VIC Investing in a Melbourne City apartment

Discussion in 'Where to Buy' started by Maree, 6th Jan, 2020.

Join Australia's most dynamic and respected property investment community
?

Should I buy a cheap apartment just to get into the property market?

Poll closed 13th Jan, 2020.
  1. Yes

    0 vote(s)
    0.0%
  2. No

    14 vote(s)
    100.0%
  1. Maree

    Maree Member

    Joined:
    4th Dec, 2019
    Posts:
    8
    Location:
    Melbourne
    Hi there,

    I’m looking to enter the property market solo with a very modest deposit of $85k. The purpose is for an investment and I don’t have a desire to live in it. Mostly because I can’t afford somewhere nice! I am a first home buyer but It’s not the right time for me to move.

    I’m thinking of buying a cheap 1 bd apartment in Melbourne city just to get my foot in the door. The rent should cover most of the mortgage and then once the mortgage comes down I should be able to use it’s equity to purchase another property (or sell it to upgrade perhaps).

    Does this plan sounds sensible? Also very interested to hear your thoughts about buying in Melbourne city. Everyone has advised against it due to low growth however it appears on the top 100 VIC suburbs in Residex’s report. That puts it in the top 1% of performing suburbs in Australia.

    I’d love to hear your thoughts and advice!

    Thanks
     
  2. Trainee

    Trainee Well-Known Member

    Joined:
    24th May, 2017
    Posts:
    7,880
    Location:
    Australia
    How has a unit in the building performed in the last 5, 10 years? A decent performing property in Melbourne should have doubled in the last 10 years.
     
    Maree likes this.
  3. # 1

    # 1 Well-Known Member

    Joined:
    6th May, 2019
    Posts:
    267
    Location:
    International
    I would use 85k as a deposit on a 400-450k one bedroom unit in Elwood or St Kilda West. Buy something in a small walk up block which can be improved by renovating the kitchen/bathroom.
     
    kmrr likes this.
  4. Bunbury

    Bunbury Well-Known Member

    Joined:
    16th May, 2017
    Posts:
    427
    Location:
    Melbourne
    That's probably the last type of property I'd buy in Melbourne 'to get a foot in the door'. I presume you have a budget of about $450k+? If so I'd be looking at a well positioned 2br unit/townhouse a bit further further out, or a house in a cheaper area, or a house in Geelong. Something you can add value to might be worth considering.
     
    Last edited: 6th Jan, 2020
  5. Maree

    Maree Member

    Joined:
    4th Dec, 2019
    Posts:
    8
    Location:
    Melbourne
    Thanks for the advice - why would it be the last place you would buy? Thanks!
     
  6. Trainee

    Trainee Well-Known Member

    Joined:
    24th May, 2017
    Posts:
    7,880
    Location:
    Australia
    Fewest ways to add value. Least land content. Infinite future supply. If there are elevators etc future expensive maintenance. Little owner occupier / family demand to drive up prices.
     
  7. Bunbury

    Bunbury Well-Known Member

    Joined:
    16th May, 2017
    Posts:
    427
    Location:
    Melbourne
    The CBD has an oversupply of poorly designed and built apartments that are targeted to investors rather than owner occupiers.
     
    Maree likes this.
  8. MattyB

    MattyB Member

    Joined:
    4th Sep, 2018
    Posts:
    17
    Location:
    Victoria
    I would personally look into another market, a market that is perfectly timed for growth within line with the market cycle (Brisbane) and I would be looking at a house on a nice piece of land. Your deposit amount would definitely be able to secure a nice house with close proximity to the CBD or beaches for around $400k, I believe this would be a better use of funds when you take everything into account (the big picture stuff) remember units come with body corporate costs and in some complexes the cost of the BC can very much cripple cash flow, not to mention how appartments value up, remember the valuation will be within the building (less comparables) and you will always have someone with circumstances worse off that yourself and they’re prepared to let their property go cheaper if they are in position where things have changed and they need to get out! And your valuation will always be based on others circumstances!

    I do however agree if you must buy in Melbourne and want to buy an apartment, I would buy in st kilda in a block of 4-6 older style brick, with stairs no lifts. And I would not buy on any main roads!!!
    Goodluck, and remember this is only my opinion!!
     
  9. Maree

    Maree Member

    Joined:
    4th Dec, 2019
    Posts:
    8
    Location:
    Melbourne
    Haven’t chosen a building yet but for Melbourne units it has been: 18.7% 5 yrs, 4.7% 3 yrs, 5.6% last year.
     
  10. Trainee

    Trainee Well-Known Member

    Joined:
    24th May, 2017
    Posts:
    7,880
    Location:
    Australia
    Impossible to tell how they calculate this. How do you adjust for new or older units? Bigger or smaller even if theyre all one bedrooms? Facilities? Throw a new building for sale and it pushes price stats up. Only comparables in the same building should be used.
     
    Maree likes this.
  11. Maree

    Maree Member

    Joined:
    4th Dec, 2019
    Posts:
    8
    Location:
    Melbourne
    Thank you
     
  12. Maree

    Maree Member

    Joined:
    4th Dec, 2019
    Posts:
    8
    Location:
    Melbourne
    Thank you - they have taken the median value of all properties. It’s not broken down by property size but the median value gives a good indication.
     
  13. The Y-man

    The Y-man Moderator Staff Member

    Joined:
    18th Jun, 2015
    Posts:
    11,394
    Location:
    Melbourne
    I'd say your figures don;t look right.
    Check the official government site
    Property prices

    Melb (postcode 3000) unit price went from a median of $375k in 2008 to $507.5k in 2018 = 3.1% pa growth


    Median DROPPED from $520k in 2014 to $507.5k in 2018

    And because it's a median, sales of the 2~3br apartments etc can really skew this.

    The Y-man
     
    Maree and Bunbury like this.
  14. The Y-man

    The Y-man Moderator Staff Member

    Joined:
    18th Jun, 2015
    Posts:
    11,394
    Location:
    Melbourne
    Don't forget owners corp (maintenance) can be upwards of $100 pw in the CBD, and PM fees around 7.7%~8.8%

    The Y-man
     
    Maree likes this.
  15. The Y-man

    The Y-man Moderator Staff Member

    Joined:
    18th Jun, 2015
    Posts:
    11,394
    Location:
    Melbourne
    If you'd settle for Prahran, I have a 1BR needing a new kitch and bathroom that I can let go for $450k :D:D:D:D:D

    The Y-man
     
    Maree and andyboiii like this.
  16. The Y-man

    The Y-man Moderator Staff Member

    Joined:
    18th Jun, 2015
    Posts:
    11,394
    Location:
    Melbourne
    @Maree

    Also check with your broker if you are able to get a 80% LVR loan for a ~40sqm aprtment (some are smaller) in postcode 3000

    The Y-man
     
    Bunbury and Maree like this.
  17. Maree

    Maree Member

    Joined:
    4th Dec, 2019
    Posts:
    8
    Location:
    Melbourne
    Thank you, the report is for post code 3004, Melbourne city including St Kilda road.
     
  18. Maree

    Maree Member

    Joined:
    4th Dec, 2019
    Posts:
    8
    Location:
    Melbourne
    Thanks, will do!!
     
  19. Maree

    Maree Member

    Joined:
    4th Dec, 2019
    Posts:
    8
    Location:
    Melbourne
    Ha!