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VIC 450k in Dandenong, Noble Park, Berwick, Upwey?

Discussion in 'Where to Buy' started by JamesP, 19th Jul, 2015.

  1. JamesP

    JamesP Well-Known Member

    Joined:
    19th Jun, 2015
    Posts:
    68
    Location:
    Melbourne
    Hey all, just wondering if we could possibly get some advice on our strategy as we're currently in over our head I believe. I'm currently looking at buying an IP with my father, I will be renting the property and we're looking for a short term flip/short term equity. We have finance approved up to 800k inc (stamp duty) for our first IP we're looking to start a lot smaller, something more realistic/comfortable in our price range. Right now let's just say it's 450k.

    When looking this weekend the agent asked what we were after, dad told him something for me to live in.. then said or as an investment, or a 900k home we could all move in and flip... or a holiday home we could renovate and flip... needless to say the agent was as frustrated as me! I'll make it pretty clear we both want short term growth (the dream), but he has different ideas on how to get it.

    The main problems are our ideas in what properties will make money. He's looking for growth in what are essentially H&L packages, I'm looking for major reno properties that can be renovated to increase 20-30%% of their buying value.. which is their current market value if they were restored, not banking on growth at all, but will be buying in growth area's. We've looked at many and to put it into perspective we're getting nowhere because he has turned down numerous good ones I've given the green light on, and unfortunately for some bad reason believes new homes will magically grow, and looks at things like clinker bricks, stained windows, art deco, period features etc... he's only interested in the building because "people still have to live in it" I feel like I've gotten nowhere and am exhausted looking at properties.

    Here are some of the properties I've given the green light on after much thinking.

    http://www.realestate.com.au/property-house-vic-noble+park-119929581 (said we should offer 420k, he believed it was a rundown dive)
    http://www.realestate.com.au/property-house-vic-clayton+south-119814379 (i said offer 520k before the auction concluded, he said he'd pay 380k for it...)
    http://www.realestate.com.au/property-house-vic-berwick-120059169 (I believe if we get this for under 450k we've done good, however dads not interested above 390k.. I believe it will go for over 500k.

    Here are the ones he likes, although good buying value these just seem like dead money to me:

    http://www.realestate.com.au/property-house-vic-narre+warren-120193205 (wont sell for over 450k in 12 months :S)
    http://www.realestate.com.au/property-house-vic-berwick-119963553
    http://www.realestate.com.au/property-house-vic-berwick-120053097
    http://www.realestate.com.au/property-house-vic-beaconsfield-120018377 (prob would've actually bought this one at this price! imo the house is too poor to flip it for above 450k.)
    http://www.realestate.com.au/property-house-vic-officer-118621399?listingType=buy (my fav choice :S)

    We looked at this one yesterday http://www.realestate.com.au/property-house-vic-belgrave+heights-120236293 and I said main street 100 meters from shops, good solid flat block, but all he was interested in on is how "it looks like a period home" and "are those stained glass windows".

    Sorry to being what could be considered a family quabble onto the forums! I'm finding this partnership rather frustrating atm moreso at an impass. Almost every Saturday for months I've found the "one" only for him to have a different view. When I ask him why the Narre Warren home appeals to him, he says "a family will live there" and "it's already done up". But he says he wants to buy and flip :S. I then raise this and he realizes and says "yes it needs to be unrenovated" so he acknowledges the concept. However every time we walk through the door of a property, first things that he likes is "it doesnt need doing up" "is that a smeg oven" etc. that's where his mind is at in this. He's been so bear towards property and thinks the growth period has started this year, despite me trying to keep him in the loop since 2012.

    Whether I buy one with him or not he's going to buy one, and lose all his money on his own. When I get frustrated he cracks it and says "I could get a nice new unit in St Kilda and claim depreciation" obviously frustrated towards all the old "dogpile" homes I keep showing him. I've educated him on OTP apartments and he understands their bad. He still says that though as though his mind is somewhere else. He genuinely prefers the unit idea despite being aware of all the great somersoft knowledge I inform him with constantly.

    Sorry more a rant than a post, just wanted to share my experience of a partnership that hasn't even essentially started. I'm completely new at this myself with no experience although I'm scared he's locked in a mindset that has constructed itself to lose. And he's going to buy regardless of what I do. He loves watching Homes under the hammer, everytime I see that show they talk about moot nonsense like stone features, granite benchtops etc same mindset as he's in. Except those English homes are more or less Toorak equivalents and not miners cottages in Berwick. Even still I'd never overdo a home hoping someone would pay a personalised amount for it.
     
    Last edited: 19th Jul, 2015
  2. Pins

    Pins Well-Known Member

    Joined:
    19th Jun, 2015
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    100
    Location:
    Melbourne
    What's the reason behind buying together? It sounds like you have completely different goals and ideas of how to meet them
     
  3. JamesP

    JamesP Well-Known Member

    Joined:
    19th Jun, 2015
    Posts:
    68
    Location:
    Melbourne
    Hi Lins! I'm currently 24, studying, and have been renting at 340p/w for the past 21 months :eek: Myself I'm currently only on a 45k wage if that (probably high 30's...) 320k is my max with some lenders offering below 200k! Also I'd require a 70k deposit to do it properly at 20%,avoiding LVR. I'm not even half way there currently. That would bring me to 390k once saved, I'd prefer and probably need to wait until I'm in a better position in a couple of years. Dad is on 120k wage, and cpa with some generous lending options (3.79% fixed, 100%, higher detectability options due to his wage). His lender has approved 800k in his name, or up to 500k 50/50 split between us. Which is more comfortable to us starting out. If it's 50% in my name it's considered 50% PPOR, no cgt on my side, but no detectability either.. these type of factors will largely depend on the property we buy at the time.

    Reason for buying together is we both agree the renting is dead money, and I don't necessarily need the house I'm currently in. And of course I guess I'm not ideally in a situation to do it myself.. With renting in mind even a Narre Warren home would probably be better, to escape the dead money situation. I have spent 30k in rent and the house I'm in has grown 60k since I moved in. Dad also likes the project idea and wants to renovate it himself (seem part hobby focused) therefore wants me as a tenant. We also eliminate vacancy issues and can use this to our advantage.

    We both have very different views on gaining that extra 20%-30% on our purchase price. If that's even possible this year. I'm trying to look for properties already worth that, in derelict conditions, with growth potential of course. Dad is more looking at those Narre properties hoping they'll grow to 500k, in general he's looking in family estates where the homes are worth as much as the land. I can't see the medians of these area's (Narre, Cranbourne, Officer) growing that high and I'm confident to say they won't in 12-24 months.

    We had a productive conversation yesterday, where we both agreed something for 450k we could revalue to 550-600k in 12-24 months is what we're both looking for. With the right property I think it's very achievable. But he's under the impression with those Narre Warren properties you can gut the kitchen, floors, repaint etc and flip it for 20% more. The only ones selling for over 500k in those estates are 4-5 bedroom double story's. The homes are essentially late 90's and while old the kitchens look fine, he believes they're too old. I believe this could be heavy overcapitalizing. That Narre Warren one for 380k for example, imo will not sell for 500k with a flashy reno, the house is 11sq, on an irregular block and in the very lowest end of that neighbourhood.
    He doesn't mind some older places in Dandenong, we might end up looking there! We both think it might be a little overpriced but has good short to mid term prospects. Moreso than the Berwick region I guess.One thing we both agree on however, Springvale is far too expensive!!!

    We both want the same thing, however completely different ideas on how to achieve it. :D
     
    Last edited: 19th Jul, 2015
  4. Kael

    Kael Well-Known Member

    Joined:
    18th Jun, 2015
    Posts:
    277
    Location:
    Sydney, NSW
    Hey JamesP! I've gone into property investment with an investment partner myself and we've both learned many things along the way through that partnership. I own one fully in my own name, with a 50/50 property with my investment partner (we're also trying to get finance for another 1-2 properties if it's achievable). From my experience there's a few things you need to do:
    1. Make sure you're both on the same page - it sounds as if you've both done that. You both want to purchase property that is CG focused. But you both have different ideas on how to achieve it. At the end of that day, if you both don't agree on HOW to make it to your end goal, I think you may struggle in your partnership.
    2. Communicate well - Again, it appears you've done that by him telling you that he wants to go for newer properties, while you've told him that you'd prefer a reno property that you can do up to increase your equity this way. But when push comes to shove, are you going to go for a NEWER style home or a RENO home? If you're searching for both of these types of properties, I think you may be looking at a LOT of re.com.au listings and a lot of open homes/sales pitches.
    3. Consider how it will effect your future - When you own a property 50/50 with someone else, the bank will look at you differently when you go to apply for a loan. For example, if you both own 50% of the property and have it rented out for let's say, $500 p/week, and you decide you would like to keep the IP and go for another property by yourself, without your father. If you goto the bank, they'll only assess you on 50% of the $500 p/week rent but the ENTIRE loan repayments. I've been told by a few people that there are "options" out there where some banks will consider only half the repayments, but that restricts you then to only those lenders (which I'm assuming there are only a few of them, please correct me if I am wrong, mortgage brokers friends! :))
    4. What will happen if one party has to sell up? Do you sell the house immediately? Does the other buy you out? Do they have that option available to them? Will it cost you more money to sell it?
    At the end of the day, if you think it can work, go for it. But you both need to be on the same page and understand what each of you want, and agree with how you're going to get there (for the both of you!). From what you've posted, it appears as though there is a lot of changing minds happening, so I'd be saying be cautious. Just my opinion though, based on my investment partner experience :)
     
  5. Tekoz

    Tekoz Well-Known Member

    Joined:
    24th Jun, 2015
    Posts:
    1,244
    Location:
    Sydney
    So how can Cranbourne is over price for investing a house in Melbourne ?

    Can anyone please shed some light here ?
     
  6. infocus13

    infocus13 Member

    Joined:
    27th Jul, 2015
    Posts:
    15
    Location:
    Melbourne
    Cranbourne has a lot of vacant land around it, which puts a ceiling on CG for any established properties.
     
  7. miked

    miked Well-Known Member

    Joined:
    1st Jul, 2015
    Posts:
    75
    Location:
    Melbourne
    I know I am very late to the party with this thread, but I had a few thoughts when reading through your posts:

    - you need to do a lot more research, both of you. This should get you both on the same page as well, trying to find something you both like the look of. Your pricing estimates were WAY off.
    http://www.realestate.com.au/property-house-vic-noble+park-119929581 (said we should offer 420k, he believed it was a rundown dive) - $475k (not too far off)
    http://www.realestate.com.au/property-house-vic-clayton+south-119814379 (i said offer 520k before the auction concluded, he said he'd pay 380k for it...) $690
    http://www.realestate.com.au/property-house-vic-berwick-120059169 (I believe if we get this for under 450k we've done good, however dads not interested above 390k.. I believe it will go for over 500k. $900k!!!

    - Be careful buying with family. Terry did a good thread (https://propertychat.com.au/communi...-of-parking-parents-cash-in-your-offset.3523/) with some dangers - all of which are similar to your situation. Also keep in mind how you buy it. If you buy as joint tenants, and later either of you dies, the whole property goes to the other owner. This might not be good if either of you wanted it to go to a wife.

    - I'd definitely advise getting some sort of written contract detailing how you will deal with things like selling the property, managing loans, etc. Nothing worse than trying to get ahead in life but ending up hating your dad because of it.

    - Don't worry about paying LMI. You can add it to your loan and you will never worry about it again - better to save 10% and pay it than save an extra year for a 20% deposit.

    - Rent is not necessarily dead money. You can buy an investment property where you can afford it, and then rent where you want to live. This is a VERY viable way to invest, although oldies like your dad might not think much of it. Times have changed.

    - The biggest problem is that it sounds like you aren't on the same page with what you want. You're probably reading different books, yours might even be in a different language to what your dad is reading! Any partnership is bound to fail if you're that far apart.