VIC First IP, Footscray, Low 300k Range - Bad Idea?

I'm tentatively planning on purchasing my first IP and am seriously considering a two bedder flat in Footscray.

There have been a bunch of similar properties in this particular street and nearby streets which have recently sold at the low $300,000 mark. Is it a bad sign if multiple properties are selling like hot cakes in the same street?

The property would provide a decent cash flow, and with its proximity to Victoria University and public transport, I'd guess that the value would steadily increase.

On the other hand, my reading has alluded to the notion that it would be wiser to focus my hunt on houses out in the burbs, on large plots.

I think I need to do a lot more reading, but any direction would be much appreciated.

 

how much would it rent for?

 

$320 per week.

 

When looking at apartments keep in mind that land appreciates while buildings depreciate. Looking at historical growth trends for 2 bedroom apartments in the area is a good indicator.
Also depends on your objective and whether it's cash flow or capital growth. You mentioned decent cash flow but this will depend on your LVR (loan to value ratio). Assuming a 10% deposit and if you go interest only, based on the numbers provided I'd say you can expect the property to be neutrally geared after taking all expenses into account (agent fees, maintenance costs, rates, insurance etc). You'd therefore be banking on capital growth to make some money.

I know Footscray houses have had decent CG over the past few years but will let someone else who knows the area better comment on the apartment market

 

Also depends on what your max budget is. To purchase something with decent land for low $300's you would have to buy fairly far from the CBD in which case you may be limited to an apartment to begin with

 

No more interest-only loans for investment loans of LVR greater than 80%, for most major lenders at the moment...

 

Hey Ben, if it is your first IP I'd suggest against it. Apartments are fantastic for cashflow but if you are looking to build a portfolio you want to start with a capital growth property. This is a subjective opinion of course and some may have different opinions but this is what I believe. With this being said, good fundamentals of being close to a uni and going the 2 Bedder close to the CBD.

If your budget is $300k and you are comfortable looking into other cities I'd suggest checking out houses in the Logan/Ipswich area in Brisbane, otherwise you could have a look at houses in Ballarat; they are reasonably priced with good yield in a strong market.

Otherwise, if you are set on an apartment in Melbourne, depending on your deposit size you could look at the studio flats in Carlton right next to uni of Melb. I don't know much about them but looked into them a little bit, most are sub $200k that rent at $320 - $350. But due to their size you will need a larger deposit and there may be more nasty clauses below the surface than I can't see but some are advertised as having a 10%+ yield.