Is it time for Frankston?

Here are some pics of approved developments in Frankston, including Southeast Waters gleaming new office which will house several thousand employees and contractors. Clearly, the area is advancing and real money is pouring in. Looks more yuppie than bogan to me.

As an aside, St Kilda Football Club is now next door in Seaford.......no shortage of people wanting to move into the warm embrace of the Frankston City Council.

Tranquilo seems to have the right idea about buying low-end property in Karingal. The cheap end is still very affordable. Plenty of good value to be found.

FCC is pretty generous to developers, particularly those seeking to make change in the worst parts of Frankston. I am told that in the last 18 months, FCC has approved every single Development Application in dumpy areas like North Frankston. That sounds pretty positive to me.

Take a look at some of the approved buildings below. To be fair though, buying a glitzy apartment in Frankston is unlikely to be a stellar investment as they will be selling for premium prices and may have limited capital gain. IMHO paying too much for a brand spanking new apartment is rarely an outstanding investment. In all likelihood, IMHO the cheapest quartile of Frankston property will outperform the top-end of the market. Whoops for those who may call me a spruiker, here I am telling people not to overpay in Frankston.

You must be seriously heavily invested in frankston :)
 
The jobs there do are specific. It is unlikely they will create new jobs unless the unemployed in frankston area are civil engineers, project managers, scientist, GIS specialist, IT etc. .

Rather than commute, it's likely that at least a few of these professionals will actually move to Frankston or surrounding suburbs.

You must be seriously heavily invested in frankston :)

Yes. But not blindly so.

I would not be recommending that people buy new stuff in Frankston. There is little capital gain to be had in paying for glitzy overpriced units. The money lies in the supposedly junk end of the market, namely old houses on large blocks. The grubbier the neighbourhood, the better because Frankston City Council is most generous to developers who build in the worst areas.
 
Rather than commute, it's likely that at least a few of these professionals will actually move to Frankston or surrounding suburbs.

Yes. But not blindly so.

I would not be recommending that people buy new stuff in Frankston. There is little capital gain to be had in paying for glitzy overpriced units. The money lies in the supposedly junk end of the market, namely old houses on large blocks. The grubbier the neighbourhood, the better because Frankston City Council is most generous to developers who build in the worst areas.


Majority of people working there already live on the peninsula end. They're not exactly the top end paying market as more civil engineering, IT, accounting, GIS or consulting jobs are still very close distance to the CBD area.

So how many oversized blocks have you bought and have you developed any ? if so what was the return on the capital gain?
 
So how many oversized blocks have you bought and have you developed any ? if so what was the return on the capital gain?

I have plans in place for a few of my acquisitions. Never had any problems with Frankston City Council. They are very happy that people want to do developments in the lower parts of Frankston and Frankston North. In my experience, they went out of their way to help and I found them to be lenient and proactive in the extreme.

Everything I own is borderline cashflow positive. I'm pretty tight-fisted and paid ridiculously low prices for what I bought. I'm sitting tight. Good tenants so far (thank Goodness). Capital gain is pretty assured when the time comes to sell in a decade or two from now. If I got hit by a bus tomorrow and the wife had to liquidate, Im 100% sure that everything we have bought in the past year would give us (at the very least) a 20% capital gain.

I do not recommend that people blindly buy into Frankston. In my opinion, the newer, fancy more expensive houses will give poorer returns than the so-called junk.
 
I have plans in place for a few of my acquisitions. Never had any problems with Frankston City Council. They are very happy that people want to do developments in the lower parts of Frankston and Frankston North. In my experience, they went out of their way to help and I found them to be lenient and proactive in the extreme.

Everything I own is borderline cashflow positive. I'm pretty tight-fisted and paid ridiculously low prices for what I bought. I'm sitting tight. Good tenants so far (thank Goodness). Capital gain is pretty assured when the time comes to sell in a decade or two from now. If I got hit by a bus tomorrow and the wife had to liquidate, Im 100% sure that everything we have bought in the past year would give us (at the very least) a 20% capital gain.

I do not recommend that people blindly buy into Frankston. In my opinion, the newer, fancy more expensive houses will give poorer returns than the so-called junk.

Wouldn't you buy a dev site to develop within 2-3 years (if you buy a few to develop as oppose to sitting on it for a decade or two )? Otherwise it would be better to just sit on property in a more established suburb?

Are you really from shanghai? or just a nick
 
Wouldn't you buy a dev site to develop within 2-3 years (if you buy a few to develop as oppose to sitting on it for a decade or two )? Otherwise it would be better to just sit on property in a more established suburb?

We are passive investors. Getting plans in place gives us options.

If there is an economic slump, builders become a bit cheaper and easier to deal with so that's a positive for us; developing during building booms when builders are smug and extremely busy sounds stressful.
 
At auction, a functional house with granny flat sold for $280,000 last week.

http://house.ksou.cn/p.php?q=Frankston&sta=vic&id=516688

This site is definitely not redevelopable as it is too small. I would imagine this sale would be a cash flow positive proposition.

Needless to say, this one was sold by the lowest achieving real estate agents in Frankston, Ray White Frankston. Good if you are a buyer. Terrible if you were gullible enough to be a seller.
 
...I would not be recommending that people buy new stuff in Frankston. There is little capital gain to be had in paying for glitzy overpriced units. The money lies in the supposedly junk end of the market, namely old houses on large blocks. The grubbier the neighbourhood, the better because Frankston City Council is most generous to developers who build in the worst areas.

If no one buys the new units then why would anyone develop these old larger blocks?
 
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We are passive investors. Getting plans in place gives us options.

If there is an economic slump, builders become a bit cheaper and easier to deal with so that's a positive for us; developing during building booms when builders are smug and extremely busy sounds stressful.

interesting view. i would have thought if you get a site - your aim would be to get the permits done and move on to the next site to develop. Getting the permits etc only goes for a designated period 2-3 years before it requires it to be redone etc.

As for builders -they're basically all the same. As long as you got your contract done properly and managed properly - they were always be issues in bad and good times. if they're buzy and signed up there are damages paid upon projects that are overdue. Strange, from your posts - i thought you had done a fair bit of building work etc which maybe you already have.
 
Hi

I agree with Lord Shanghai's thought.

My father has previously developed over 500 townhouses/units and over 100 maybe 200 homes and complete shopping centres. He has always taken advantage of doing the developments when contractors are looking for work and never done a development when labour is at the peak of a cycle. The difference in costs of construction can vary dramatically once these cycles are taken into consideration.

Sometimes this has meant having to sit on the land for 10 to 20 years till the timing is right and in the end it was all worth it. You also get to take advantage of the capital gains of the land over this time which also increases the return immensely.

Sometimes to do a development immediately is not the most effective use of one's time and often a development can achieve a much higher return once the suburb has gone through its gentrification process, assuming you purchased when the land was much cheaper.

Maybe this does not work for everyone but it has always worked for us and our family.

Never develop during a building boom because you will pay for it in the end.

Regards,

alicudi
 
not sure about that - if there was land in kew to be developed 1.5 years ago was not undertaken to get the permit for multi unit, the changes in sub-division rules for the suburb would have meant unable to build 3 townhouses and there would be relatively minimal gain. The main reason any one buys a sub-division site is to develop otherwise, might as well rack up something in toorak, hawthorn etc like james hird passively waiting to sell up 5 years down the track.

there is also a variety of issues to play into it as well. target buyers to buy the dev, holding and generating returns to not be negatively geared etc. 20 years is a long time to wait on something that has not realized. Changes in circumstances - married, chidren, illness could all play into it as well.

Maybe if frankston is going to be a million dollar suburb 20 years which it may be.
 
If no one buys the new units then why would anyone develop these old larger blocks?

I think what Lord Shanghai is saying he wouldn't recommend these glitzy overpriced units to a investor. Most people will buy not knowing that they maybe paid to much but for most its the life style thing to live in a apartment.
 
Hi

Thanks Melburnian for your reply it is appreciated and I actually do agree with what you are saying with the example you have presented.

Any investor needs to take into consideration the location of where they are buying and to make the biggest gain with the highest return you need to buy specific sites in particular areas that will be able to offer high returns and most properties for sale do not match this criteria.

Keeping on top of current zonings and the Melbourne (2050) Plan and any proposed changes to future plans is the key here.

To go and buy a run of the mill piece of land in a suburb such as Kew which we all have to admit has already gentrified can be risky for an investor because the capital gains have already been enjoyed by previous owners. In this situation it may be better to develop this type of site immediately whilst you know you can get 3 x townhouses on it and to do so may mean paying for builders and contractors in a heightened economy.

It is always good to look at areas that are earmarked for specific future use such as suitable sites for future shopping centres and other outer areas with infrastructure been implemented to cater for a large influx of residents.

Or as in this thread to take advantage of the large scale changes happening in Frankston.

Regards,

alicudi
 
location is more important than block size in frankston I believe, you want to be close to all amenties and services which are more accessible.

why would I buy a dev block in Karingal when I can get a block in central frankston? id have to drive an extra 5-10 minutes to go where I need to?

pointless really....
 
Hi

Thanks Melburnian for your reply it is appreciated and I actually do agree with what you are saying with the example you have presented.

Any investor needs to take into consideration the location of where they are buying and to make the biggest gain with the highest return you need to buy specific sites in particular areas that will be able to offer high returns and most properties for sale do not match this criteria.

Keeping on top of current zonings and the Melbourne (2050) Plan and any proposed changes to future plans is the key here.

To go and buy a run of the mill piece of land in a suburb such as Kew which we all have to admit has already gentrified can be risky for an investor because the capital gains have already been enjoyed by previous owners. In this situation it may be better to develop this type of site immediately whilst you know you can get 3 x townhouses on it and to do so may mean paying for builders and contractors in a heightened economy.

It is always good to look at areas that are earmarked for specific future use such as suitable sites for future shopping centres and other outer areas with infrastructure been implemented to cater for a large influx of residents.

Or as in this thread to take advantage of the large scale changes happening in Frankston.

Regards,

alicudi

Appreciate the response - to say never develop in high economy maybe right if you're talking about 500 houses for savings in a year but how much different would be be in savings for someone who develops say 8-10 houses in a year. With materials prices increasing, how much savings can there be being permit and professional costs (like town planners, architect all increase over the year) and there changes etc are need to be accounted.

Also - if you're in your late 20s-early 30s to develop, without children (responsibilties maybe different when you are 40 or approaching 50 with kids)? availability of time would be much different back as well.

As for that example, there were actually 2, one site had confirmed 3 buyers where else one just put them on the market hoping to make an extraodinary market. The one who sold all three made a profit of 700K and diverisified to another 2 site in doncaster and doncaster east. and is averaging 300-500K per year doing devs like this.

As for original poster - i'm not throwing stones at frankston just wanted to get a feel of any person who sub divided there and made a relatively modest profit to get some understanding of what the returns are
 
Appreciate the response - to say never develop in high economy maybe right if you're talking about 500 houses for savings in a year but how much different would be be in savings for someone who develops say 8-10 houses in a year. With materials prices increasing, how much savings can there be being permit and professional costs (like town planners, architect all increase over the year) and there changes etc are need to be accounted.

Also - if you're in your late 20s-early 30s to develop, without children (responsibilties maybe different when you are 40 or approaching 50 with kids)? availability of time would be much different back as well.

As for that example, there were actually 2, one site had confirmed 3 buyers where else one just put them on the market hoping to make an extraodinary market. The one who sold all three made a profit of 700K and diverisified to another 2 site in doncaster and doncaster east. and is averaging 300-500K per year doing devs like this.

As for original poster - i'm not throwing stones at frankston just wanted to get a feel of any person who sub divided there and made a relatively modest profit to get some understanding of what the returns are

Hi

Materials and labour prices do fluctuate in a heightened economy versus a low economy or a recession, sure they all go up over the long term but in the short term periods it is possible to take advantage of the surplus of labour and materials when it is available. I know of one example where someone built several shopping centres and always did the construction phase when he was able to get the best price for materials and labour. The saving was in the millions. In regards to professional fees, yes I agree they always seem to be going up in price and increasing.

On a smaller scale you can save considerably even when doing 2 or 3 houses if you can negotiate good deals at the right time when tradies are looking for work and not rejecting surplus work.

$700k profit is awesome, the only way to make that in Frankston is to resort to drug dealing and you will probably make much more than $700k.:eek:

Regards,

alicudi
 
http://house.ksou.cn/p.php?q=Frankston&sta=vic&id=518214

This is the kind of textbook example I have referred to in the past. In this case, a rentable brick house on a dual occ block in central Frankston has been sold for a measly $304,500. Capital gain is pretty assured at this price.

Why so cheap? My understanding is that the sales agent is an out-of-town underachiever who presented the first cash offer to the vendor (who had been conditioned down).

So there you go.....a perfectly nice house has been sold in the lowest decile (ie. the lowest 10% of all of this years sales). Although this house is too nice to demolish, it will eventually be redeveloped due to its location and zoning.
 
I was in Frankston on the weekend again and saw that most of the southern side of Davey Street has been sold off (3 or 4 lots next to each other right behind the Deck). There will be more high density applications being submitted for here judging by local precedents and the purchase price on these properties. Local council seems hungry and very supportive of high density developments.

Also South east water has reached top level and looks like it is nearing completion. The stretch of Napean Hwy around SEW, Peninsula on the bay leading up to Davey St may soon start blossoming little by little.
 
http://house.ksou.cn/p.php?q=Frankston&sta=vic&id=518214

This is the kind of textbook example I have referred to in the past. In this case, a rentable brick house on a dual occ block in central Frankston has been sold for a measly $304,500. Capital gain is pretty assured at this price.

Why so cheap? My understanding is that the sales agent is an out-of-town underachiever who presented the first cash offer to the vendor (who had been conditioned down).

So there you go.....a perfectly nice house has been sold in the lowest decile (ie. the lowest 10% of all of this years sales). Although this house is too nice to demolish, it will eventually be redeveloped due to its location and zoning.

Brick? Looks timber to me? Do you know if the existing house can be kept after subdivision?
 
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