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first IP in Werribee

Discussion in 'General Property Chat' started by Nish, 18th Jan, 2016.

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  1. Nish

    Nish Well-Known Member

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    Hi, I want to buy my first Investment property and trying to be a bit cautious about the first purchase, I do not want to buy an expensive one. Could someone please provide advise on the idea of buying a land in Werribee, Victoria of say 165 sq m and build a townhouse of that costing all in all around 265- 270k. I am thinking of paying 20% LVR on that saving me LMI and also less stamp duty on over all build. In an year or so, after gaining some confidence and getting some equity in the townhouse and my savings, I can look for a better investment property. 2 thoughts in my mind:
    1. This will give me some instant equity perhaps as similar tounhouses are sold by developers above 300k in the same area.
    2. Since I will be paying 20% LVR, it will give me some positive cash flow.

    I am a newbie so please don't be harsh if the approach is not right :)

    Thanks in advance!!!
     
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  2. MsAli

    MsAli Well-Known Member Premium Member

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    Hi @nishant gupta

    Welcome to PC. I believe you mean 80% LVR.

    @Soul may be able to shed light on the area.

    Though by the sounds of it, you already understand the principle of making money going into the market and not when exiting.

    What would be the gross rental return on the property?

    What sort of location is it? (convenience factor)
     
  3. Leo2413

    Leo2413 Well-Known Member Premium Member

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    @nishant gupta for a newbie and a first Ip and stating you are cautious and i guess want lower risk for your first IP, to me your plan doesnt sound like low risk. Its really developing so you need to understand the numbers, demographic, some development process, profit margins...and many other things.

    Its just my opinion that this is not a cautious approach (as you wanted) for a first ip.
     
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  4. Nish

    Nish Well-Known Member

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    Hi @MsAli

    Thanks for your reply. Yes, I meant 80% LVR :)
    I am not sure if I really understand the principle but thanks for your kind words..... I am expecting the rental above 280 per week. It is around 3 kms to the train station and a petrol station but I am still doing some more checks regarding the shopping areas, schools nearby..
     
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  5. Nish

    Nish Well-Known Member

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    Thanks @Leo2413 for your suggestion. I am still trying to understand the development process and taking help from a friend in Melbourne who is constructing his own house through a developer. What i have understood till now is that it works on a fixed amount contract with all the numbers upfront. So, I believe that I should be aware of the cost involved. Regarding demographics, as I mentioned I am looking at the land in Werribee. Still doing research on that....Please correct me if I am wrong somewhere!
    Thanks
     
  6. Leo2413

    Leo2413 Well-Known Member Premium Member

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    HI @nishant gupta, Its great that you have a friend who is helping you who has some experience. With regards to Fixed Contracts, really there is no such thing as '100% fixed' (i learnt the hard way). There will always be 'unknowns', especially when the builders dig out the site and so they will pass on any additional costs onto you (as will be in the fine print in the 'fixed' contract. So you need to make sure you have a decent contingency for the development. Also becasue your aim is to extract equity out when you are done, just make sure (as much as possible) that there is a decent profit margin when you minus all your costs to then have it revalued. Also revaluation is usually more conservative than end sale so that might further affect how much (if any) equity can be drawn out.

    Best thing to do is to have someone who is experienced who you trust, to look over the numbers and overall deal and get their opinion. I'm sure others here will have advice for you too. Congrats on starting your investment journey!
     
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  7. melbournian

    melbournian Well-Known Member

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    i've done a few builds in the west. For higher CG, i wouldn't be buying or considering a 165sqm townhouse in werribee and for 265-270K, you could get a older house on a plot of land in wyndham vale. You would be better off with a 285-350sqm land to build a standalone house with a minimum 10 meter frontage to get a 2 carpark. those are properties that will appeal in the future in those areas. Also to build would take anytime btw 3-4 months which will also inccur holding costs. Also land you would have to wait 1-1.5 years to get titled if it hasn't already. If you buy titled land, you sort of pay interest on your loan while searching for a builder to finish your house which adds to the pressure and you will be more prone to mistakes. if you were a buyer with 3 kids and labrador pet dog, would u buy a brand new townhouse or an older property with a yard etc. Townhouses as you suggested do well in closer to CBD suburbs where land is in limited supply like carlton, albert park, sti kilda, brunswick. OTP properties in general do not do well in melbourne.
     
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  8. melbournian

    melbournian Well-Known Member

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    You have a fixed contract but there are always exclusions (landscaping, fencing, even flooring, fixed costs, site clearance, connection costs (which are a bit) and consumption of utitlies during construction)

    Werribee is also 32 kms away from CBD - hence the suburbs around those areas with their transport is primarily focussed on cars. Which is why a 3 bed 2 bath 2 capark is normally the better option. If you have a husband and wife, husband drives to work in the city, wife needs another car in bring the kids around or go shopping. i agree with @sash 3x2x2 that is the best combo for suburbs 25kms out from CBD.
     
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  9. jpcashflow

    jpcashflow Well-Known Member Business Member

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    @nishant gupta gupta
    I have bought and sold a few properties in Werribee and Hoppers Crossing.

    Please see below points:
    • Cheap is not always the key to success - Cheap buy may equal cheap return.
    • A good buy = Good return.
    • 165 sqm is very tight.
    • The type of land you are targeting is not really bought by developers as such but more from builders. They pretty much only make a small amount of return on the sale as they do not add a margin for them selves.
    Be time you add insurance, building cost, stamp duty cost, council cost and any other related cost I am not sure if this deal would be worth it to be honest.

    Your better off spending $300,000 + on a home in a area that has the pontential to add a unit at the back.
     
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  10. Peter_Tersteeg

    Peter_Tersteeg Finance broker and strategist Business Member

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    I don't know that I'd be buying in Werribee. It's on the outter fringes of Melbourne with a lot of vacant land around it. Close to the Point Cook development corridor, there's going to be continuing development going on in the general area for decades. There's not shortage of land in the area for development and this is one of the reasons the area is cheap and will remain so.
     
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  11. melbournian

    melbournian Well-Known Member

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    Agree - cheap is not always good and 165sqm land would maybe only make it 125sqm house with setbacks etc. my apartment is bigger than that.

    @nishant gupta i just realized you are a guju and i understand you are keen to keep costs down but as my guju fren always says buy the best investment first and then focus on cost reduction[/QUOTE][/QUOTE]
     
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  12. Soul

    Soul Well-Known Member

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    Wow! PC members have given you so much to think. My 2 cents:
    -There is no shortage of land in and around Werribee, however some areas are better positioned to grow than others. Is the land you are looking for is in a new estate or in an established area. 165 is tight as someone said, you should be able to buy a house in 325K with min 500sqm. New estates are planned around Werribee. For example: Kingsleigh, New Werribee, Manor lakes and a couple more in Wyndham Vale.
    -Some areas are less desirable and you may want to wander around after 9pm.
    -Area near Pacific Werribee, Heathdale christian college is better.
    -You may be able to afford a house as indicated by @melbournian if you search well for around 325K in the newer estates where a train station is at your door step and near schools. Another take is strata charges/ body corporate for TH.
    -Finally, is there or going to be a demand for TH in Werribee. I see families/ retirees in the area and they prefer a home whether big or small.
     
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  13. Nish

    Nish Well-Known Member

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    Thanks all for your inputs!!!
    More than 30k-40k house price, it was more about the choice of house.
    I am not sure how to move ahead then. I have zeroed in on Werribee after talking to a couple of people already in property investing. But I have been trying to find a good house in and around Werribee but all I am getting are 20-25 years old houses which require repairs and without that they are difficult to rent. They are also in range of 340 - 370k. If I think of going through a Buyers Agent, it decreases my purchasing power by around 100k.

    @Soul Thanks Soul. By New estates, do you mean Off the plan. What I have learnt till now is that Off the plan is not a good investment. If you do not mean OTP, then could you please help me understand the process of moving further towards selecting my first IP as I am stuck now searching for 5-6 months.

    Thanks again all. Being a newbie, I appreciate all the help by Forum members.
     
  14. MsAli

    MsAli Well-Known Member Premium Member

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  15. dabbler

    dabbler Well-Known Member

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    All houses require maintenance/repairs.

    The demographic is from a lower base, but has transport & good shops etc. It should improve.

    I do not think OTP is totally off the table if new is your thing, but you may be better looking for something that will title soon or maybe an existing block.

    The returns are quite poor IMO though.
     
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  16. dabbler

    dabbler Well-Known Member

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    There is miles of land out there, I would not just right it off due to that though, it costs money and takes time to develop, there is a couple of really big housing projects coming up right in Werribee.
     
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  17. Nish

    Nish Well-Known Member

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  18. Nish

    Nish Well-Known Member

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    Thanks @dabbler
    not looking for exactly new but atleast something that does nt need immediate 5-10k from my pocket
     
  19. MsAli

    MsAli Well-Known Member Premium Member

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    I'd stay away....@monalisa and I lost/invested 2k on our first investments . Best loss (read lesson) ever :)
     
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  20. dabbler

    dabbler Well-Known Member

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    Understand, you will be competing with home buyers most likely.