VIC Hold or sell in Burwood VIC?

Discussion in 'Where to Buy' started by thejourneybegins, 18th Dec, 2017.

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  1. thejourneybegins

    thejourneybegins Member

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    Hi PropertyChatters,

    I've just stumbled across this forum and wished I had picked up on it much earlier! There's some good insights going around and would have liked to have been part of it sooner.

    It's my first time posting so please bear with me. :)

    I currently own and live in a 12 month old 3 bed townhouse in Burwood VIC. Estimated worth between $1.2m - $1.3m.

    For a variety of reasons, I'm looking to move out of the area into the inner north area of Melbourne (i.e. Northcote, Clifton Hill, Fairfield, etc....). Having read through this forum, I've been considering rentvesting.

    If I did rentvest, would it be worthwhile holding the Burwood property or has
    Burwood peaked and should I sell that property, and buy something else with more upside?

    Financially, I won't be able to contribute more to any purchases so if I were to buy somewhere else, the cost would have to be the sale price of the Burwood property less the selling and buying costs.

    Hope I haven't typed up gibberish and an early thanks to any replies!


    Cheers
    Greg
     
  2. Big Will

    Big Will Well-Known Member

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    This is my own personal opinion but there is less upside to Melbourne than 1-2 years ago, not saying it is bad news for next year. However as you would be buying and selling in the same market it doesn't make much difference overall.

    You would want to ask yourself how long are we going to stay in the inner north? If it is only a couple of years you are most definitively better off renting out Burwood and back into the property within six years (from a finance point of view).

    However if you cannot handle being a tenant then there is no point rentinvesting so you are better selling and buying.

    The cost for seeling Burwood would likely be about 2% or ~25k plus marketing and other fees (legal) would bring it up towards 30-35k total. However to then purchase you would also be up for stamp duty and for a 1.25M purchase that is another 72k + other fees (75-80k) so by selling and buying you would destroy over 100k worth of net worth.

    This is purely my opinion and you should seek your own advice along with think about what you want at the end of the day money isn't everything :).
     
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  3. Peter_Tersteeg

    Peter_Tersteeg Mortgage Broker Business Member

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    I think Burwood (and almost anywhere in the eastern suburbs) will do well long term. You probably won't see the same growth as the last two years in the next two years though.

    Ask yourself what you'd do with the money if you do sell? You may never have the opportunity to buy in Burwood again, so make sure that what you would do with it will do better than what you've already got.
     
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  4. kaibo

    kaibo Well-Known Member

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    Must be an awesome 3 bedder to be worth that. You need to look at tax benefits with good depreciation on a new build.

    There is a ceiling on the price of townhouses in the area so capital gains will not be very high. Hopefully the value of land it sits on can outperform the decrease in value of the building.

    Personally being in the area if you are in Mount Waverley school zone then easy to rent out but if not then can be tough with a ceiling of around $650 for a 3 bedder and not much potential for an increase (townhouses.apartments are being built everywhere and tenants tend to move to a newer one after a few years).

    Specific to area I am not very bullish on Burwood as no train station (metro link upgrade) and not close enough to North east link to get the upside of these 2 massive infrastructure projects
     
  5. The Y-man

    The Y-man Moderator Staff Member

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    Good pickup! I read the original post as "house" and was wondering why you were questioning it! :oops:

    Great point re the depreciation if turned into an IP too.

    Agree with no station, but does have trams (to Hartwell station) and a good bus network (to Box Hill line or GW line) and of course Deaking in the middle of it all.

    My view is that the inner east subs have eased off - so now may not be the best time to sell. I'd opt for a hold and rent until the next crazy wave (which could be some years away - but who knows)

    The Y-man
     
  6. thejourneybegins

    thejourneybegins Member

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    Thanks for everyone's comments so far - appreciate it!

    Ideally I'd like to sell out of Burwood and buy in the inner North but I think prices are a little out of reach at this stage ($1.4-1.6m). Have to knuckle down for a few years to get to a point where I could make that feasible (say 2-3 years). Hence why I'd be open to renting there temporarily and leasing the Burwood property out.

    Will I handle renting? Not sure - haven't done it before, have always lived in my own homes. But I'm pretty easy going and keen to take some good financial steps to set myself up for future

    My thought process was along the line of if I was going to do that, would it be wiser to sell out of Burwood and invest those funds into propertie(s) in an area that holds more upside in that 2-3 year time frame. But i guess I'd be starting $100k behind by way of buy/sell costs anyway... and perhaps Burwood might be a good hold prospect for the next few years anyway?

    The property itself whilst currently a 3 bedder actually has scope for 4beds. There is a rumpus upstairs which was originally built as a 'bedroom size' room. All I'd have to do is just put a single wall across (with door) and built in robes and hey presto - its a 4 bedder. Overall its a double storey about ~186sqm with 3 baths and double garage. Also got a 4x4m deck outside with pergola.
    - do you think this would have scope to go beyond 650/pwk for rent if i added the 4th bedroom?

    Location is close to warrigal road x burwood hwy, so schools around are PLC, wattle park primary, st benedicts primary, emmaus college, deakin up the road.

    keen to learn more about the depreciation benefits of a new townhouse - is there a link you could recommend I read further on?

    so far the general gist seems to be hold on to Burwood and wait (given inner east suburb holds value well long term)?
     
  7. The Y-man

    The Y-man Moderator Staff Member

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    You leave that to a quantity surveyor to make a schedule, and an accountant to work with it.

    Basically, you can get a tax deduction off the depreciaiton of the building and fittings/fixtures while it is rented.

    ATO info at
    https://www.ato.gov.au/uploadedFiles/Content/IND/downloads/Rental-properties-2017.pdf

    The Y-man
    .
     
  8. kaibo

    kaibo Well-Known Member

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    depreciation probably can deduct 20K off income per year decreasing by around 1.5K per year would be a ball park for that build. Look at how you structure the loan (offset instead of redraw) and keep an eye on the 6 year capital gain tax free rule while you renting out. Seek an accountants advice as it will be worth it

    Keep in mind you will only pocket about 70% of the gross rent as agent fees, maintanence, land tax and rates do add up

    I don't see much capital gain even if the market heats up again as there are so many better options out there at that price range for capital gain (anything with a rentable house on a block over 500 sq even if a little further out e.g.
    5 The Mews, Vermont, Vic 3133 - Property Details
    100 Boronia Road, Vermont, Vic 3133 - Property Details

    but obviously you won't get as good a rent but its always about CG in my opinion
     
  9. thejourneybegins

    thejourneybegins Member

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    thanks for the responses and heads up on depreciation. looks to be that the biggest benefits come early on as the property is new.

    will def speak to an accountant.

    if it was you kaibo i suspect you'd sell Burwood and buy into properties with bigger land sizes for future CG? even accounting for the $100k in changeover costs to be incurred?
     
  10. kaibo

    kaibo Well-Known Member

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    Take a view on where you want to live in the future and buy a place with 80/20 (most likely means an older standalone house) value split in land/building. Within 2 k.m. (prefer 1 k.m.) of shops (coles/woolworths) and good train line with good school zoning. Where would be a lifestyle choice as never considered inner north but East/South east for me (no offence to West or North)
     
  11. melbournian

    melbournian Well-Known Member

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    @thejourneybegins - personally to make capital gains but "not to live" - I would just get rid of Burwood townhouses (it's not like it is in Balwyn or glen Waverley school zone or the Mckinnon School zone) if it is townhouses they are plenty of them. You throw a dart in Doncaster and they are heaps or 1 mil plus townhouses ard. there are also villas selling for less than that. Esp now with the neighbourhood residential zone removed from minimum block size - it is only downhill push to the townhouses. Seriously ppl paid this for 1.3 mil (1224sqm) in GWSC why would they want 1.2m townhouse in burwood

    upload_2017-12-20_22-56-10.png
    I would go North or West for investment to buy blocks of land that have development potential or decent size blocks close to transportation.

    if you want a PPOR then different story
     
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  12. thejourneybegins

    thejourneybegins Member

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    @kaibo - no offence taken. different strokes for different folks. taking your guidelines, i'm looking as far out as reservoir for something within the right price range with an 80/20 land/build split...... but most good schools are out in the east (from what I've read????). Something like this:
    <2 Croft Crescent Reservoir Vic 3073 - House for Sale #126969402 - realestate.com.au>

    [​IMG] @melbournian - i'd been in reservoir for 6 years and only moved to burwood 12 months ago. still prefer northern like northcote and thornbury but using criteria mentioned by all searches seem to take me up to reservoir again for the $1m price range. with your knowledge of the north, do you think there are still good buys for something that can be PPOR for now but with development/CG potential for future? Say a price ceiling of $1m?
     

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  13. melbournian

    melbournian Well-Known Member

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    Reservoir is huge -- many areas - the edwardnes lake areas, the oakhills, the merrilands estate, the northland precinct etc. I don't think all the houses are in the 1 million median, even parts of preston aren't. Of course, the oakhill estate will command this price and some of the higher end areas but you can easily get something close to the northland areas (which is currently experiencing huge rejuvenation and gentrification) below 1mil or even below 900kish (and that could include parts of preston too) though whether it suits your needs as a PPOR is the question from a CG definitely.

    Have a read of the ACZ RGZ thread -
    VIC - Melbourne Rezoned - ACZs, NEICs, RGZs GRZs etc
     
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  14. thejourneybegins

    thejourneybegins Member

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    @melbournian - wow what a thread - that is very informative of you - all that effort.... thanks!! i've got some further reading and investigating to do. had a look around on RE (of course not much stock right now but some look to be good CG IP options but not to live in right now as a PPOR) but that information really helps focus the direction.

    In regards to all the areas you mentioned for Reservoir, would you say you wouldn't go wrong in any of them? or would you rate them in terms of more desirable area say 1.oakhills, 2. edwards lake, 3. northland precinct, 4. merrilands?

    southside of preston bordering thornbury would be nice!
     
  15. melbournian

    melbournian Well-Known Member

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    as a PPOR the oakhill estate is the best but I would say for CG would be the worst.
    It really depends what your priority is PPOR or CG.
     
  16. thejourneybegins

    thejourneybegins Member

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    thanks for the response and PM, i'll continue my research into the new year.
    so far have come up with thornbury, preston and resa as potential places to buy
     
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  17. Hamish Blair

    Hamish Blair Well-Known Member

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    I live not far from you - we completed a 3 townhouse development 12 months ago and sold one, rented one and live in the other. Think future CG will be less than we have enjoyed over the past 3-4 years so trying to figure out what to do next. Land appreciates whilst buildings depreciate.
     
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  18. thejourneybegins

    thejourneybegins Member

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    Happy New Year and congrats on the development. Hope it was a profitable one for you. Judging by the comments earlier in the thread around CG potential with townhouses in Burwood, it's no surprise your in the same boat. Also agree with your comment around land appreciating.

    Quick squiz on RE.com shows a fair amount of townhouses coming on the market (some available now - but mostly coming within the year). With supply increasing and demand not so (not currently anyway....), especially if more developments get approved and keep adding stock to burwood in the future upload_2018-1-9_17-39-27.png

    I'm no expert but I think all things considered I'm leaning towards a sale rather than holding. But that's with an overlay of my situation where I actually want to move and live in a different area and not return to burwood/eastern melbourne in the future...
     
  19. melbournian

    melbournian Well-Known Member

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    @thejourneybegins - well I suppose Burwood is not your cup of tea. then you should go back to your old stomping ground.


    upload_2018-1-15_11-48-57.png
     
  20. thejourneybegins

    thejourneybegins Member

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    Yeah - even though most my family live around the eastern suburbs its not my cup of tea - definitely the black sheep of the family.....
    80% increase in prices in the past 5 years is phenomenal for reservoir - it was only a matter of time being so close to the city with still relatively affordable houses at the time.. just had a bad rap to overcome although the 6 years i was there was mostly fine...

    amongst the few incidents was the one where a car on the street was lit up overnight..
     

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