Buying in already established areas?

Hey Everybody,

As the thread title suggests, wanted to gauge peoples opinions on buying in already established areas. More so in the inner North of Melbourne.

In particular, my girlfriend is extremely keen on purchasing our next property in Fitzroy / Fitzroy North (Melbourne). We moved here about 2 years ago and Fitzroy was the first area we really got to know. We have always lived in/around the area and we currently live in Collingwood.

I have searched these forums and the general consensus seems to be that Fitzroy is overpriced. Statistics seem to indicate that Fitzroy has achieved average growth year on year, but to buy in these areas you need at least $500K for a smallish 2 bedroom unit. Gross rental yield seems to be around 4% - 5%?

At $500K, just doesn't seem like you get much at all, whereas, you could move one or two suburbs further and get a lot more. This is almost double the cost of our first property which was a 3 Bed, 2 Bath, 2 Car house!

Are there any benefits in purchasing in areas such as Fitzroy?

I should mention that emotion will form part of our decision making process this time around. This place will be our PPOR. We intend to live in it for the next 2/3 years before turning it into an IP. This is similar to what we did with our first property in Brisbane prior to our move (albeit accidentally). This property is now an I.P and our long term goal is to continue with a buy and hold strategy.

So part of me wants the numbers to also stack up as a future I.P.

:confused:
 
Schmick, I can give you some insight into the inner North of Melbourne suburbs (recently bought an IP in Brunswick and currently living in Fitzroy).

Since you are purchasing a PPOR, I would think Fitzroy North is more suitable in terms of living desirability. Whilst Fitzroy is great, the prices are relatively more expensive and at $500K, you could probably only buy a flat/apartment at best. In fact, some of these flats/apartments have already nudged past the $600K mark (one sold for $650K on Rose St a couple of months ago) so trying to get anything decent with some land content for circa $500K may be optimistic and improbable. However, I wouldn't necessarily say it is overpriced because people will continually pay such prices (so there is substantial market demand there) and Fitzroy pretty much has it all - proximity to CBD, Brunswick St, Smith St etc...hard to go wrong on this premise alone. Having said that, you would find the area is still populated by a plethora of commission flats, one way streets, warehouses, graffiti walls etc... hence why I thought it may not suit your requirements.

In terms of Fitzroy North, it has always been one of my favourite inner city northern suburbs (my overwhelming favourite is Carlton North) and my parents have an IP there. The amenities are great and in some sense, you do get a suburban feel as well. The streets are arguably much nicer and wider than Fitzroy proper (especially around the Edinburgh Gardens, Alfred Crescent Precinct) and there is an abundance of street parking (if OSP is not an essential for you). Still, you may need to budget around the $700-800K at least to get something decent, but the value would always be there. I guess it all depends on budget, and if you must buy inner city, then there will be a trade off one way or another.

Even if you turn it into an eventual IP, Fitzroy North would easily be rentable (as with all inner city suburbs) and I would be surprised if any property there is vacant for long. Therefore, I think for your situation/requirement, Fitzroy North > Fitzroy.

Btw, have you considered Brunswick, Brunswick East, Northcote??? In my opinion, still affordable for what you get.
 
Can't go wrong buying in Fitzroy/Collingwood for long term. And if it's a PPOR for 3 or so years then why not?

Agree mate totally. Inner city suburbs will always be popular and in high demand regardless of how small and run down the place is. Whatever price you pay today would be a bargain in years to come, I have no doubt.
 
We moved here about 2 years ago and Fitzroy was the first area we really got to know. We have always lived in/around the area and we currently live in Collingwood.

I am a big advocate of "buy in an area you are familiar with" - after all you can tell:

1. what's been moving/what's not
2. local tastes/trends
3. local good spots / bad spots.

Cheers,

The Y-man
 
Have you considered Kensington/Flemington? You can still buy a 2 bedroom period style house with R.O.W for under $600k...
 
Hey Guys,

Thanks for all your replies.

DeeHwa, we actually used to live in Fitzroy North and tend to agree with your comments around livability. Fitzroy does appeal to us also for all those things that make Fitzroy what it is, such as the warehouses, graffiti, etc. LOL.

Had we known the power of leverage 2 years ago, we would have bough the unit we were renting at the time in Fitzroy North which was a 3 level (1 level of rooftop terrace with city views), 2 bedroom, 2 bath Warehouse/Townhouse. It sold then for $525,000! =(

I guess one thought I've had is that if we purchase our next property in an inner city suburb, we'd be using practically all of our equity and would be relying on our next purchase experiencing some capital growth in order to fund our next purchase.

Is this the wrong strategy to have if we want to acquire more properties in the future? I mean, should we be looking at a lesser property in order to be able to buy again sooner?

Have also looked/are looking in areas such as Brunswick, Northcote, North Melbourne, etc.
 
Hey Guys,

Thanks for all your replies.

DeeHwa, we actually used to live in Fitzroy North and tend to agree with your comments around livability. Fitzroy does appeal to us also for all those things that make Fitzroy what it is, such as the warehouses, graffiti, etc. LOL.

Had we known the power of leverage 2 years ago, we would have bough the unit we were renting at the time in Fitzroy North which was a 3 level (1 level of rooftop terrace with city views), 2 bedroom, 2 bath Warehouse/Townhouse. It sold then for $525,000! =(

I guess one thought I've had is that if we purchase our next property in an inner city suburb, we'd be using practically all of our equity and would be relying on our next purchase experiencing some capital growth in order to fund our next purchase.

Is this the wrong strategy to have if we want to acquire more properties in the future? I mean, should we be looking at a lesser property in order to be able to buy again sooner?

Have also looked/are looking in areas such as Brunswick, Northcote, North Melbourne, etc.

Hey Schmick,

I guess that is always the predicament with property investors today, with the golden question being 'should I spend more on a superior inner city location or more further out, given all things equal'. This, I guess depends on very much on your own analysis and foresight, with a bit of luck as well. Personally, I don't think there is ever a wrong strategy (some people have made a lot of money buying and selling vacant land, subdivided in unheard places on the ends of Metropolitan Melbourne, and likewise, some people have made a lot of money on 120m2 houses by simply relying on 'boring' capital growth).

Also, don't fall in the trap of thinking buying more is better. Personally, I prefer to hold 1 quality blue chip property asset than 2 mediocre assets. If I have to delay purchases or save that little bit more, I would do that rather than being blinded by mere asset accumulation. Of course, in an ideal world, you would like to buy as many blue chip properties as fast as possible, but then again, if this was the case, I wouldn't be on this forum looking for advice and learning right? haha

To help answer your question, would you be able to let me (and us know), what would be the alternative if you didn't buy in an inner city location? Would it be a property in the west? A different property type (as in not a house), like a flat or unit? etc...

I like your choices of Brunswick, Northcote and North Melbourne (biased because I just bought in Brunswick as you know, haha) but man, these places are fetching some big prices, so hopefully it is still in your budget (should be since you are considering them). Also very easy to rent in those areas so I would class them as premium IP locations.
 
To help answer your question, would you be able to let me (and us know), what would be the alternative if you didn't buy in an inner city location? Would it be a property in the west? A different property type (as in not a house), like a flat or unit? etc...

Hey DeeHwa,

We are really attracted to the North of Melbourne. Guess we are biased because the North is really all that we know. As mentioned earlier, we only just moved here two years ago from Brisbane and the North was the first place we ended up... =)

At this stage, we are really only looking at Units as I think that's all our budget will allow in the inner city. Our other place in Brisbane (still own) is a House in the outer suburbs (approx. 20km from CBD). Since living in inner Melbourne, we've really become accustomed to the 'lifestyle'.

If anybody has some recommendations as to where we should consider, I am all ears. Probably hoping for no more than 10kms from the CBD.

In regards to Fitzroy, you say you are living in the area currently. Have you bought a place or are you renting? House/Unit?
 
Hey DeeHwa,

We are really attracted to the North of Melbourne. Guess we are biased because the North is really all that we know. As mentioned earlier, we only just moved here two years ago from Brisbane and the North was the first place we ended up... =)

At this stage, we are really only looking at Units as I think that's all our budget will allow in the inner city. Our other place in Brisbane (still own) is a House in the outer suburbs (approx. 20km from CBD). Since living in inner Melbourne, we've really become accustomed to the 'lifestyle'.

If anybody has some recommendations as to where we should consider, I am all ears. Probably hoping for no more than 10kms from the CBD.

In regards to Fitzroy, you say you are living in the area currently. Have you bought a place or are you renting? House/Unit?

Hey Schmick,

I live in an apartment with my parents (who bought it) and sister near Nicholson and Johnston St and have been doing so since I was born. It actually does not sound so bad given that I am 'only' 23 (turning 24 this month!). Fitzroy is such a convenient place and I walk to work everyday to the city (in fact, haven't caught a tram or train for years no joke) Although I bought a house in Brunswick recently, I will still continue to live with my parents and thus will be treating my Brunswick house as an IP for a number of reasons (some financial, some practical), not to mention that I can't cook, don't clean etc...it is good to have parents around, haha

Well Schmick, there are still some relatively affordable units and small~ish houses within 10km of the CBD (10kms actually covers a lot of suburbs). I will throw you a few suburbs out of many I can think of which may be of interest and I will assume that you still want to stick to the 'cosmopolitan type' suburbs given that you mentioned you have been accustomed to the 'Fitzroy' life.

1. Northcote and Thornbury - High St strip
2. Brunswick and Brunswick East - Sydney Road, Lygon St
3. Ascot Vale, Moonee Ponds and Essendon - Union Road, Mount Alexander Road and Puckle St
4. Coburg (try to hug Moreland Road as it is the border of Brunswick as much as possible)
5. Yarraville if you so choose the west (personally I am not a fan of the west)
6. St Kilda - Fitzroy St, Acland, Chapel etc. - probably my pick! Probably the most similar to Brunswick St in terms of hippy~ness I reckon

All the usual inner city suburbs like Carlton, Richmond etc...hard to go wrong there, although even a unit would probably be the size of a shoe box.

Not a fan of Flemington and Kensington though. Don't really like the demographics and it is bombarded with housing commission flats galores to the max! Also, nothing 'fun' to do around the area either.
 
Whatever price you pay today would be a bargain in years to come, I have no doubt.

Before saying this, its important to look at the ratio of home prices to local median wages over the past 40 years. Few bother.

Yes, prices may well rise. But there are limits - trees rarely grow into the sky.
I know lots of bullish people who paid too much and had to sit around for a decade waiting for prices to pick up.

All that said, I am a huge fan of property as an investment class
 
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