VIC House with >500sqm land for <$400K

My situation is that we're a single income family, with a wife and 2 young dependents at home. We have some equity and a reasonable deposit, and would like to buy another IP.

We currently have the following properties:

1. PPOR - 3BR House in Pascoe Vale (subdivided block)
2. IP - 2BR apartment in Southbank

We feel that we made a mistake not buying a full block of land in Pascoe Vale when we could afford it, and certainly the apartment hasn't had very much CG (as per this thread: Apartment in Southbank VIC - Sell? ). This next time around we want to make sure that we get some land (I'd consider units, but my wife won't).

We know that we can borrow up to $420K (possibly more, but prefer not to). Being a single income family with 2 dependents, we're not exactly flush with cash. So what we're after is:

• >500 sqms of land
• Potential to subdivide in the future
• Capital Gain
• As close to CF positive as possible

I'm currently leaning towards Broadmeadows. I think the reality on the ground doesn't match it's stigma anymore, but the prices still do. Considering the price of land in Glenroy/Hadfield, I can't see Broadmeadows remaining so far behind in the long term. It's close to the city, has good transport, and I believe that prices can only go up. However, I'm concerned that this is a bit of a risk because:

1. It is Broadmeadows
2. I'm concerned about the quality of tenants.

I need this next IP to work out. If we end up with another dud like the first one, that'll be it for me. I won't be allowed to buy any more

Is Broadmeadows a good option? What other areas should I consider, where we can get a decent amount of land, the potential for CG, and a fairly good rental return?

Obviously I'll be doing a lot more research/due diligence, but any advice from some seasoned pro's would be appreciated.

 

First thing you need to do is cut your losses with Southbank. Put it down to lack of education, bank the capital loss and put it towards a future gain now you are more educated.
Holding that one any longer is just going to cause you pain and hinder any investment progress. Believe me when I say the growing it has done (probably 0%) is the most it will likely do in the next 10 years.

Broadmeadows I believe to be a top choice for that budget and that land in VIC. Apart from St.Albans which is now slightly outside that budget I think for what you seek is the best available. Look at the Melbourne plan which outlines its strategy up to 2050 and you will see Broadmeadows being a significant Hub (realistically it already is).
As prices rise so will rents and the area will begin to gentrify, as you suggested the ground is already showing signs of life. If you know Melbourne well you know it wasn't too long ago we were talking about "scumshine" and anything Footscray related quite unfavorable. Anyone holding property with land in these parts now is getting high fived.

It sounds like you have a much more reliable and long term strategy than buying apartments in horrible areas like Southbank and Docklands. I actually feel sorry for people who are holding these with any kind of bright outlook.
Go the city and see how many towers are being constructed, check REA and see how many listings and then put 2 and 2 together. There is a lot of pain coming to these markets.

 

I think it's grown a little in the 5 years I've had it. A recent sale of a comparable apartment (I've been in this apartment, and I think mine is a little better) went for 20% more than I purchased at, but this is probably an anomaly. Realistically I think the gains are more like 5%. And I agree with you that it is unlikely to do anything much more than this in the coming years.

But 12% gross yield, giving me 10 - 15K profit per year? That's something you'd give up?

re Broadmeadows, I'm with you. It doesn't feel that scummy or dangerous to me. It doesn't feel much different than it's neighbour Glenroy, which commands prices almost 50% more. Clearly the negative stigma is still affecting prices, but hopefully that will change.

Any tips for the good and bad parts of Broadmeadows? And how do Jacana and Westmeadows compare? I'm under the impression that Westmeadows is like the Broady of the 80's; it's still quite rough.

 

I just realized you had posted that other thread so realizing it is so heavily CF+ makes my comments a bit heavy handed.
It is rare for these kind of places to be giving a cashflow of 10-15k.
Just be very careful though because in the next 5 years you will be adding 1,000s of apartments and those looking for options will have plenty in terms of short stays. The last thing you need is it to become neutral again with no outlook for CG.

I actually prefer Broady over Glenroy TBH. I think the Hub has more going for it but obviously it is still a bit rough. Glenroy has cleaned up a fair bit.
I have been in the Jacana market and attended a few auctions. Just be careful as the rear areas of jacana speaking to a REA ha massive easements that cannot be constructed over.

I have spoken to a couple of BA's and they all speak more favorable of west meadows than both jacana and Broady. I personally can't see why but they are the experts