Best Investment Strategy 1-1.2mn

Hi - this is a bit of a "what would you suggest" situation.

Couple in question are friends - mostly paid off ppor, mid-30s, two young children, earning approx 120-150k pa after tax
They can get an additional loan of approx 700-800k and have some savings so can spend total 1mn or slightly more on property. They are paying off their ppor but want to get an IP or two. They live frugally and save a lot so a negatively geared property would be ok.

In terms of property, what should their "best" strategy be? They want to stick to Vic ideally; I was suggesting a property where they could subdivide and build another unit at the back down the line, but not sure if such strategy is still viable? They are open to reno-ing etc but would engage trades to do so.

I was thinking large blocks in certain parts of Melbourne West (Ardeer?) might work for subdivision?

Or are they better off just buying one or two faded houses/units with decent yields, doing a bit of cosmetic reno and selling them 6-10 years down the line?

edit to add - they want to avoid low-income housing since are wary of tenant issues

 

I would suggest the get specific investment advice from a reputable Financial Planner - Property might not even be the best option for them and neither their friends nor strangers could advise differently I suspect

 

I'd be buying 2 dual occ's, setting them to P&I and paying them off.... this would deliver them a 6 figure income stream within 20 years. But if they are already just about mortgage free and can pay extra , that could be shortened to 10 -12 years. Or, rather than using their spare cash to make extra repayments they could salary sacrifice quite a lot more into super instead. Starting at such an early age, the compounding benefits would be enormous .

But you cant do Dual Occ in Vic. If they are only interested in resi in VIC, that rules that out.

Whatever their decisions - they are in a great position being almost PPOR debt free in mid 30's.... they can do whatever they want from here, really...

 

Thanks @euro73 - is Dual Occ more of a qld/syd thing? They have mentioned a few reasons for wanting to invest in Vic only, part of it is their comfort zone and the fact they'd like to visit the property before buying, they don't travel often with young kids and even Sat inspections can be hard to organize with kids' Saturday activities etc (they are thinking of taking half-days on Thursdays and going to inspections then)

We did talk specifically about subdivision opportunities in Melb. As first time property investors (other than the ppor) they are wary of more complicated developments.

edit to add: the subdiv opportunities discussed seem somewhat similar to dual occ, eg 1.3 to buy house in ringwood east and subdivide (900k house, 300k plus contingenies to build unit at back); rent for 400+400 wk, while paying off the debt to end up with a decent rental income or sell the property at the front while keeping the rear unit for rental income. [and repeat... ?]

 

Dual occ ( where 2 dwellings sit on one title) is able to done anywhere in NSW as a complying development-so you dont need council approval

Dual occ under one roof can be done in some parts of SEQld but I'd tread carefully because there is a lot of extreme clustering and it will cannibalise rents

Dual Occ can also be done in some parts of SA and WA under certain circumstances. Someone like @Westminster could probably provide some more insight into the WA stuff....

If they are dead set on VIC, forget Dual Occ. Granny Flats can't be done in VIC. But they could consider Duplexes.

FYI - What many Victorians call a Dual Occ is not actually Dual occ. They buy a large lot, subdivide it and place a second dwelling there. By subdividing they have created a separate lot with a separate title, rendering the definition of dual occ ( two dwellings on a single title) redundant. They end up with two dwellings on two separate titles The concept certainly has merit, but it's a splitter block not a Dual Occ . There are some members on here who do that sort of thing regularly- you can search for threads on the topic

 

So just to add to the above, Dual Occ in VIC means a subdivided block with two attached townhouses. See this pic --> https://marque.com.au/wp-content/uploads/2018/11/why-dual-occupancy.jpg
There is plenty of scope for this type of build, however the median house price needs to be around $1M+ which puts this strategy out of scope for your friends.

If they are keen on development, there are plenty of cheaper options producing very good outcomes.
Option -> Buy a bigger block 600sqm+, needs enough access and room at the back for additional dwelling, subdivide, build free standing house at the back, renovate the front.
Here is an example of this (I almost bought this house recently but a better option has emerged) https://www.realestate.com.au/sold/property-house-vic-seaford-132303830

There was a solid $200-300K profit in the above address depending on how much work you wanted to do yourself, I am not sure what the sold price was however it was selling for $580-630k. Look at the neighbours house, and check the sold prices, should have all the information there to give you the idea.

Hope that gives you some inspiration

 

Wow @croseks that sounds good - I'd love to do a subdivision project myself after this new ppor purchase/reno/? works out - but that might be another year or two down the line. Great to see that other people are still doing subdivisions and that the numbers still work out in vic, hope your project works out