There ARE properties in Frankston currently for sale with around 5.5% yield. Just got to do a bit of work to find them.
Harris
Frankston prices increased???
- Thread starter DanielG
- Start date
There ARE properties in Frankston currently for sale with around 5.5% yield. Just got to do a bit of work to find them.
Harris
That Clarendon Street one looks like a redevelopment site. You can't expect high rent on a dump just because the block is big and can be redeveloped. Talk about want your cake and eat it too.
The rent on that other one does look a bit low however, but keep in mind the comments others suggested about rents lagging behind etc. Depends what you're after, if you want a redevelopment site then you probably need to expect a lower return and it's only temporary anyhow until you build. But I think if you are looking for a buy and hold nice property, that the rental return would generally be higher. I don't think it's hard to find a return of 4.5% or more in Frankston. Just depends what sort of property you're looking for.
good answer!!
are these units, or houses?
Houses - those with a unit on the back.
okie, not many of these around in my experience.......
I reckon subidivinding or dual occupancy would be a bit more potential.
so basically any block above 600sqm would be considered ideal for subdivision or development for which you may pay extra $$$ for,
so if you were looking at the hold for the long term approach are you suggesting that you should go under 600sqm, as there won't be much/any subdivision potential.
I am just trying to work out at which point or at which characterisitic, you start paying extra $$$ for an option that you might not consider?
I understand that the first example I gave wsa $350k but with $240 per week rental which is 3.6% yield, which is pretty poor but it does have the development potential as someone suggested
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PM, you are right in your assessment of poor yields and it's annoying. On that $350k one you posted the rent of $240 is probably about market. Even if you could bump it up to $260 per week it's not great. I suggest that there's no shortage of rentals in Frankston under $300 p/w and unless that changes I think it will be a pretty slow road to increased rents.
With regard top your question of what to look for, if your main aim is chasing yields then ,the answer is Yes - You will more likely to find this on a sub 600 sq metre property. I haven't looked into it but I'm not surprised about Harris' experience finding better yields on sub-divided blocks. One thing that happens with increased investors in an area is that price premiums are put onto "development potential" blocks. I believe that RightValue mentioned that valuers don't necessarily see "potential" as adding to the property's value today. However, the market often disagrees.
With regard top your question of what to look for, if your main aim is chasing yields then ,the answer is Yes - You will more likely to find this on a sub 600 sq metre property. I haven't looked into it but I'm not surprised about Harris' experience finding better yields on sub-divided blocks. One thing that happens with increased investors in an area is that price premiums are put onto "development potential" blocks. I believe that RightValue mentioned that valuers don't necessarily see "potential" as adding to the property's value today. However, the market often disagrees.
So has anyone done the sums to see what amount spent versus yield return is the most feasible? For instance, putting a 10k bungalow at the back versus a 50k granny flat and how that progresses yield and sales return? I'd expect that adding a 50k granny flat might limit your resale market and be overcapitalising the property - but I have no basis for that opinion.
Spot on Ms Jade - the prices being paid for development blocks today, moreso in the FHSZ especially Frank South, Frankston Heights & even some in Central Frankston mean that there is no profit in developing them immediately. You will need to hold for at a number of years before it becomes viable.
interesting points made,
so on a strictly hypothetical situation, say you were looking to buy 2 IPs immediately, one to hold for ever, the other to subdivide and sell/rent out, is the following reasoning a good one
Hold for Ever
Either go for a unit in a good location, or a house around 590sqm, that has had very minor but tasteful rennovations, eg floorboards, new paint, half decent kitchen, or one that is quite run down but with a few minor rennovations could rent better, the above two options to achieve a good yield with either no or minimal work, and the reason why I ve chosen 590sqm is because once the sizes reach 620sqm+ the price seem to jump 5%, I assume because of subdividability options
Subdivide
Large block of land 600sqm+ with crappy house with no rennovations done to it,will have low yields due to condition of the house, but maybe a small rennovation to increase the yield with the intention to subdivide down the track? However, once you get into 800sqm+ you get the possibility of 3 unit site, so how much extra would you pay for a say 700sqm Vs 840sqm, eg 840sqm is 20% bigger then 700sqm, however it allows for 3 units instead of 2......
my above is based on the fact that some properties in frankston, the price ranges are all over the place sub 600sqm, you can get under 285k if you are lucky, but once you get over 600sqm, they range from 300-$350k and some of the houses are horrible!!
fellow comments would be much appreciatd
so on a strictly hypothetical situation, say you were looking to buy 2 IPs immediately, one to hold for ever, the other to subdivide and sell/rent out, is the following reasoning a good one
Hold for Ever
Either go for a unit in a good location, or a house around 590sqm, that has had very minor but tasteful rennovations, eg floorboards, new paint, half decent kitchen, or one that is quite run down but with a few minor rennovations could rent better, the above two options to achieve a good yield with either no or minimal work, and the reason why I ve chosen 590sqm is because once the sizes reach 620sqm+ the price seem to jump 5%, I assume because of subdividability options
Subdivide
Large block of land 600sqm+ with crappy house with no rennovations done to it,will have low yields due to condition of the house, but maybe a small rennovation to increase the yield with the intention to subdivide down the track? However, once you get into 800sqm+ you get the possibility of 3 unit site, so how much extra would you pay for a say 700sqm Vs 840sqm, eg 840sqm is 20% bigger then 700sqm, however it allows for 3 units instead of 2......
my above is based on the fact that some properties in frankston, the price ranges are all over the place sub 600sqm, you can get under 285k if you are lucky, but once you get over 600sqm, they range from 300-$350k and some of the houses are horrible!!
fellow comments would be much appreciatd
Maybe someone who has subdivided can tell us of their experiences? I'm told the local council is pretty pro-development as they want to have the older houses removed and replaced with nicer ones.
4.4 % yield on units
This:
http://www.realestate.com.au/cgi-bi...r=&cc=&c=76688901&s=vic&snf=rbs&tm=1258229559
was reported as sold for $ 906,000. at a return of $ 40,000 pa.........that's a 4.4 % gross yield.
Are the investors now allowing their emotions to cloud the numbers?
Sure there'll be value add by soft reno's to boost that figure, however in my eyes, that is a low return for units there on actual purchase price.
On a house that has spare land to add a dwelling to, perhaps one can fathom a soft yield as a holding cost for the development upside, however on units
And......rents can't be forced up so quickly in that area
This:
http://www.realestate.com.au/cgi-bi...r=&cc=&c=76688901&s=vic&snf=rbs&tm=1258229559
was reported as sold for $ 906,000. at a return of $ 40,000 pa.........that's a 4.4 % gross yield.
Are the investors now allowing their emotions to cloud the numbers?
Sure there'll be value add by soft reno's to boost that figure, however in my eyes, that is a low return for units there on actual purchase price.
On a house that has spare land to add a dwelling to, perhaps one can fathom a soft yield as a holding cost for the development upside, however on units
And......rents can't be forced up so quickly in that area
This:
http://www.realestate.com.au/cgi-bi...r=&cc=&c=76688901&s=vic&snf=rbs&tm=1258229559
was reported as sold for $ 906,000. at a return of $ 40,000 pa.........that's a 4.4 % gross yield. Are the investors now allowing their emotions to cloud the numbers?
Its probably on a massive site and buyers would thus be less concerned with the current yield than in redevelopment opportunities. Pity the agent didn't have the intelligence or courtesy to advertise the block size. Buyers would naturally want to know the block size - and if 10 units fit there, I suspect it'd be close to half an acre in size. Damn these agents - one has to bust one's tail getting anything useful out of them.
It was meant to have been auctioned this weekend. Again, a stupid way to sell property in Frankston. Most local sales aren't done by auction. Bet it suits the agent fine....less work for him. I feel sorry for the vendor. Probably too old to know how things work....or perhaps an absentee landlord. Either way, the agent gets his grubby commission for selling the property for as song. If sold individually, each would fetch much more than the sum realized by an en-bloc sale. Again, the agent should have told the vendor that.
Hi BM
It was reported in The Age as being on 980 sqm and I think they are 5 x 2.
Still it is a dated property with possibly some structural issues. It looks brick veneer to me, not solid brick.
In any case, I don't think there is too much value add by way of building (aside from car ports perhaps) to achieve, so as a land bank, unless the council upzone that area to a higher density, what exists is what exists. Only other way out is to strata and reno and flog off one by one, however I reckon the entry price is too high to achieve a reasonable return on that also.
If you bulldozed what's there, you'd only get three town houses.
My point being, that at that purchase price, and closings of over 50,000, the new owner is looking at say 960,000 round numbers and on a prospective rate of say 8 % is looking at 77,000 interest per year (the bank will probably assess the loan at that rate) on a GROSS 4.4 %. Also they will likely get a 70 % LVR if not slightly less. Once one factors in council rates, PM fees, water, insurance, repairs, land tax (as applicable) ,etc., that yield is looking skinnier and skinnier.
Significant holding costs IMHO. Location is good and central, however as much as I like multi's for yield (not in this instance) and full control, I would never have purchased that at that price. Waiting for cap growth having bought at that price point in the market, is speculative.
It was reported in The Age as being on 980 sqm and I think they are 5 x 2.
Still it is a dated property with possibly some structural issues. It looks brick veneer to me, not solid brick.
In any case, I don't think there is too much value add by way of building (aside from car ports perhaps) to achieve, so as a land bank, unless the council upzone that area to a higher density, what exists is what exists. Only other way out is to strata and reno and flog off one by one, however I reckon the entry price is too high to achieve a reasonable return on that also.
If you bulldozed what's there, you'd only get three town houses.
My point being, that at that purchase price, and closings of over 50,000, the new owner is looking at say 960,000 round numbers and on a prospective rate of say 8 % is looking at 77,000 interest per year (the bank will probably assess the loan at that rate) on a GROSS 4.4 %. Also they will likely get a 70 % LVR if not slightly less. Once one factors in council rates, PM fees, water, insurance, repairs, land tax (as applicable) ,etc., that yield is looking skinnier and skinnier.
Significant holding costs IMHO. Location is good and central, however as much as I like multi's for yield (not in this instance) and full control, I would never have purchased that at that price. Waiting for cap growth having bought at that price point in the market, is speculative.
Hi Player
Wow 10 units on a mere quarter acre?! Wonder how they got approval for that back then.
What's the cheapest 1br unit in Frankston sell for these days? Would the vendor been better off strata-ing off each unit and selling them individually?
Wow 10 units on a mere quarter acre?! Wonder how they got approval for that back then.
What's the cheapest 1br unit in Frankston sell for these days? Would the vendor been better off strata-ing off each unit and selling them individually?
5 x 2
No. They are five units of 2 BR each. So only five doors.
If it were 10 hell yeah, cop the yield and reno/strata and flog off.
No. They are five units of 2 BR each. So only five doors.
If it were 10
hell yeah, cop the yield and reno/strata and flog off.I was there and i was one of the under bidders. I'd done alot of homework on work necessary and couldnt see the value in it myself at that sort of coin - still the guy that brought it was "going to buy it" if you know what i mean.
Yes it was brick veneer but didnt have obvious structural issues. All the gotchas for making it strata titled were there and would have cost a few bucks.
So thats 2 in the last 3 weeks ive missed out to exuberant bidding and waifer thin yields.
Yes it was top dollar. Good result for the vender
pieman
Yes it was brick veneer but didnt have obvious structural issues. All the gotchas for making it strata titled were there and would have cost a few bucks.
So thats 2 in the last 3 weeks ive missed out to exuberant bidding and waifer thin yields.
Yes it was top dollar. Good result for the vender
pieman
Sounds like the guy who bought it is perhaps expecting further capital growth in the area - or simply, had put a significant amount of time into the deal and has the money to hold it until further growth kicks in.
All very interesting though. Are standard houses/units in Frankston increasing in value at the moment too? Or is it mainly property with subdivision/development potential?
Regards Jason.
Prices are moving, albeit slowly - this is good for investors who haven't gotten in yet.
It is rare to be able to buy houses in any metro Aussie beachside suburb for the $300k mark. But one can easily do that in Frankston/Seaford. That makes it cheap in my book. At the $300k price, it is still 40% below the greater Melb median. So there's little downside. And IMHO there'd be zero downside for the development sized stuff if bought at the current median price of $320k.
But I suspect that the bargains will dry up when the construction of the humungous marina starts. Its been approved at all levels of government and although he naysayers said it'd never happen, it will eventually put the area on the map.
Was the buyer a buyers agent for an out of towner? Thats a pretty poor looking area of Frankston and was inhabited by many druggies, as there are many ugly looking units with 5 on a block type units in that area.
Maybe that part of town is slowly changing. Sure was a good price for the vendor.
Sounds like sour grapes that you don't have a spare $1m to invest.
Druggies? Do you work for the police and keep in touch with local stats do you? I've seen drug paraphanalia on the street in Vaucluse & Double Bay. Prices there went up a lot since I saw the syringes back in 1990.
Pray tell us where we should park our money old boy. And if you don't have any positive investment ideas, why bother posting at all?
