Hi from Footscray - decisions, decisions, decisions!

Hi everyone,


I will echo what many others have already said in that I have been lurking around PC for many months, learnt a lot (been confused even more often!) and decided it is time to start getting involved.


My husband and I purchased our first home in Footscray in 2010 which we have since renovated. Currently waiting to have the place valued and believe we will likely have between 150-200k equity to use for our first investment property - preferably in the inner west of Melbourne. At this stage our goals are fairly modest in terms of getting something that we can hold onto for potentially 10+ years which will achieve good capital growth and that we can rent out to hopefully cover the majority of the mortgage (we have two young kids and I've not yet returned to work so cash flow is a factor!).


My husband and I have differing opinions as to which is the best way to go about it -


My thoughts are to get a house on a block of land (somewhere like Werribee, Sunshine West), somewhere that is yet to really take off in terms of property prices, but surely (?) will eventually and so the only way is up (based on proximity to the city, close to transport, population growth and the trends of surrounding suburbs etc etc ). To me I think, surely that is a better / safer option that purchasing somewhere where house prices are already crazy and potentially are already at their peak – and so then the only way is down?


My husband thinks getting somewhere in better/nicer/more expensive suburbs is the way to go as he thinks they will always outperform the werribees and sunshines of the world.. (and with our likely equity we could probably afford to do this) – ie. Yarraville / west Footscray… While I don’t disagree that they will always outperform the suburbs further out , I feel like there is more potential to see better return on a small investment in the outer suburbs over a larger investment in the inner suburbs…


Apologies this is a very long winded introduction .... any feedback is very welcomed !!

 

Hey Jess, from Jess

What's your cashflow like? Buying more expensive will often be quite negatively geared so that will play an important factor in your decision making. Also if you buy slightly cheaper, you may have the opportunity to buy again elsewhere sooner if you want too - having access to a couple of markets can sometimes work well, especially if Melbs is nearing its peak.

 

Thanks for your reply Jess We have just started seeing a financial advisor who is doing some financial modelling for us to help give us a better understanding of our cashflow as we are completely useless when it comes to this side of things (builder and a healthcare worker - we should have got some professional advice years ago!). We could probably afford to top up the mortgage $100-150 per week if we needed to.

 

I also live in the area and would invest in the inner west rather than outer west. I'd be on the lookout for an older dwelling on a large block. Gives you the option of development in the future.

You'll still make a great return if you decide to invest in the outer west.

 

Thanks Hodge, we would love to do exactly what you suggest! We have been keeping a close eye on properties within the inner west but for that price it seems like you either need to compromise on land size or end up with a decent size block but with a house that essentially needs just to be knocked down and to start again (which obviously isn't always possible with the heritage overlays).. Either that or spend a significant amount of money getting it up to scratch to rent out.. There are few auctions coming up in West Foots / Maidstone which we will be watching with interest!

 

hi jess, a smaller investment is a safer investment will perhaps allow you to feel better, but, in the long run, since your strategy is 10yrs+, reconsider how you feel. If you are nervous, keep attending auctions and talking to people.
Darren

 

39 Blandford Street, West Footscray, Vic 3012 - Property Details

An example of the state of West Footscray at the moment.. This would surely need 100k + spent on it before you would be able to rent it out at a reasonable price.. and it's only on 495m2

 

Looks like they paid bit too much! If you are looking to rent out this property i would say 30k would be enough to get it to a reasonable standard.

I'd be looking at Altona north around newport end. Bigger blocks that give you development options.

I've always purchased run down properties on large blocks close to public transport. Once renovated instant equity. Don't be discouraged by a bit of work.
Hasn't failed me but land tax is a killer.

 

Yeah actually i'm basing the 100k off the fact that we spent that amount renovating our home in Footscray which was in much better condition than the one above. However we renno'd it to a much higher quality than we would have if our intention had have been to rent it out (for us to live in and raise a family in - before we even considered investments).

Definitely not afraid of a bit of work or getting our hands dirty, in fact that is what we are looking for as we quite enjoyed the process of renovating our first home!

 

Oh and will definitely check out Altona North, hadn't really even considered Altona area.

 

Interesting looking at that area Hodge, so many of the listings are off the plan compared to other areas I've looked at.. will definitely keep a closer eye on the area though thanks for the tip!

21 Croker Street Newport Vic 3015 - House for Sale #123825854 - realestate.com.au

I'm going to check this auction out - I wonder if this is just blatant underquoting ??

 

I think the price is not far off. It's a fairly small block, doubt it has much development opportunity. Really good pocket though. Would be an ideal flip if the price is right.

 

Welcome Jess and best of luck on your investment journey! Just keep in mind Australia is a huge country and the best investment options are often not within close proximity to where we personally live!

 

It's so true Bryan - we are trying to get into the mindset of making decisions with our head and not our hearts! I think because we are on the ground in the inner west of melb and we can see so how much is happening in terms of improvements to the area we feel that it would be a safe investment. In saying that, thanks to advice on this forum we are starting to think more about areas like Frankston / Epping ... but at this stage I just don't think we want to go outside of the state (mainly because my husband is a builder and so we would like to be able to do any maintenance / minor renno work ourselves)

 

I like that ^^^^^

Have you had the numbers crunched for you in regards to borrowing capacity via a broker as this is your starting point.

Financial Planners are a good member of your team if they know their stuff but generally are anti property for the simple reason they dont make money from it, unless they are flogging you OTP stuff for a kickback.

 

Our financial planner has so far been really on board doing the property thing and he is organising the loan application for us at the moment while also restructuring our current home loan. He has indicated we would be looking at being able to purchase something at around 750-800k - based on those figures I think we are fairly well priced out of the inner west in terms of older dwelling on a large block in the inner west..

 

He is a broker as well by the sounds of it which isnt uncommon so makes sense.

 

Sold for 810k today at auction !!

 

That's crazy and scary at the same time!

 

It's also not a freestanding house . Semi - detached !