VIC It's time for IP2... but where in Melb for 500k?

Hi everyone,

Off the back of my reno topic, I wanted to pose a question re where on earth I can pivot my search for IP2. The objective is to start developing a portfolio, ideally a balance of capital growth and rental yield although something more neutral/maybe positive cashflow would be even better as IP1 is negative cashflow. I'm set on re-investing in Melbourne while everyone is steering clear of it given the cooling market. I feel like the next couple months is the perfect time to invest, for the long term.

So my budget is max $500k. My preference is to buy an established house on its own block of land. So no new home and land packages, no apartments or townhouses. But no idea where to go.

I've heard great things about the below suburbs - would love to hear if anyone has any insights at all?
- Geelong
- Corio
- Melton Sth
- Dallas

Thanks so much
A

 

No cashflow-positive suburbs in Sydney or Melbourne

A few good spots in Victoria on that list.

 

-I think Dallas/Broadmeadows/Meadow Heights/Campbellfield will be okay if you can wait til the next cycle for any gains.

-Melton scares me as it could be slow long term, it has taken since the early 90s til now to get any decent growth- but good for cashflow apparently

-Dont know Geelong and I only like Melbourne personally for investing only because it has everything going for it regarding employment and population (and I know Melbourne)

 

Thanks for sharing - super helpful!

 

Yeah I've heard Melton is good for cashflow too, and heard lots of investors are flocking there. I do agree it's been stagnant for ages (same as Eynesbury) but with new road infrastructure coming and improving connectivity to Werribee etc. things may be on the rise. And the ripple effect from Rockbank next door maybe?

Geelong is an interesting one isn't it - so many people flocking there too...

I'll look into those other suburbs too

 

Werda

Why don't you consider Bendigo? A 110,000 people strong regional town 150km from Melbourne? Must it definitely be Melbourne?

It is possible to still buy cash flow positive properties there. But it might not be long as house prices have been creeping up.. It is a market starting to boom, somewhat like Ballarat. Better to buy in a rising than a stagnant or declining market. Moreover, with the low entry price, it is possible $500,000 Will buy you 2 instead of 1 property here in Bendigo.

Melton in my opinion might be a bit too late and risky to buy into now. It has grown a lot the past 3 years so there might be little growth left. And with so much lands available around there for building, house prices here could stagnate for a long time or even fall.

 

Melton is great for cashflow and you get a lot more for you buck. The area has boomed in the last year so I was pretty lucky I got in early. Even though prices seem to have stabilised it's still attracting a lot of investors.

 

Thanks for the tip - definitely something to consider...

 

For 500K budget, you've got some decent Geelong suburbs you can get into. For existing stock, with a bit of luck Belmont and Grovedale definitely fits your price range. They're well established owner-occupied suburbs with close proximity to Geelong CBD.

The only challenge you will find at Geelong right now is yield is low across the board as the area has already taken off a fair bit in the last 18 months or so. With these suburbs you'll be looking at a low 4 if not high 3 type of rental yield. So given your first IP is already negatively geared (depending on how much plus your risk appetite), you may want to look for a more neutrally geared opportunity in which case Geelong may not be the best candidate.

Corio...yes you do get better rental returns but you also need to be aware of the whole suburb is heavy with investors. In the last 12 months it has pushed from high 200K to now high 300K, so that's quite a significant jump in price already. Rental yield is also on the way down so you'll need to be mindful of that. Do your own research and you'll get a feel of what it's like.

Cheers,
David

 

Thanks heaps David. I may need to keep the budget to 400-450k. 500k might be out of reach. Where in Melb do you think could be the right fit given a max of 450k? Thoughts on Melton/Melton Sth?

 

In some pockets yes I agree prices have peaked. But I've noticed since the changes with lending were introduced and the Banking Royal Commission sellers have become more realistic with how much they could sell for. With regards to the abundance of land (even though people are actually buying & building) I would avoid also and go for something established that is closer to all the amenities.

My pick would be Melton South (I bought here). I love how everything is very central, train station, shops, schools, parks etc, everything is within walking distance. It is the only suburb out of the 3 Meltons that has a train station and it's only a 40 minute trip into the city. My colleague also bought here a couple of months after my purchase and we're both quite pleased with how much the area has grown. Contrary to what people say about Melton we've had no issues with our tenants either.

 

I would not buy an "investment" in Melbourne at present unless you get an amazing deal

 

I agree - the proximity to the train station is ridiculously good. It's underrated and a "battler" suburb like what Werribee and Frankston used to be / are ridding of. I'll have a closer look into it.

 

Sorry I don't know enough about Melton to be able to comment much. I'm sure other people on this forum who have invested in Melton will be able to help out. Personally it's a bit too far out for my liking (and seems like Plumpton is still have plenty of land so have no idea how it works over there ) but I'm sure people have made money out of Melton.

Cheers,
David

 

Haha you raise some good points. Heaps of land left in Plumpton...

Any suggestions within 450k?

 

Plenty of houses in my street for sale in pakenham

 

If you are considering the Geelong area, definitely look at the Mornington Peninsula beforehand. Mornington you will easily get into with a good buy. Mornington Peninsula is booming and has been the 2nd top area for the highest property price growth in 2017/18 across all of Australia. Definitely defying the odds of Melbourne's downturn and making it a safe investment for the future. Plenty of developments in the area and infrastructure is sure to make the region more desirable in the future. Its also on the fringe of Melbourne's ever expanding south-east which is a great position to be in.

 

Melton was a great buy until a couple of years ago but now is tapped out. It has doubled in price in the last 10 years. As interest rates rise with reduced lending caps off lower than average income base there wont be much scope for growth for a while. Agents are reporting people simply cant get finance - check out the ksouhouse time on market...
As always dyor

 

Maybe Doveton/Hampton Park