VIC Melbourne - what to buy, where?

There's been a flurry of people posting "I have $X, where can I buy a house with good growth and high rent in Melbourne?"

We do generally reply with a "you can't get both" - but in reality what have some of us actually found?

I thought I might put some examples of what seems to have worked (or not) that I know of.

It's a bit difficult, because if it was too long ago it becomes irrelevant (market has moved) and too recent and we don't know if the "experiment" has worked..... so take the info below with a grain of salt, but I hope it gives some idea of what worked (or would have worked), and how much you need(ed).

I'm hoping some others can input some actual examples here as well:

Units: Despite the "only buy houses" mantra - sometimes you can only afford units. By "units" this is a Victorian definition being "townhouse" or "villas", not apartments. Our recent experience (all yield as at time of purchase):

Epping: 3BR unit bought 2013 high $200k’s rental yield 5.6%. Value today: ~$400k (based on sale next door last year - may have gone up since)

Lalor: 2BR unit bought 2013 high $200k’s rental yield 5.6%. Value today: $380~$400k (bit uncertain but basing on sales similar distance to station etc)


For a longer term view of units:

Clarinda: 3BR unit bought 2000 $175k rental yield ~5%. Value today $700k


Houses:

Clayton South/Westall: 3BR bought 2015 Low $500k’s rental yield 4%. Value today $800k

Ascot Vale: 4BR House on ~350sqm bought 2015 Low $700k’s rental yield 4% Value today $900k

Ascot Vale: 3BR House on ~400sqm bought 2015 Low $900k’s rental yield 2% (existing tenancy lease) Value today $1m ($1.2m+ with some reno work)


Curve Ball - Commercial:

Dandenong (part ownership component): $100k invested 2013. Yield 8% Value today $126k


Hope this helps!


The Y-man

 

BIt more data for houses (no rental figures sorry - these were for ppor proposals)

Donvale 4BR House on 700+ sqm $440k, Value today $1m
Donavle 5Br House on 750+ sqm $600k, Value today $1.3m

The Y-man

 

Ok, so another piece of the puzzle for those who have been asking "where to buy (in Melb) of what sort" here's my 2c on our strategy.

The way we look for property is *NOT* which suburb is going up, which suburb is affordable - granted it plays an importnant part, but here's the real core for us - and it's no secret, we've ALWAYS let it be known - look for a cool/cold SEGMENT of a market. Typically in Melb, the barometer is the "passed in" (PI) marker on
Australia House Sold Prices, Property Sales Data, Auction Results, Victoria, New South Wales, Melbourne, Sydney, Canberra, Brisbane, Adelaide and Perth - AuHousePrices.Com

Now unfortunately the current "cool segment" is pretty expensive. What I mean is that in the past few years, the part of the market that seems to have the most PI is in the $1m ~1.5m bracket in the inner to mid-band suburbs. You back up your observation on the ground by going to the opens - if there's the sound of crickets and a lonely looking agent - that market is cool. If everything else makes sense (good transport, rental, distance to town) - we're interested.

Did we buy last year? Yes.
Why? Because a house came up for sale 7km north of the CBD near transport on a block of land over 600 sqm (eminently developable). It had been passed in at auction in the low 9's. Have a look at my original post on this thread - Ascot Vale is admittedly 5km from CBD, but still a 400sqm cost $900k - that is $2.25k per sqm of land. That alone made this new proposition about $1.4m~ish less transport and distance to city allowances. We also know properties in that area are typically $1.1~1.3 for 350 to 400sqm blocks.

So other than the "what the hell is wrong with this house?" question to the agent (and the house looked fine - admittedly the photos on the internet did absolutely no favors for it) we just could not find a reason to "walk on by".

I didn't include it in the analysis because it has only settled a few months back, but this month a house 200m away from it on less than 300 sqm sold for over $1.6m.

So for many of those who are asking "should I buy in <xyz>?" sadly in most cases I find there are no PIs OR the price is witheld (boo hiss!).

Now remember - just saying this is our strategy and definitely NOT saying it's the best by any stretch of the imagination. But I hope it helps people understand the mechanics of how I come up with suggestions when people ask the proverbial "I have $X, where should I buy..." question


The Y-man

 

Have a look at Yarrambat, Hurstbridge, Diamond Creek.

example:
638-646 Yan Yean Road Yarrambat Vic 3091 - House for Sale #123547454 - realestate.com.au

While you can't subdivide I see 2 possibilities of CG:
1. it does eventually become subdivisible due to pressure from Mernda/Doreen
OR
2. It remains a huge block surrounded by little 340 sqm sub divs across YY Rd.

It represents $77.50 per sqm compared to $755.88 per sqm in your example.

The Y-man

 

Sure, I get that - I generally avoid new estates (because I have no idea mainly) but I have been pushing Mernda of late, after I saw what happened to Sth Mornag after the rail was extended. You may find something there.

Also - at the risk of copping a lot of flack - 1BR apartments in Prahran/StK East are having a really crap time. It's one of the few market segments that have gone super backwards in the past few years (may be due to new apartment flooding). If you can find a +50sqm older 1BR, may be worth considering.

The Y-man

 

Nothing wrong with that - the uniqueness in the future will drive up value IMHO when everywhere else in 30km of Melb will be 300sqm blocks. Same for the LDR zones of Donvale/Park Orchards

The Y-man

 

Maybe also look at the older villa units in Epping/Lalor/T-town (the new ones are too small).
They are on blocks only slightly smaller than house blocks in the north edge, and the OC costs are about $80 pa (common prop insurance split between owners)

The Y-man