I'll be in a position later this year to buy another IP. Moving forward my goal is to buy properties with strong capital growth and development potential. My ideal price range is $500-700k, and I realise it's hard to find properties in this range that make sense to develop immediately, plus I've got my hands full with work and personal commitments at the moment, so I'd like to buy properties that are close to neutrally geared that I can hold for a period (likely 5+ years) then develop. I have exposure to QLD so don't want any more there. I live in Sydney and have a PPOR here only. I would consider Melbourne, Sydney and potentially the Central Coast. I like the metrics of Perth too.. I'd probably feel more comfortable doing a quick development there rather than holding long term as it seems a touch more volatile, but I have a feeling it will trend upwards for the medium term at least. Thoughts?
Can find blocks in Melbourne at that price range but not in east. Holding costs shouldnt be too bad as long as you dont get any nasty repair bills. If you want to swing for the fences focus on areas where international buyers are lurking as they often pay overs for new. The rising middle class in Vietnam (work ethic and entrepreneurship is similar to Chinese) could be a long term winner- areas would be st albans / albion at your price point. Otherwise anywhere near latrobe uni where townies are in demand. But since selling prices in these areas would not be much more than build costs you may need to do some estimates to see what is possible without any underlying improvements in density or product end values. It actually might be cheaper for you to buy two finished townies vs an old house on a splitter block at this point.. Most developers i know focus on the east due to the greater margins between end product values and build costs but definitely need much more capital to get things going there which naturally restricts competition and supply.
Thanks, very helpful. What budget would I need to get something in the east? Holding costs not much of an issue as my other properties are all positively geared (before depreciation) and I'm on a high income. Close to neutral is good, but if it was negative by $100/week it wouldn't matter either. I'm more so concerned about the impact on future borrowings.
Depends how far out you go, but under $1mill is definitely possible. Say ringwood, doncaster east, mitcham, boxy north, blackburn north even closer in if its barely habitable. Sure there are more. There was a house right next to mitcham station that sold for 850k yesterday.. smaller block so no sure what is possible but still pretty cheap for the area. All those are high on the list for chinese buyers who love new stuff esp as wedding gifts whether they are new houses or premium townies. But since its quite exxy already the cheaper areas may provide greater upside. I think recently i saw a major discrepancy between new build at 50a maggs st and 32a maggs st donny east (please double check) so definately crunch the numbers. Ive also come across a listed asx company buying subdivided (name escapes me) lots in certain developments recently as they believe they are getting in at below replacement value. Something else to consider
Thanks Robbo, will look into Melb. Thoughts on best areas for hold + develop strategy in Central Coast/Sydney?
Why don't you show us what you have researched so far and we can give you some opinion if you're on the right track?
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