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First IP

Discussion in 'Where to Buy' started by KoBro, 27th Mar, 2016.

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  1. KoBro

    KoBro Member

    Joined:
    15th Mar, 2016
    Posts:
    6
    Location:
    Melbourne
    Hi, I am looking for our first, & soon after 2nd, IP.
    We are considering the following options & would appreciate any insights you have to offer :)
    We are looking to build wealth, long term strategy. Wanting areas with high rental demand to reduce risk of vacancy. Obviously capital growth over time is what we're looking for. The options we are considering are:
    1) top of the list is Bonbeach. It's a bayside suburb we can afford that's still not too far from the cbd, and access to train line & close to the beach. Given the prices of other bayside suburbs further in the city, I would think capital growth here is a given? The 2 options here are a new townhouse, however rent would be about $550 per week. Are there many renters in this price range? I mean if I was paying that much rent I would rather buy! Other option is a cheaper older house where rent would also be cheaper & assuming there would be more possible tenants.
    2) a new townhouse in Coburg, a lot of gentrification in the area, & very close to cbd, rental demand seems high & close to cbd so capital growth should be ok too. Purchase price & rental yield is similar to Bonbeach.
    3) A townhouse in south eastern suburbs, probably Officer, but not a huge amount of rental demand right now but it is said to be growing in popularity. Rent would be more affordable for tenants, say $350 a week so even in times of an economic downturn one could assume it would be easier to rent out than option 1 & 2?
    4) new to the list is Frankston South, mainly because I've seen a lot of talk about it on here, but we have not researched it much yet. I've heard lots of gentrification happening in Frankston too & the demographic changing from druggies, low socioeconomic area.
    I am making lots of assumptions here & they may be very wrong, would love some input :)
    My biggest question is around whether there are many renters in the price range of $550 pw, which is what a new townhouse in Bonbeach or Coburg would be asking. Is it safer to buy cheaper houses further out as rent is more affordable?
    Thanks heaps :)
     
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  2. Azazel

    Azazel Well-Known Member

    Joined:
    18th Jun, 2015
    Posts:
    8,113
    Location:
    Brisbane
    Hey @KoBro , welcome aboard.
    Good on your for doing research.
    I don't know that much about those areas, but sure to be someone around here with some ideas.
     
  3. Amberlee

    Amberlee Active Member

    Joined:
    18th Jun, 2015
    Posts:
    29
    Location:
    Sydney
    Hey @KoBro
    Welcome! Good to hear you are keen to start investing.
    I don’t know anything about these areas either. But if you look at similar properties you can get a feel for the market. Like look at this townhouse in Bonbeach, it sold for $720K and was then rented for $550pw a year ago and is up for rent for $550pw again now.
    Onthehouse.com.au: Your Home for Property Research 《 Link to 5/104 Nepean Hwy, Bonbeach.
    Have a look at a bunch more to average out findings.
    This type of investment is going to take a fair amount of cash to service the loan. The yield isn't good even without taking in to account the strata and other expenses. But if you aren't concerned about cashflow and are wanting negative gearing and depreciation then it doesn't matter. But make sure you play through the worst case scenario in your mind, that you don't get any capital growth for 5 years or more and you have periods of vacancy for a few months each year. Can you afford to hold it? Will you be able to buy a second IP?
    Spending upwards of $650K on a townhouse 31km from the CBD for your first IP seems like diving in in the deep end to me. But hey, different strokes for different folks.
     
  4. KoBro

    KoBro Member

    Joined:
    15th Mar, 2016
    Posts:
    6
    Location:
    Melbourne
    Hi @Amberlee, thanks for your response :) I didn't realise you could get the history of properties like that, thank you for giving me a new tool :)
    Yes, it does seem like diving in the deep end but we want to get in the market closer to the cbd, & the expensive one will be a SMSF so will have about 200k put down on it. We are then looking at a cheaper property which will be fully mortgaged.