IP in Melbourne CBD

Hi All,

I am living and own a house in Sydney. I am considering to buy a 1/2 br unit/apt in Melbourne as IP. I like to some advice.

1. How shall I do research and negotiate a deal remotely from Melbourne? My good friend advises me to fly over to have a look and talk to the property managers personally.
2. Shall I employ a buying agency to do this for me? How much do they charge? What services do they provide?
3. The properties I am considering to buy may involve clearings and renovations. How can I do this?

Thanks

 

There's a couple of unrenovated apartments on the market right now only 7kms from city selling for a real cheap price but like a mentioned in previous threads, the apartment market has flatlined.

I was looking at flipping apartments a year ago but I wouldn't invest in that now.

 

What is the purpose of your investment? Growth? yield? Are you looking to short term lease it or air BnB?

 

@DrunkSailor Thanks your comments. Is it really that bad even in CBD area? Say somewhere around Collins St?

 

Hi @Lisa Parker
Purpose: passive income
Growth: Do you mean capital gain? Hopefully, it can catch up with the inflation rate.
Rental Yield: 5%? Is it OK?
Lease term: I'm flexible as long as not too much trouble. I hear about but not familiar with AirBnB.

 

My wife has just found out that she has a friend in Melbourne. I wish she may give us some advice or help...

 

Just ask your Melbourne friend how many IPs they own (not their home), and how many years have they been investing?
So IMO, if they have been investing for the last 20 years or so, been through investment cycles, own say at least 5 IPs or more, then I would maybe take their advice (I would ask even more questions....).
That was one of the early mistakes I made, I asked a family member who lived in Brisbane for IP advice, never bought in the suburb as was given negative opinion (not a fact) and wished I bought there, it had tremendous CG.
So it is like this in comparison, would you take advice how to raise kids from those people who don't have any kids?

 

Oh, I don't think there's many in the CBD, I'm talking about areas further out (many unrenovated apartments). CBD is full of brand new dog boxes. High volume areas like Footscray look to me like the strongest indicator of downturn but that's also where a lot of run down apartments are.

I think the market is burnt out. Up until a month ago people were paying 285k for an unrenovated 2 bed apartment in ALBION. I bought a renovated apartment on the same street for 236k last year. I think that kind of inflation is over now. At least for apartments.

****, atleast I hope it's over. I sold that apartment for 257 in August

 

I think it needs to be a combination of high rental income vs a larger apartments. there are a lot of selections to buy in Melbourne. Melbourne apartment market has a lot of markets within markets.

of course stay away from the dogboxes. Also suburbs that are not apartment type products or just starting to push apartments has no value in buying there like for e.g in some of the western suburbs. You would better off be buying on in the eastern side close to CBD.

I would personally stay close to the underground station in the fringes. this would offer very good rentals due to proximity and also connection wise.

 

Note that Metro tunnel is expected to be in operation in 2026, so wont see the benefits for almost 10 years. Still good to know if you're planning to hold for long term.

 

Ok, so if you are not targeting growth, then an apartment may be suitable strategy for you.
As others have commented, there are a lot of different areas within the CBD and the fringe to consider.


Blocks of apartments vary greatly in reputation, some are in demand, others will rent OK but are not considered highly by owner occupiers and therefore growth will be even more subdued.

I would not put a lot of weight in asking a friend who lives in Melbourne what their thoughts are, just because they live in Melbourne, it doesn't mean they know anything at all about the property market or how various areas stack up from an investment perspective.

I have clients all the time come to me with a list of suburbs their friends have given them because they are "nice suburbs" - but they are also double the budget the client has. It really is a pointless exercise unless they are experienced in property or property investment.

I think you either need to make the time to understand the market and sub markets, then fly down and inspect properties. You will need to spend about 4 days to do that adequately in each of the areas in and around the CBD, be very focused and strategic in what you book in to see, and then be in a position to know what each property is worth, what is in demand, what will achieve a better rent and be able to act on that information before flying home.

If you are not in a position to do that, then hiring a BA would alleviate the time factor, shortcut your learning curve and get you a result that is alignment with your goals within 2-4 weeks of hiring one.

There are buildings that banks will not lend well against - you need to be mindful of this.
there are apartment buildings that are known for air bnb listings where there are lot of issues. There are apartment buildings that have poor quality finishes, pokey layouts, interrupted views etc that an experienced buyers advocate can help you avoid. of course, you can also do all the research required on your own if you have the time, patience and if it is a skill you want to develop.

The last thing that I will say is that apartments in Melbourne do not return as much on the yield front or growth front as Sydney apartments. Depending on your budget and long term goals there may be other options for you that will work better.