Richmond VIC 1BR vs 2BR

Hi all,

First time poster here looking for advice. Having considered all the inner city areas, I'm most comfortable investing in the same suburb I live in. There's a lot of new developments going up around here. A woman at the bank thinks I need to consider buying off the plan. I wasn't into the idea originally because I really do want to avoid a bad one with 200 apartments that all look the same.

I'm not sure if I can post links in case it appears like I'm a sales agent but I came across a development tonight called Cirque. As a local, it's in what I would consider the 'right' part of Richmond (ie the city side of Burnley Street). It's a bit more unique than others on offer in the area BUT it is definitely more expensive than the average. It offers a lot of eco-friendly initiatives which I find appealing as well.

I really only wanted to spend around $550K. We could get a 2BR in Richmond though it would be smallish, or we could only afford a good sized but 1BR apartment at Cirque. Which would you do?

Does inner city Melbourne have a higher demand for 1BR or 2BR in your experience?

Are the developments too overpriced right now and should I stick with my original plan of trying to buy something already established instead?

We're looking at a long-term investment 7-10 years if possible. Sorry for so many questions - I'm quite dazzled by the options.
 
First, let me start by saying that I know nothing about Richmond, so I can't advise where in that suburb would be best, however there are a few points to consider regardless of the area.

Firstly, an off-the-plan investment can be quite risky, especially for a new investor. Before contemplating this kind of purchase, make sure that you do a lot of homework. Yes, it can work well in a rising market, and yes, I believe Melbourne is rising right now, but whether or not it is going to rise with the tide is another story. I'm not saying don't do it, but I am saying be careful.

You are wanting to spend around half a million dollars to purchase a property for someone else to live in, you need to work out what your return will be on it. So, sit down and do some research. You need to find out the anticipated rental return (go talk to property managers and DO NOT rely on the information from the pretty sales brochure. Next, you need to know what your Strata Fees will be. These could be substantial, especially with a new build that has all the mod cons. Add in rates, insurance, management fees, repairs & maintenance (yes, even new places need maintaining), etc. Add in the interest you will be paying on the loan. How much out of pocket are you? Are you comfortable with that? What is the yeild?

From my experience, new units are usually overpriced. If you check out the market you may find there is a huge discrepancy between the price of these units and some that are only a couple of years old. If there is, then the developer has taken all the gain up front, and there maybe little left for you in the comming years.

You have done the right thing in comming here. There are many so-called experts around (the lady at the bank, for instance), but ask yourself, how many investments do these "experts" have and how much experience do they have. Speak with those who have the knowledge to assist, rather than those well-meaning armchair experts that really don't know.
 
I wasn't into the idea originally because I really do want to avoid a bad one with 200 apartments that all look the same.
Your gut feeling is more reliable than the woman at the bank, IMO
It's the land that appreciates & buildings depreciate - compounded somewhat by a new development. Stick to smaller blocks if possible.

I really only wanted to spend around $550K. We could get a 2BR in Richmond though it would be smallish, or we could only afford a good sized but 1BR apartment at Cirque. Which would you do?
Definitely the former. How many 1 bedders are in this development that will be sold to investors? You will all need to compete for tenants on price - probably at the same time.

Are the developments too overpriced right now and should I stick with my original plan of trying to buy something already established instead?
Yep

We're looking at a long-term investment 7-10 years if possible. Sorry for so many questions - I'm quite dazzled by the options.

You are on the money with your time-frame & the effect of time will probably minimise any errors you make early on. I would get a rental list & go check what's renting in the area for what price. Speak to a few PMs about what the demand is for.
 
Thanks for the replies guys. Good food for thought. I would definitely crunch my numbers before buying anything but one great piece of advise I hadn't considered was that all the 1BR's at the development were probably sold to investors who would be looking for tenants at the same time as me. Ouch.

The rental yield in Richmond is a bit below average overall from what I can tell, but I've been weighing that up against the rapidly increasing prices etc... Maybe I need to go back and start looking at other inner-city areas I'm familiar with.

I've only invested once before and it was six years ago so I'm very rusty.
 
Hi
Best not to buy off the plan as the others have indicated. I lived in Richmond a couple of times in the last 25 yrs and highly recommend it.
Best to aim for a reno'd 60's block or an older flat that you can do work on yourself. Not many deco or <50's blocks most are 60s-70s but some are quiet large and are in better posistions than the new ones.
cheers
pieman
 
People have made money buying off the plan but lots of people have also lost money (e.g. docklands). One benefit you need to consider is saving on stamp duty since it is a new dwelling - but for 550k i'm sure u can find a townhouse/house a bit further away from the city
 
I'm wondering whether something like this

http://www.realestate.com.au/cgi-bi...t=&header=&cc=&c=77163158&s=vic&tm=1263512655

wil "go out of fashion" in 10/20/30 years as compared to something stodgy like

http://www.realestate.com.au/cgi-bi...t=&header=&cc=&c=83704993&s=vic&tm=1263512786

for a lot less dosh (leaves a lot of change to reno the insides!)

Cheers,

The Y-man

I will personally prefer a bright red/orange brick external appearance (not the brownish type), which makes a building appears much newer than they are. They require less maintenance as they do not get "dirty" and require repainting after a few years.
 
Cirque is not a new building. It's a reno. Go drive past it on Lord st. It's an old office building that they are going to do up.

Overpriced IMO.

What I have noticed is new 1br in Richmond go for just over $400k whilst 2br are close to $600k. I think 1br will rise to $450k before long
 
Rae

Check what it is to buy a 1 and 2 bed in the vacinity of the place you are looking at. Remember it is only brand new for 1 day. Not trying to discourage you, but developers make a lot of money from off the plan apartments that is why there is so many of them in the area of Richmond. Good luck with it but I would prefer to look a existing property. There is 30+ listing for this type of property on RE.com.au please research.
ta
Jezza
 
I also think it's a slightly risky time to buy OTP in Richmond at the moment. I don't think the market will go backwards, but when you settle you might get little or no growth depending on how well you buy. I have no doubt that right now in Richmond that an older 2br unit in between Punt/Swan/Burnley/Bridge is the best option. With all the big apartments going up and the close vicinity to the city, the population of young cashed up lifestyle oriented professions will rise. That means more cafes, resaurants, boutiques and bars will pop up. I think it's a good area to invest but I favour 20+ yo apartments that have larger rooms over OTP. Cirque also looks a bit over priced. It's $430k for 1br, it's a renovated office block, and 1 house back from Bridge Rd at the bottom of the hill.
 
Thanks all for your input, it's most appreciated. I live in Richmond so obviously I love the area and know it well, but having given it thought over my weekend away I agree it's overpriced and I'm going to look for older blocks that can be done up or other suburbs close to Richmond.
 
Hi All, seems like the only forum online that's discussing the cirque development. Does anyone know if they've started construction or if not when they plan to? Cheers.
 
IMO i would go for an older apartment in a smaller block, with the benefits of buying an older apartment compared to off the plan being:
- you can increase the value of it by renovations and add your own style
- less number of units = more unique and often more sought after by renters
- Less competition when renting out
- much cheaper
- lower body corporate fees
- more character (imo many of the new buildings look awful)

Its also more enjoyable to search around for a little gem of a unit, well it is in my opinion at least
Good luck
 
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