VIC Investment property in eastern

Hi all, I'm new to the market. Looking for investment property in Melbourne, and now researching possible location. I don't know much about the process so please correct me if I'm wrong.

Currently my capital is around 140k to 170k, if it's 20% deposit I'm paying the target property price range would be 650k ~ 800k? In short term I hope it may help tax deduction, and later in 3+ years I'll see if it can generate rental income. In long term, redevelopment / subdivision for sale or my own stay would likely be the plan.

So I'm looking at 3br house with 600m2+ size. I'm staying in Ringwood, VIC. This suburb is kinda overpricing I would probably look at Bayswater, Ferntree Gully, Noble Park...

I just start planning on it, open to any opportunity. So any opinion would be very appreciated.

 

5 Peck Street, Bayswater, Vic 3153 - Property Details
705K seems a good price for land only, Depends how "Dilapidated with little hope of repair", probably need at least 80-100K to make rentable for low 300's per week. I would say your budget can not buy Ringwood proper for the specs you are looking for. Perhaps Bayswater, Croydon, Heathmont, Ringwood East more realistic target

 

Welcome to the forum.

A lot of things that are worth looking further into before looking for a property.

1. Add 5% to purchasing costs (stamp duty), so 20% + 5% = requiring 25/105 (=23.8%) if you actually will be using 20% deposit, although you might be able to pay under 20% deposit if you use LMI, so talk to a broker to find out how much you can actually borrow. It costs nothing to talk to a broker - they get their commission from the bank as a way for the bank to say thanks for bringing us a customer.

2. Don't buy just because of a tax deduction, although yes factor that into your calculations on your ability to pay the bank.

3. It will take a LOT longer than 3 years to turn cash flow positive given the state of the Australian market generally, and the Melbourne market specifically.

4. I haven't done development but am looking into it now and I wish I was more aware of it earlier, so I think you are on the right track having that in mind in advance.

5. Learn what the property cycle is so that you can make an informed decision as to exactly why you are buying in Melbourne (or anywhere else). Just because you live there is not a reason to choose somewhere that might be entirely unsuitable and there may be other more suitable locations.

6. If still looking at Melbourne, melbournian has a great thread on zoning that I think everyone wishes they were aware of before he posted it.

 

if we assume 800k based on your estimate that it can be made rentable, then you are looking at a loan of 800k and 4.5% interest (if you can even still get 4.5) = $36,000 per year in interest. Net yield of 300 * 52 * 0.7 = $10,000 p.a. (notice the 70% shading because maintenance costs are around 30% which you may not be aware of). $26,000 p.a. out of pocket for a single property is a lot, even after you consider tax deductions. If rents rise at even 5% p.a. (optimistic), this property will be cash flow neutral after more than a decade.
You may be able to do something with development, but can you afford the repayments while developing? Can you even borrow for the development or will you have used up your serviceability? If you knock it down can you afford the cost of servicing the loan while development occurs (on the top of the cost of development)?
You might find a way for this to work, but based on your own numbers, it's not looking good.

 

He does have around 170K capital so loan will be more like 550K (included 5% stamp duty). OP seems to not own any property at the moment so best to buy in area he would consider living in as a PPR in the future

 

I would forget the eastern unless you have some serious money. Fern tree gully rest have already moved

IMHO for that budget -you’re best off in Preston and reservoir for that range for a carefully chosen property that Has subdivision potential . You can read the ACZ thread I created. End of the day in summary even a 450sqm which has higher density can get better results than 600sqm with lower density. Just like Ringwood these suburbs I mentioned has good growth potential with all the infrastructure changes coming along and are on the list of being the next in the million dollar suburbs in vic. If u choose your site ip careful it will easily outshine anything you could purchase interstate such as SEQ in terms of capital growth. This I believe from studying hundreds of planning applications and attending hundreds of auctions on the Ground research for my own purchases.

 

Yes you're right so I'm actually looking at those suburb you mentioned, do you have more details about those areas?

 

Hey Anthony thanks for your reply.

1. Yes I've heard of LMI. Just think it'll save some cost if I can pay 20% deposit, will limit my choice and lower my saving though. Is it a better approach?

3 & 5, Picking Melbourne as years later I may be still working here and would like to have a place for myself. Yet I'm open to invest interstate, but then I'll have to look for a place here again in later years. What do you reckon for a interstate investment?

And correct me if I'm wrong, like another thread above said if I'm borrowing like 550k. think a 800k property would probably make a rent at 400/week. I think there could be some suburbs in eastern that may suit my budget?

 

Yea recently I've attending auctions and going inspection every weekend. Realized there could be other suburbs at better price so I'm checking in where I should spend time. Interstate could be an option but then I can't go inspection / auction?

Btw, I don't know much about Preston. Do the council there allow subdivision on 450sqm land? Not sure if it's better but looks like not any cheaper than eastern.

 

I came from the eastern side too (talking Doncaster, box hill etc). I think if you want to focus on subdivision, it is not something that can be learned in a day etc - it takes time to understand what to look for and there are also lots of variables to focus on. Well - I can say if one invested last year in those areas. the growth has already exceeded what one would invest in the east for x dollars put in. you subdivide anything as long as it is complies with regulations. My friends place in Footscray is only 310 sqm but is subdivided into 2.[/QUOTE]

 

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if one invested last year in those areas. the growth has already exceeded what one would invest <-- that's massive growth.

Hope it's not too late and I could still find next Doncaster around eastern. Cheers!

 

@kaacu Anyway good luck to you and hope you find the next Doncaster.