First property purchase (Melbourne)

Hi all,

So I am finalising my first property purchase (investor property) in Abbotsford, Victoria Street (close to Victoria Gardens shopping centre). Settlement date is at the end of the month. With interest rates so low, now seemed as a good time as any. The area does look like its developing quite rapidly recently. With a tram and train, its a bit under 15 minutes to get to the city (double that if only a tram is taken).

Now I always look at any purchases I make being as long-term as possible, especially with property. Essentially I had a choice to look at a house in a less than desirable area or an apartment in a pretty established, inner city area.

House prices have gone loco in Melbourne, and getting an owner-occupied loan is getting tougher due to the assessment rates of banks, so I decided on an apartment in Abbotsford (good rental yield).

The property I am buying has a purchase price of $535k (I have managed to get the developer to pay pretty much all the stamp duty, and even discount it a bit). All in all, I'll be looking at paying about $530k. The property was completed about 12 months ago, and is essentially brand new, fully furnished with roller blinds, top notch appliances etc. It has 2 bedrooms, 1 bathroom, 1 car spot (and storage space). It also has an unobstructed city view and is on the sixth floor (highest floor in the building). Its internal space is about 58sqm, with a roughly 10sqm balcony, so roughly 68sqm in total. Its definitely on the smaller side but has some nice perks to offset that. Its also off the main street (Victoria) and away from any elevator shafts, so is pretty much completely silent when balcony door is shut.

I wonder, do city views command a premium when it comes to apartments? The apartment is nicely bathed in natural light on a nice day, which was a really nice initial impression for me. Sunsets will look great, as the apartment faces West. The building itself has a gym, cafe, heated pool and a few other things that make it quite a nice spot. LVR will be 80% and I've locked in a 5 year fixed interest rate which should be a about 4.48% (with a 12% variable component, the rest fixed).

Rental appraisal has come back at $450-$500 per week which I think is pretty good? I am single 29, currently living at home (and probably will be for the next 2-3 years unless circumstances change). Body corp and council rates are pretty steep, and will work out to be about $5,200 per year. But yer, kudos to my broker who managed to secure the loan even though I was 2 months into a 3 month probation period.

I have noticed quite a few developments sprouting up in the area, the good thing being the building I bought in is still is closest to the city (and still has unobstructed city views), whereas other developments are "behind" it and don't.

Would like to get some opinions, advice or anything else I can on this forum (while contributing wherever I can), so thank you for reading my intro

 

Congratulations on making the leap, that's the hardest part. Hopefully the purchase meets the requirements of your long term strategy - sounds like it is long term hold and it isn't a cashflow play so I am assuming long term CG is a (?big) part of your goal/plans.

My biggest concern would be ongoing holding costs associated with the type of development you have described.

When do you settle?

Good luck

 

Thanks Hodor! It is a big leap for me, as I am usually very conservative from a spending perspective (or just life in general).

Yes, its a very balanced approach I guess. Definitely more geared towards CG than cash flow and I know Abbotsford won't be seeing any massive CG in a small period of time. I have added in the holding costs (body corp and council rates) in my initial post (they are steep). I settle at the end of this month (going overseas in a bit for a small trip with family beforehand).

I was thinking of buying the depreciation schedule from the developer for a small fee ($395) to give to my accountant.

Thanks for the reply!

 

You can get this done yourself, $395 sounds like a good deal to me if it is done properly. Cheaper than any I've seen.

CG is where you make your money, so hopefully your research is solid and you'll see the CG you are after long term. IMO if you are planning to grow a large portfolio it is important to have cashflow to support further growth, especially in today's environment, or you will hit the lending wall very quickly. Not to mention holidays will become a thing of the past

 

Yer, I figured for the price its a pretty good move, considering it includes everything including the building and all fittings and fixtures.

A portfolio is something I am considering but not entirely sure (but logically it seems like a sound move if CG is going to make that easier). Yes agree about the cash-flow, that is a good point and something I will consider for the next purchase. I figured for a first property, inner city would be fairly "blue-chip" with less chance for a property glut to occur anytime soon like in the CBD/Southbank etc.

Thanks again!