A few years back I travelled down to Frankston (from Sydney) with an open mind to look around the area for an IP. I also bought in Carrum Downs. Not that far to the beach.
Regards
Marty
Purchasing in VIC - Frankston Area
- Thread starter Cherry Pro
- Start date
Regards
Marty
hey Matt, can I assume that you are 24-25 years old, if so congrats on starting young,
so can I ask if you had the equity/cash, would you develop now, I am just curious if you think the timing is not so great,
also, if there are developers out there, do good potential development sites generally make good general investments if you aren't going to develop.. as per one of my previous posts
thanks
Yes i am 24 going on 25. I studied Finance at Uni and the one of the main points i took away from the course is it's about "Time in the market, not timing the market". Which is why i am starting so early.
If i had the equity, no i would not develop a f.north place now, as you said minimal to no development yet and the area simply isant ready YET.
As for the second question. I had a similar conversation with our Buyers advocate. He essentially said bigger development sites say 850-1000sqm with only one house on it costs alot more to hold onto because your paying alot more for them andthe tenents arnt going to pay extra for a massive backyard.
They will still follow the general trend of the area but the full value wont be unlocked until you develop it.
Cheers,
Matt
P.s I would love to here an experts views
Another factor is that the house might be run-down and only just habitable; lowering its rentablility and rent received. Plus you'd be reluctant to spend much on it if it's going to be pulled down in a couple of years.
A buyer wanting a house to live in wouldn't really care if the block was 580 or 600 m2 (or 880 or 900m2) but a developer might. So demand for the larger property might come from two sources, provided the house was OK.
On the other hand development is fickle and in a recession it may be more volatile than other economic activity, including people buying their own homes.
Hence I'm playing devils advocate, but there could be circumstances where business confidence is poor, so there is little interest from developers, yet the property is unattractive for owner occupiers so the property goes for a song to someone like you.
Well Said Spider.. All very good and valid points.
Last edited:
ok, can I confirm what you are saying, I think we are thinking on the same wavelength.
yes, maybe Im letting emotion or my logic getting involved but I also don't think its right to develop something only to tear it down a few years later, but if its going to get you a better return I guess go for it, I guess its the same for those display suites in high rise buildings, they have one for display and demolish it later, as a part of sales/marketing
so are you saying that the average person won't care if the property size is 580 VS 600 OR 580 VS 800, I took your statement to mean a small difference won't matter to the average person or tenant
can you please explain what you mean by "two sources" from "So demand for the larger property might come from two sources, provided the house was OK". are you saying that larger houses might be interesting to developers AND tenants looking for large houses, if that is the case, isn't that what usually happens, so if you find a larger then usual place, then most of the times it fetches a bit more for the rareity factor.
"On the other hand development is fickle and in a recession it may be more volatile than other economic activity, including people buying their own homes. "
yep agree, developing probably will be hit first during a recession before house prices
"Hence I'm playing devils advocate, but there could be circumstances where business confidence is poor, so there is little interest from developers, yet the property is unattractive for owner occupiers so the property goes for a song to someone like you."
that I find interesting, yes, people may not want to develop due to the economy or the area is NOT READY for it. and the average home owner, might not be interested, hence someone like me could get a bargain for it, but then as sabitor mentioned, doesn;t this mean that you may get a substantially lower yield for it, because the actual house might be a bit shabby hence lowering the rent even though the land is bigger.
sorry I couldn't work out how to multi quote
Having a large block of land does not necessarily mean you will have a large house sitting on it.
Ultimately tenants are paying for the building so weather the land which the building sits is 500sqm or 1000sqm is mostly irrelevant.
Obviously to the developer the land size is everything.
Off the subject a little:
The reason why i am buying development sites with a long term view is so when i can afford to develop in 7-12 years i wont need to go and buy a site at the market price is 7-12 years time.
From what i hear small time development is hard work with lots of ways you can stuff up, even after intensive DD.
I figure if i purchase land worth, say $200,000 now in 7-12 years time hopefully it will be worth double that. Therefore i can develop it and have room to move should i make mistakes (which i will).
That way the first development or 2 i can learn the in's and outs with room to move as i purchased the land at half its current value.
The last thing i want to do is go out in 7-12years time and buy a site at the current market price of say $400,000 and try to make it work first time around.
Kind regards,
Matt
Ultimately tenants are paying for the building so weather the land which the building sits is 500sqm or 1000sqm is mostly irrelevant.
Obviously to the developer the land size is everything.
Off the subject a little:
The reason why i am buying development sites with a long term view is so when i can afford to develop in 7-12 years i wont need to go and buy a site at the market price is 7-12 years time.
From what i hear small time development is hard work with lots of ways you can stuff up, even after intensive DD.
I figure if i purchase land worth, say $200,000 now in 7-12 years time hopefully it will be worth double that. Therefore i can develop it and have room to move should i make mistakes (which i will).
That way the first development or 2 i can learn the in's and outs with room to move as i purchased the land at half its current value.
The last thing i want to do is go out in 7-12years time and buy a site at the current market price of say $400,000 and try to make it work first time around.
Kind regards,
Matt
sabitor84,
thats exactly what I have been thinking, however
don't quote me on this, but I would say
a good development site MAY NOT be a good passive investment,
because Ive found a property with large land component, the house is bad, so you would be paying more to buy the entire property however, due to the house being bad and of normal size, the expected rental will be lower,
hence the shortfall from your payments to the rental ie yield will be much lower,
are you prepared to accept a lower yield then the going rate to maybe develop in 7-10 years time, that is unless you get the property at a bargain price!! ie same as a block with smalled land component????
I would be interested to hear from some developers who could put some insight into this debate
thats exactly what I have been thinking, however
don't quote me on this, but I would say
a good development site MAY NOT be a good passive investment,
because Ive found a property with large land component, the house is bad, so you would be paying more to buy the entire property however, due to the house being bad and of normal size, the expected rental will be lower,
hence the shortfall from your payments to the rental ie yield will be much lower,
are you prepared to accept a lower yield then the going rate to maybe develop in 7-10 years time, that is unless you get the property at a bargain price!! ie same as a block with smalled land component????
I would be interested to hear from some developers who could put some insight into this debate
My block is 650sqm front house is good with rental return around the 5% mark. I can keep it, or develop the site. Wont be a massive development just something to sink my teeth into.
Update on harbour
http://www.frankston.vic.gov.au/lib...e=pdf/168/13.pdf&siteID=3&str_title=Frankston Safe Boat Harbour - Information Bulletin December 2008 quarter.pdf
Toni
http://www.frankston.vic.gov.au/lib...e=pdf/168/13.pdf&siteID=3&str_title=Frankston Safe Boat Harbour - Information Bulletin December 2008 quarter.pdf
Toni
Toni and sabitor84
maybe one or both of you could tell me,
I am quite happy with Frankston South and North atm.
but what I have realised that the yields in the North are much better then the South.
eg properties 3bdr run down houses that are selling for about $220k, are getting close to 5% (4.8%) eg 200-205 per week
while 2 bdr units in Frankston South selling for about $270-280 are only fetching abut $200-$220 which represents about 4%.
I was under the impression that South is far more desirable. yet some of the rentals are the same across the 2 suburbs with the South having a far higher median. I know we are comparing run down 3bdr houses VS neat nice newer 2 bdr units....
that I would love to know...
maybe one or both of you could tell me,
I am quite happy with Frankston South and North atm.
but what I have realised that the yields in the North are much better then the South.
eg properties 3bdr run down houses that are selling for about $220k, are getting close to 5% (4.8%) eg 200-205 per week
while 2 bdr units in Frankston South selling for about $270-280 are only fetching abut $200-$220 which represents about 4%.
I was under the impression that South is far more desirable. yet some of the rentals are the same across the 2 suburbs with the South having a far higher median. I know we are comparing run down 3bdr houses VS neat nice newer 2 bdr units....
that I would love to know...
PM,
I am no expert but i don’t think you can really compare a 2br unit with a 3br house.
I would think rooms play a major factor in determining the rent therefore it is harder to compare rents/rooms/area. Too many factors for a newbie like me!
What’s the rental return like between a 3br South Vs North?
My south property earns 4.8%
Yes the returns in north are better but I suppose the risk is slightly higher.
F.South is less "risky" in terms of quality of house and tenent therefore I would assume there are more homes owned by investors in that area hence a higher supply placing downward pressure on rent.
If someone knows the actual numbers they can let us know? As they say assumptions are the mother of all f--- ups!
I am no expert but i don’t think you can really compare a 2br unit with a 3br house.
I would think rooms play a major factor in determining the rent therefore it is harder to compare rents/rooms/area. Too many factors for a newbie like me!
What’s the rental return like between a 3br South Vs North?
My south property earns 4.8%
Yes the returns in north are better but I suppose the risk is slightly higher.
F.South is less "risky" in terms of quality of house and tenent therefore I would assume there are more homes owned by investors in that area hence a higher supply placing downward pressure on rent.
If someone knows the actual numbers they can let us know? As they say assumptions are the mother of all f--- ups!
PM,
I personally would prefer to buy a 3 bedroom property with subdivision potential over a 2 bedroom unit in any part of Frankston, unless it was to live in. Frankston North may look a little dodgy, but as far as financial gains go, Frankston North has done very well.
I will never forget a Sales Man I met many years ago, who is now retired and exceptionally well off. He quoted "bread and butter properties". This is how he made his money. There are always people out there that can afford them and from what I can gather with the Frankston market so far, this part of Frankston has been the constant mover, with the other parts following.
Now, whether or not this continues, remains to be seen. Allot of development is happening in Frankston. Have you looked at houses in the central part of Frankston, as I believe there could be a good chance of development here in the short to long term
The other angle to look at, and others may be able to add to this in some way; Are there any other comparable suburbs in other areas that could be used as a rough guide to estimate what the likelihood of Frankston's growth potential could be, i.e. beachside units versus house in north? Frankston hasn't really taken off yet and when it does, I'm not entirely sure how it will unfold.
In any case, I still believe that when Frankston does take off, all parts of Frankston will be well sought after and with subdivision potential, you could do very well.
My property selections so far have been houses only, and as such have chosen South Frankston and Marylands. I am not in a position to buy now, but if I was, it would definately be a house and I would be seriously looking at central.
Toni
I personally would prefer to buy a 3 bedroom property with subdivision potential over a 2 bedroom unit in any part of Frankston, unless it was to live in. Frankston North may look a little dodgy, but as far as financial gains go, Frankston North has done very well.
I will never forget a Sales Man I met many years ago, who is now retired and exceptionally well off. He quoted "bread and butter properties". This is how he made his money. There are always people out there that can afford them and from what I can gather with the Frankston market so far, this part of Frankston has been the constant mover, with the other parts following.
Now, whether or not this continues, remains to be seen. Allot of development is happening in Frankston. Have you looked at houses in the central part of Frankston, as I believe there could be a good chance of development here in the short to long term
The other angle to look at, and others may be able to add to this in some way; Are there any other comparable suburbs in other areas that could be used as a rough guide to estimate what the likelihood of Frankston's growth potential could be, i.e. beachside units versus house in north? Frankston hasn't really taken off yet and when it does, I'm not entirely sure how it will unfold.
In any case, I still believe that when Frankston does take off, all parts of Frankston will be well sought after and with subdivision potential, you could do very well.
My property selections so far have been houses only, and as such have chosen South Frankston and Marylands. I am not in a position to buy now, but if I was, it would definately be a house and I would be seriously looking at central.
Toni
Last edited:
Toni,
Do all your places have development potential?
Good post!
Matt
Do all your places have development potential?
Good post!
Matt
Hi Toni,
Thanks for your input, keep up the good work!
As for potential for frankston, north, south and centre as suburbs, I have already made my mind up on what I think of them and I am happy with them so no need to try and convince me
anyways, seeing you own more then one in this area, can you please give us your feedback on a few Qs (its going to be long...sorry)
it almost seems that properties selling for $210-$230k in North and renting for about $190-$210 which yields about 4.8% while $250-$280k in South are also reneting for about $200-$220 per week which is a about 4%.
Firstly I am finding the yields to be a bit low for my liking, other bluechip suburbs are yielding 4-4.2% so hence with an area that is a bit further out the yields to be quite poor. I often see other people here, purchase properties for say $285k and rent them out for $320 per week, so this low yield is bothering me at the moment, I think there is more potential in North and still lots of potential for South but South would be safer!
also, the median of the north is something like $230k, while the median for South is about $410k, so obviously buying a good property well under the median is a good sign as the property is always catching up! so hence why I dont understand why a property for $230k in north vs $280k in the south would rent basically the same,
I understand that most of the cheaper ones in the South are newer neater 2 -3 bdr units (the odd house) that require not much work, while the North ones are all usually much older 3 bdr houses, (some require work, some require lots of work, some require not much/nil work), but I would have expected someone would prefer to rent in a nicer suburb with newer housing for the same price even though the land is smaller and with a smaller garden, just as the argument someone put through that a person who is going to rent out an old house in north won't pay extra for a slightly bigger garden.
also, in regards to subdividing, when I went through the other day through the north, I didn't see many properties that had been or were being subdivided, so do you think there is anything that is holding it back???
also, this leads to my next question ,suppose you found a property with a big land component with a shabby house on it with land division potential, if no-one is doing it then yes, you might become an innovator, however, there are more risks associated with being a trend setter, so if you found a good one, lets say the average price was $230k and you found one with a big chunk of land for $275k, however it might have development potential but if you aren't going to do it immediately, then the house is shabbier, you have paid extra for it, however, your rent will be the same or lower compared to other properties so your yields drop, hence it costs more to hold on to it, so I think buying a potential sub division and not doing anything to it might be the wrong strategy, what do you think, I ve been looking at 3bdr houses, which mind you look all similar, but the larger land components are asking for more..... so I'm a bit unsure what to do.
and finally, you mentioned frankston central, Im not too sure yet of what the differences between central and north are? maybe central slightly dearer and a bit more closer, very similar to the north but just closer, and completetly different to the South
and finally x2, you seem to be aware of Seaford as well, I only drove through it and I thought wow, nice, closer to the city, this area must be $500k+ but re.com.au reveals its only in the $300ks, can you tell me what you think of this area, I'd buy in all of them if I could but it just seems that Seaford might have a bigger chance of booming, I know that Frankston has better infrastructure at the moment though....
thanks for reading my looong post everyone!
Thanks for your input, keep up the good work!
As for potential for frankston, north, south and centre as suburbs, I have already made my mind up on what I think of them and I am happy with them so no need to try and convince me
anyways, seeing you own more then one in this area, can you please give us your feedback on a few Qs (its going to be long...sorry)
it almost seems that properties selling for $210-$230k in North and renting for about $190-$210 which yields about 4.8% while $250-$280k in South are also reneting for about $200-$220 per week which is a about 4%.
Firstly I am finding the yields to be a bit low for my liking, other bluechip suburbs are yielding 4-4.2% so hence with an area that is a bit further out the yields to be quite poor. I often see other people here, purchase properties for say $285k and rent them out for $320 per week, so this low yield is bothering me at the moment, I think there is more potential in North and still lots of potential for South but South would be safer!
also, the median of the north is something like $230k, while the median for South is about $410k, so obviously buying a good property well under the median is a good sign as the property is always catching up! so hence why I dont understand why a property for $230k in north vs $280k in the south would rent basically the same,
I understand that most of the cheaper ones in the South are newer neater 2 -3 bdr units (the odd house) that require not much work, while the North ones are all usually much older 3 bdr houses, (some require work, some require lots of work, some require not much/nil work), but I would have expected someone would prefer to rent in a nicer suburb with newer housing for the same price even though the land is smaller and with a smaller garden, just as the argument someone put through that a person who is going to rent out an old house in north won't pay extra for a slightly bigger garden.
also, in regards to subdividing, when I went through the other day through the north, I didn't see many properties that had been or were being subdivided, so do you think there is anything that is holding it back???
also, this leads to my next question ,suppose you found a property with a big land component with a shabby house on it with land division potential, if no-one is doing it then yes, you might become an innovator, however, there are more risks associated with being a trend setter, so if you found a good one, lets say the average price was $230k and you found one with a big chunk of land for $275k, however it might have development potential but if you aren't going to do it immediately, then the house is shabbier, you have paid extra for it, however, your rent will be the same or lower compared to other properties so your yields drop, hence it costs more to hold on to it, so I think buying a potential sub division and not doing anything to it might be the wrong strategy, what do you think, I ve been looking at 3bdr houses, which mind you look all similar, but the larger land components are asking for more..... so I'm a bit unsure what to do.
and finally, you mentioned frankston central, Im not too sure yet of what the differences between central and north are? maybe central slightly dearer and a bit more closer, very similar to the north but just closer, and completetly different to the South
and finally x2, you seem to be aware of Seaford as well, I only drove through it and I thought wow, nice, closer to the city, this area must be $500k+ but re.com.au reveals its only in the $300ks, can you tell me what you think of this area, I'd buy in all of them if I could but it just seems that Seaford might have a bigger chance of booming, I know that Frankston has better infrastructure at the moment though....
thanks for reading my looong post everyone!
There are alot being divided in Frankston North, one in my street Bursaria Crescent has just been finished
Also....
http://www.realestate.com.au/cgi-bi...r=&cc=&c=59269365&s=vic&snf=rbs&tm=1231375677 sold
http://www.homesvic.com/realestate/...rescent-frankston-north-vic-local-233361.html
I personally like Frankston Central best but could only afford North, if buying North buy on the outskirts. Frankston Central is close to beach, shops & train line. The area is really run down but has lots of potential if you ask me. Frankston South has better properties but it's a treck to the beach because its all cliffs once you go up Olivers Hill
If you want closer to the city then Frankston North is closer than Central, South and Karingal. Buy at Belvedere end and jump on freeway from Seaford road entry ramp
Also....
http://www.realestate.com.au/cgi-bi...r=&cc=&c=59269365&s=vic&snf=rbs&tm=1231375677 sold
http://www.homesvic.com/realestate/...rescent-frankston-north-vic-local-233361.html
I personally like Frankston Central best but could only afford North, if buying North buy on the outskirts. Frankston Central is close to beach, shops & train line. The area is really run down but has lots of potential if you ask me. Frankston South has better properties but it's a treck to the beach because its all cliffs once you go up Olivers Hill
If you want closer to the city then Frankston North is closer than Central, South and Karingal. Buy at Belvedere end and jump on freeway from Seaford road entry ramp
