the 400K mark. I don't think I know of any properties in Mitcham that have almost doubled in 36 months.
 
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