VIC Investing in a Melbourne City apartment

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

 

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.

 

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.

 

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.

 

Thanks for the advice - why would it be the last place you would buy? Thanks!

 

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.

 

The CBD has an oversupply of poorly designed and built apartments that are targeted to investors rather than owner occupiers.

 

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!!

 

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.

 

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.

 

Thank you

 

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.

 

Thank you, the report is for post code 3004, Melbourne city including St Kilda road.

 

Thanks, will do!!

 

Ha!