Young investor confused of where to start

[youngmelbguy]

Hey guys im a 23 year old guy who has been fortunate enough to have $80,000 in equity to use in order to acquire my first investment property. I have a budget of between 380,000 and about 470,000 in order to buy this property and havebeen looking for an apartment/house but im currently hitting a wall as there is endless options. Ive looked at a house in Brunswick West that is in fairly average condition but three bedrooms with a secure lease for mid four hundred thousand. Then i have looked into two - three bedroom apartments in north melbourne and oher close inner city suburbs. I was wondering if anyone would have any advice for me as im beginning to become a little confused of what to do.

Any help would be greatly appreciated

Regards

 

[Melbournian]

Read more on the forums

there is a list of reviews on inner city and apartment investing on the age domain 5th march .Buy this months API magazine oand other property investor magazines.

Buying your 1st investment is always something to really think carefully. you obviously do not want to make a mistake.

 

[laurencei]

Firstly - read some investing property books, so you understand what you want.

Personally - I just bought one of the hotspotting 'top 10' guides for $100, picked the suburb i liked most in that list, and I'm in the process of negotiating a deal at the moment in that suburb.

 

[trinity168]

hi,

Am relatively new to the forum but would like to hopefully be able to contribute! First of all, congratulations! Good on you for thinking of investing your 80K into an investment property rather than, go off on a spending spree!! Second, I noticed there is another section of the forum on "Information Resources", I have started going through that section and it has heaps of useful things too.

Good luck!

 

[newbyinvestor]

It sounds like you aren't confident to make a decision yet because you haven't done your homework.
IMHO this forum will share plenty of useful information with you however nothing beats becoming a walking encyclopedia on property in the specific area you are interested in buying for yourself.

 

[FormerLurker]

?

Are you only looking in Melbourne? if not do you only look in metropolitan areas? Are you chasing cashflow or growth?

My advice is as others have said research research research.

Also perhaps consider a buyers agent if you don't want to do the research yourself - for $7k odd you'll find some reputable people on here.

Personally I just bought in Western Sydney but that was based on my needs and research and also to diversify out of owning property in just one state.

Best of luck and have a great investing journey.

 

[newbyinvestor]

Hey guys im a 23 year old guy who has been fortunate enough to have $80,000 in equity to use in order to acquire my first investment property. I have a budget of between 380,000 and about 470,000 in order to buy this property and havebeen looking for an apartment/house but im currently hitting a wall as there is endless options. Ive looked at a house in Brunswick West that is in fairly average condition but three bedrooms with a secure lease for mid four hundred thousand. Then i have looked into two - three bedroom apartments in north melbourne and oher close inner city suburbs. I was wondering if anyone would have any advice for me as im beginning to become a little confused of what to do.

Any help would be greatly appreciated

Regards

If it were me buying my first investment property I would not buy an apartment fullstop.

 

[buzzlightyear]

I would be looking at something like this or even this. I am less familiar with prices in the area, nor rents, but something of similar style, I think this is a really good option for the amount you are looking to spend.

Of course you could do nothing for a while, save some more and see what opportunities there are in say 6-12 months.

 

[laurencei]

If it were me buying my first investment property I would not buy an apartment fullstop.

^^ this.

With the amount of cash you have, you should be using the first 1-2 purchases to help build your portfolio.

You have high cash flow, but low equity. Units "tend to" be higher cash flow incomes with lower capital gains (of course they go up, but the amount of land you own is substantially less).

You should buy a nice solid house, on a decent block somewhere (why VIC - look @ Australia), and use it to help fuel future growth....

 

[Rixter]

Hey guys im a 23 year old guy who has been fortunate enough to have $80,000 in equity to use in order to acquire my first investment property. I have a budget of between 380,000 and about 470,000 in order to buy this property and havebeen looking for an apartment/house but im currently hitting a wall as there is endless options. Ive looked at a house in Brunswick West that is in fairly average condition but three bedrooms with a secure lease for mid four hundred thousand. Then i have looked into two - three bedroom apartments in north melbourne and oher close inner city suburbs. I was wondering if anyone would have any advice for me as im beginning to become a little confused of what to do.

Any help would be greatly appreciated

Hi YoungMelbGuy,

First off welcome to the good ship SS forum, this being your first post.

What and where to buy is dependent upon your chosen investment strategy.

You see property is merely the vehicle.

The strategy is how you intend driving that vehicle. Unfortunately the mistake I see newbies and sometimes not so newbies is that they are property focused instead of strategy focused which is like putting the cart before the horse.

Property investing is not about property rather about the strategy and the way you intend to use the vehicle to get to where you are wanting to go. No good buying a small shopping car if you intend driving interstate on a family holiday.

What strategy/s are best for you is determined by where you are wanting to go, the time frame you want to get there in and how hands on along the way you want to be ( manual/automatic etc)

What is your chosen investment strategy?

If you dont know what you are looking for you will never know when you have found it. Its the biggest mistake that creates the most frustration.

I hope this provides some food for thought.

 

[Belle]

If it were me buying my first investment property I would not buy an apartment fullstop.

I disagree. You can't rule out apartments and units all together.

Yes holding all other factors constant the higher the land component of your investment the greater your capital growth. However, if you do your research, identify and purchase an apartment below market value or you do a small renovation to add value there's your capital growth right there.

Apartments that have something unique about them like an amazing view can also achieve high capital growth, in some situations much higher than a house. Which would experience more capital growth: an apartment with panoramic beach views or a house on a large block in the outer suburbs? Proximity to train stations, the city, the beach, parks, shopping strips, schools and universities etc will also drive growth. Scarcity will drive growth.

I would avoid high rise apartment towers BUT an apartment or unit in a small boutique block in an area with a high proportion of owner occupiers can make a good investment for both capital growth and income.

To the OP I'd say that you have to do your math. You can't just look at a property as a property. It isn't a house. It isn't an apartment. It's an investment. It's future cash flow. What you pay for something comes down to future earning potential. You need to form an opinion about what you believe the future earning potential of the properties you look at will be. Then you need to compare them against each other and against what you could earn from other investments. Sometimes I think people forget the math.

I have no property investing experience either so obviously listen to the more experienced people on here over me!

 

[Belle]

What do you guys think of this?

http://www.realestate.com.au/property-unit-vic-edithvale-107034525 ?

It's pretty much on the beach, walking distance to the train station and local shops and in an area I consider very safe. Dorky orange walls, curtains and light fixtures which could all have a very quick makeover to improve value. A decent kitchen which could be left alone for now but updated in a few years.

Similar sized place in Edithvale without beach views is earning $360 rent pw http://www.realestate.com.au/property-unit-vic-edithvale-405047904

 

[Melbournian]

If it were me buying my first investment property I would not buy an apartment fullstop.

there is an article in this month's API whereby an investor can generate good capital growth and higher returns by renovating in apartments

Thinking out of square helps which promotes innovation. If you just gonna buy a place and hope that it grows or land. and do nothing abt it - that's just plain lazy It depends on how much you have and what kind of risk you are willing to take. Apartments are easy to rent out less maintenance and have lower turnover rate. You also can get good depreciation.

 

[wobbycarly]

What do you guys think of this?

http://www.realestate.com.au/property-unit-vic-edithvale-107034525 ?

It's pretty much on the beach, walking distance to the train station and local shops and in an area I consider very safe. Dorky orange walls, curtains and light fixtures which could all have a very quick makeover to improve value. A decent kitchen which could be left alone for now but updated in a few years.

Nice find - I don't know the area pricing, but the property itself looks like it has good potential.
IMO, those couple of things won't necessarily 'improve value', but will make it easier to rent.

Similar sized place in Edithvale without beach views is earning $360 rent pw http://www.realestate.com.au/property-unit-vic-edithvale-405047904

I'd suggest you keep an eye on this. It says "available now" - see how long it takes to rent; they might drop the rent. Even ring the REA pretending to be a potential tenant, to gauge the level of interest that has been shown, and whether they will consider a rent reduction.

Good luck!

 

[Belle]

Oo actually there is a fairly big block of vacant land opposite (670m2). If they build a big block of brand new units/apartments so close by would that push the rents down? Could that be a reason why they're selling?

 

[newbyinvestor]

I disagree. You can't rule out apartments and units all together.

True, it is the student accommodation and highrise developments I really mean't.


Yes holding all other factors constant the higher the land component of your investment the greater your capital growth. However, if you do your research, identify and purchase an apartment below market value or you do a small renovation to add value there's your capital growth right there.

Um, if you purchase units and houses below market value and renovate the investor can also achieve capital growth.



Apartments that have something unique about them like an amazing view can also achieve high capital growth, in some situations much higher than a house. Which would experience more capital growth: an apartment with panoramic beach views or a house on a large block in the outer suburbs? Proximity to train stations, the city, the beach, parks, shopping strips, schools and universities etc will also drive growth. Scarcity will drive growth.

Um, units and houses in a great location will also return excellent capital growth and you can't subdivide an apartment.



I would avoid high rise apartment towers BUT an apartment or unit in a small boutique block in an area with a high proportion of owner occupiers can make a good investment for both capital growth and income.

Yep

To the OP I'd say that you have to do your math. You can't just look at a property as a property. It isn't a house. It isn't an apartment. It's an investment. It's future cash flow. What you pay for something comes down to future earning potential. You need to form an opinion about what you believe the future earning potential of the properties you look at will be. Then you need to compare them against each other and against what you could earn from other investments. Sometimes I think people forget the math.






I have no property investing experience either so obviously listen to the more experienced people on here over me!

Good Luck, I'm sure you will do very well for yourself when you do take the next step.

 

[Rickardo]

Oo actually there is a fairly big block of vacant land opposite (670m2). If they build a big block of brand new units/apartments so close by would that push the rents down? Could that be a reason why they're selling?

Not necessarily, brand new units are generally priced higher rent wise than older style so attract a different type of tenant, but it really depends on the suburb mix and how in demand apartments are. If it's a low demand area and there's an influx of stock the rents on the new apartments may have to move downwards to meet market demand and this will have a corresponding downward effect on existing stock - if the price differential between a brand new apartment and an older style one is only say $30-50pw you'll get more tenant demand for the newer place.

Part of your pre purchase due dilligence would be contacting the council to see if there are any development plans for blocks around the area, this will give you an indication of whether there's been a DA in recently - i remember a property i was looking at a few years ago where the numbers stacked up quite nicely, but my research found a 5 story public housing block was planning to go up across the road, very glad I did the appropriate checks before signing any contracts.

 

[jingo]

Hey guys im a 23 year old guy who has been fortunate enough to have $80,000 in equity to use in order to acquire my first investment property. I have a budget of between 380,000 and about 470,000

Hi melbguy,

Your budget is certainly enough to buy a great first investment in Melbourne.

In order to buy this property and havebeen looking for an apartment/house but im currently hitting a wall as there is endless options.

That is part of the fun of investing in property! There are so many options and possibilities! A way to start could be to work out how much you can afford to pay to support the property each month. Try not to buy a property that will drain too much of your money each month. Remember to allow some flexibility in your budget for travelling, changing jobs, studying, unexpected events that crop up etc etc....

i have looked into two - three bedroom apartments in north melbourne

The major hospitals (Royal Melbourne, Women's, Children's) are located in North Melbourne. Melbourne Uni is close by and The University High School is sought after. (People often seek to rent in North Melbourne to send their children to this school). The suburb attracts hospital works, uni students and city workers.

The apartments/flats in this area offer reasonable rental yields and capital growth has been fantastic in this area over the past 10 or so years. I think you would do well buying a 2 or 3 bedroom apartment (with a car space) and hold it. You could then use the equity generated from the growth in this apartment to spring board into other investments.

Flats and apartments have had significant capital growth in Melbourne recently and the increase in capital growth has been comparable to houses. More and more younger people are using apartments as their first home - hence the rapid growth in values.

When buying apartments allow for body corporate fees in your calculations. Try to buy into a block where each flat has a separate water meter (a lot of blocks in Nth Melbourne don't and then you will have to pay the water usage yourself and won't be able to pass the bill onto the tenant). Aim to buy a strata title - over a company or stratum title. I look for apartments that have a carpark/caport as an accessory unit on the title. They tend to rent more easily and show better capital growth over time. I prefer older apartments in low rise developments.

With the start that you have - just do something. Don't over analyse at this stage. For what it is worth - although I really appreciate this site now - I am glad that I didn't know about it when I first started investing. Otherwise, I believe I would still be looking for the perfect, albeit illusive investment/strategy. (There is a lot of over analysis on this site - much of it great, yet some of it is unnecessarily complicated)......

Regards Jason.

 

[Melbournian]

Hey guys im a 23 year old guy who has been fortunate enough to have $80,000 in equity to use in order to acquire my first investment property. I have a budget of between 380,000 and about 470,000 in order to buy this property and havebeen looking for an apartment/house but im currently hitting a wall as there is endless options. Ive looked at a house in Brunswick West that is in fairly average condition but three bedrooms with a secure lease for mid four hundred thousand. Then i have looked into two - three bedroom apartments in north melbourne and oher close inner city suburbs. I was wondering if anyone would have any advice for me as im beginning to become a little confused of what to do.

Any help would be greatly appreciated

Regards

Prices are slightly dropping for inner city apartments - if you play your cards right - u can get a 2 bedroom for 470K 90sqm and above.

 

[Wunderbar]

There's pros and cons to both houses and apartments. Houses have significantly lower yields (3-4% in good areas) which means you basically have to fund the 3-4% gap out of your salary. If you're on a low-ish income that is a significant expense - in which case you'll be better buying a higher yielding apartment to hopefully get positive/neutral cash flow and build up your asset base that way.