Help with first time investment - Parkville unit (VIC)

[hc_andy]

Hi All,

Just discovered this forum and it's fantastic.

I'm a first time investor and came across this little unit in Parkville (1 bedroom, living area with kitchen, bathroom) which is in our price range (I think). No car park with the title but can be purchased for an additional $8K. Rent at about $210/week.

http://www.domain.com.au/Public/PropertyDetails.aspx?adid=2007688083

My wife is a broker so she's done all the maths and so as not to over commit ourselves too much, we are looking for a modest investment property of $250,000. And this one looks to be within our price range.

Research tells me that Parkville is a great little inner city suburb with a lot of capital growth in the last 10 years.

Median Prices $455,000
Long-term Trend 8.14%
Rental Yield 4.3%

The median unit price in 1999 was $230K.
In 2008, the median unit price has risen to $455K.

My main concern is - what's wrong with this unit and why is it being sold so cheaply??? We've inspected the property and to be quite honest have fallen in love with it.

A recent sale of another 1 bedroom unit in the same building only sold for $200K in Nov 2008, so the asking price for this one isn't far off the mark.

http://www.myhome.com.au/buy/vic/melbourne-city/parkville/apartment/p000s9ho

So is this property really a good buy? Parkville is an expensive place to buy, so why is this place being sold so cheaply? Does it have potential for capital growth?

Some re-assurance or practical advice from those long term investors would help ease my nerves a little bit

Cheers.

Andy

 

[Propertunity]

Median Prices $455,000

So you are buying under the median - good

The median unit price in 1999 was $230K.
In 2008, the median unit price has risen to $455K.

Well this thing has done the RE rule of thumb - it doubled in 10 years

A recent sale of another 1 bedroom unit in the same building only sold for $200K in Nov 2008, so the asking price for this one isn't far off the mark.

...and you have a comparable sale

What more do you want? a set of steak knives? Just buy it.

All the best with it Andy and welcome here too.

 

[hc_andy]

So you are buying under the median - good


Well this thing has done the RE rule of thumb - it doubled in 10 years

...and you have a comparable sale

What more do you want? a set of steak knives? Just buy it.

All the best with it Andy and welcome here too.

Thanks for the reply Propertunity !

Steak knives would be good

Joking aside, my main concern is the capital growth of the property. I don't want it to end up like those dodgy student accomodations or studio apartments where in 3 years time they've barely gone up in value.

Are there any rules of thumb or data I can use to help me evaluate the potential capital growth of this unit? Will it follow the trend also and double in 10 years???

Thanks.

Andy

 

[geoffw]

It is a 1BR apartment.

As such, it may be hard to get a loan- as it may well be below the bank's minimum of 50sqm.

 

[The Y-man]

Issues I see with the Lennon st end:

Railway - runs well above ground at this point and may be noise concern for apartment. (on the bright side, this apartment is right next to the station ramp)

Freeway - runs right next door - many of the apartments on this street has a beautiful view of... the sound barriers. This apartment appears to be above the barriers (downside - could be traffic noise).

About the medians - Parkville is one of the most difficult and deceptive suburbs for getting meaningful stats. Most of the suburb is in fact taken up by parks, a hospital, a uni, CSL, a juvenile detention centre, and a zoo. The residential areas are basically on the fringes bordering Brunswick (Comm Games Athlete's village - i.e. new developments), the Tulla freeway (where this one is), and Royal Parade (where the period homes, terraces, and some newer apartment developments are). These form 3 very distinct areas, each with different characteristics.

The Lennon St end has great transport as already mentioned - but suffers from lack of shops - I think the petrol station across Flemington rd is the nearest thing.

Cheers,

The Y-man

 

[Propertunity]

I don't want it to end up like those dodgy student accomodations or studio apartments where in 3 years time they've barely gone up in value.

Hey Andy, there are lots of places that show no CG in 3 years. RE is a 7 - 10 year investment. See the attached CG graph for period 2004 > 2007 - all downhill but still managed to double in 10 years

Are there any rules of thumb or data I can use to help me evaluate the potential capital growth of this unit?

There is no data that can predict the future CG of anything. All you can do is look at what it has done in the past and make the assumption that all other things being equal, it will continue in this trend. RE does do its doubling act every 7 - 10 years - has done for the last 140 years here and the last 900 years in th UK (so I'm told).

Will it follow the trend also and double in 10 years???

Sure why not. Does that make you feel better

Cheers, Andy.

 

[The Y-man]

It is a 1BR apartment.

As such, it may be hard to get a loan- as it may well be below the bank's minimum of 50sqm.

It'll be most likely ok for a 80% (older style bigger-than-modern-excuse-for-one-br).... and seeing as the hc_andy's wife is a broker...

Cheers,

The Y-man

 

[The Y-man]

As for CG in this particular corner of Parkville, around 2001-2002, I seem to recall seeing apartments in this block in the (very) low $100k mark.... (if not below)

Cheers,

The Y-man

 

[hc_andy]

Issues I see with the Lennon st end:

Railway - runs well above ground at this point and may be noise concern for apartment. (on the bright side, this apartment is right next to the station ramp)

Freeway - runs right next door - many of the apartments on this street has a beautiful view of... the sound barriers. This apartment appears to be above the barriers (downside - could be traffic noise).

About the medians - Parkville is one of the most difficult and deceptive suburbs for getting meaningful stats. Most of the suburb is in fact taken up by parks, a hospital, a uni, CSL, a juvenile detention centre, and a zoo. The residential areas are basically on the fringes bordering Brunswick (Comm Games Athlete's village - i.e. new developments), the Tulla freeway (where this one is), and Royal Parade (where the period homes, terraces, and some newer apartment developments are). These form 3 very distinct areas, each with different characteristics.

The Lennon St end has great transport as already mentioned - but suffers from lack of shops - I think the petrol station across Flemington rd is the nearest thing.

Cheers,

The Y-man

Thanks for the insight Y-man.

Right next to Lennon St is the tram line that they can take you down racecourse road or mt alexander road to get to the array of shops in flemington and monee ponds in 5mins inc mcdonalds and kfc plus asian shops/take aways/restaurants. Plus there's the train station as you've already mentioned. With the CBD and park lands close by, a tennis court also across the road, hospitals around the area, airport access via the tulla freeway, it doesn't look all that bad.

Noise like you said might be a problem with it being right next to the tulla freeway and train station. Plus the street itself is quite narrow and on a steep slope.

This being our first investment, we just want to make sure that we're paying a good price for it which our research has indicated we are. Next we want to establish whether it's has potential for capital growth and we're hoping it will.

Thanks.

Andy

 

[hc_andy]

Hey Andy, there are lots of places that show no CG in 3 years. RE is a 7 - 10 year investment. See the attached CG graph for period 2004 > 2007 - all downhill but still managed to double in 10 years
Cheers, Andy.

True that. But would you touch a student apartment / studio because there's plenty in the inner melb area for $150K-$200K as well. Or would you buy the one in Lennon St

Which is going to give you a better capital growth?

Cheers.

Andy

 

[The Y-man]

True that. But would you touch a student apartment / studio because there's plenty in the inner melb area for $150K-$200K as well. Or would you buy the one in Lennon St

Which is going to give you a better capital growth?

Cheers.

Andy

Wouldn't touch a student accomo thing with a barge pole.


The Y-man

 

[Propertunity]

Wouldn't touch a student accomo thing with a barge pole. The Y-man

Amen to that brother! It works for some ppl tho.

 

[hc_andy]

It'll be most likely ok for a 80% (older style bigger-than-modern-excuse-for-one-br).... and seeing as the hc_andy's wife is a broker...

Cheers,

The Y-man

We just made the cut off with the Lender we're going with only allowing units that are 45sqm+

 

[hc_andy]

Thanks to y-man and Propertunity for your time and advice. I'll go back and research a little more and we'll most likely put forward an offer to the vendor soon.

 

[newlywed1311]

How did you go??

Andy,
Just wondering if you've made an offer and whether you've bought the unit?
Cheers,
newlywed1311

 

[hc_andy]

Newlywed,

I was told by the agent that the unit sold for $240,000. We weren't prepared to pay that much given that the unit next door sold for only $200,000 in Nov 08. But that's the market for you

Cheers.

Andy

 

[newlywed1311]

Too bad

So, they list for $190-210 but sell for $240??? How does that work? Do they play potential buyers off against each other until it moves up to a price that they want? Why do they do that? To get more interest, I guess.
Sorry Andy, I hope that something else comes up for you. I'm also looking for my first investment property and know how exciting and nerve-wracking it can be.

 

[Bayside]

Similar thing hapened to me when I was trying to buy a 1 bed in Carnegie, was listed for $190-$210k. I asked if I could put a pre auction offer in of $220k because I really wanted it. Couldn't work out why the agent didnt bother contacting me back seeing I was a serious buyer. Sold at Auction for $250k
This was last year

 

[hc_andy]

Yes it really is an interesting time in the Melbourne property market. We've looked at various suburbs and the sale price has been much higher than we had anticipated. We thought we could pick up a 1 bedroom unit for atleast $220,000 but after coming back from a few auctions over the weekend, we've learnt that the sale price is $20,000-$30,000 higher than our initial budget.

For example we followed the one in parkville (1 bedroom 1 bath) - sold for $240K. Another 1 bedroom unit in reservoir sold for $260,500. And another 1 bedroom unit in coburg sold for $255,000.

Hopefully after the FHOG boost runs out we'll see less people in the market for property and prices will become more reasonable.