Where to buy 400k Melbourne?

[pavloge]

Hi all,

Long time reader, first time poster.

I have decided to buy my first investment property. My partner and I have been pre-approved for a 400k loan. I'm trying to decide between:
- a smaller apartment (1 bed, 1 garage) in Carlton/North Melbourne/Fitzroy) or
- a larger apartment (1/2 bed, 1 garage) in Brunswick/Northcote

The plan is to rent it out, and in around 5 years time re-assess and possibly use equity from the property to get a second investment property.

Which option would be best for my goals.

Thanks in advance - appreciate any advice as I'm fairly new to this. I'm also open to new suggestions - I just feel the above options are safer/conservative choices.

 

[J_aco]

Hi OP,

- Carlton will give you good rental yield (probably 7%?) but CG would be less than ideal, especially for what you're planning to do (see below)
- Brunswick/Northcote is near the $500k mark now for 2-1-1. $400k would get more a 1-1-1. It's really lifed this year...

- If you're thinking about extracting equity from this in 5 years time, have you thought about units/houses further out with more of a chance for growth?
- For $400k maybe a 2-1-1 unit near Ringwood/Ringwood East (certainly development happening there)
- Otherwise, Nunawading maybe?

 

[pavloge]

Thanks J_aco,

I haven't but I'll definitely do some research on Ringwood. My only concern will be what kind of rental yield it has, my partner and I do not wish to be putting in too much each month.

 

[J_aco]

With the rising price over the past 12 mths (10%+?) and rents not able to catch up yet, I suspect that the current rental yield across most suburbs in Melb just won't be that great (maybe 3.X%-5% max for most houses and units; and of course higher for apartments but growth won't be as good).

 

[KoopaTroopa]

My advice is to take $50k off, then look what you can buy for $350k

That'll make things a little clearer.

Find something $350k, see how the numbers stack up, and then you'll know if you want to go ahead.

I wouldn't be looking at $400k if I were you. Just because you're pre-approved for that much, doesn't mean you have to buy in that price bracket.

Plus, a property that is sold for "$400k" isn't really 400k once you add on all the associated costs, as I'm sure you're aware. Add $20k

 

[The Y-man]

My advice is to take $50k off, then look what you can buy for $350k
....

Plus, a property that is sold for "$400k" isn't really 400k once you add on all the associated costs, as I'm sure you're aware. Add $20k

Great advice - stamp duty, conveyancing, repairs (maybe) etc etc and you are at 7%~10% of purchase price already

The Y-man

 

[pavloge]

Hi thanks for the advice KoopaTroopa but the loan is for 360k - I'm factoring in 430k for the property, stamp duty, etc. And I have an 80k deposit.

I should of been clearer, the 400k is up to.

Any advice on area, size of apartment, etc. for 350k?

Cheers

 

[jpcashflow]

Hi

Hi,

Why are you keen in a apartment? There are few developments taking place in the area which makes me think that there is going to be a oversupply of units / apartments in the near future.

Rental yield can always look good on paper but in practice it may be different.

Are you looking at getting something off the plan or established?

 

[pavloge]

Hi,

Why are you keen in a apartment? There are few developments taking place in the area which makes me think that there is going to be a oversupply of units / apartments in the near future.

Rental yield can always look good on paper but in practice it may be different.

Are you looking at getting something off the plan or established?

Hi jpcashflow,

I'm not 100% set on an apartment, just thought given my budget it was the only reasonable option.

It isn't a necessity to have high rental yield, strong capital growth is definitely preferred given my goal.

Definitely not interested in something off the plan - established with less than 10 apartments is what I was looking for, but I'd obviously prefer land if the investment is right.