VIC Melbourne - what to buy, where?

Do you have any thoughts on an older villa unit in a somewhat more desirable area vs a free standing house on a bigger block further out?

One more question - I was looking at Epping and the yield is still pretty good (well as good as it gets in this market) and was wondering why. One website said there was more crime there so I am wondering if that will not be as in-demand in the long term. Any thoughts?

 

thats it isnt it... i.e. how close are we to the peak... eg Sydney - are we there yet?

 

Are you referring to the shops that have the Coles in the middle and the library on the other side of the carpark?

 

Yeah, it gets pretty dark in the middle of that shopping strip at night. Then couple that with the 150yr old German grave yard down the road, I now know what those spooky things are

 

Great post. Our strategy is somewhat different. We look at blue chip and try to buy the cheapest house in the suburb. Can't go wrong with the that imho. Bought 2 properties in 2015.
1. Brighton 575m2. Paid 1.27 at that time and median price in 2015 was abt 2.0 at that time. Nobody wanted it, needed a bit work. Rented at 750pw
2. Pascoe Vale South 590m2. Paid 500k at that time and median price in 2015 was 750k . Again was in the market for a very long time, nobody wanted it because it was on the main road. Got rezoned to rgz last year (purely by luck) . Rented at 400pw
No idea what it's worth but there are many properties selling more than double of what we paid.

 

Yeah this is my biggest concern when people recommend buying an IP 30 or 40 or 60km out and why I am thinking a house (or unit?) on a smaller block in a more desirable suburb will be a better long term investment.

Of course, it is very hard to draw the line.
In Sydney, Blacktown is 30km west has had awesome growth. There is tons of development and lots of people don't even need to go to the city with lots of jobs in Parramatta.

If you go a little too far out but can hold it for 20 years it might be fine since as population grows people have no choice but to move further out, but in that case it is probably better to just buy there in 5-10 years and invest elsewhere before then.

 

I am in a similar position but a higher budget - we started out at mid 700s and after about 2-3 months of research/auctions found ourselves losing out in very hot markets e.g. Reservoir and Springvale.

Sometimes I'm bewildered by how expensive the East/South East is, compare a Ringwood/Springvale - these two are more expensive than Reservoir, because as Y-man did some comparisons (Ascot Vale vs Doncaster), the difference is stark.

So we are now stuck with a few options, which probably applies to most others as well on the market:

1. Increase budget to mid 800k's to have any real chance of a crack at Reservoir or even Springvale (our preferred suburbs). The latter however, doesn't make when you compare the two.

2. Settle for odd blocks - i.e. not rectangular blocks or ones with wide frontages and shallow depths (20 x 30).

3. Settle for smaller blocks, ideally we like 600m2+, though having said that some 500-550m2 don't really pay off - i.e. they aren't that much cheaper.

4. Venture out further - e.g. Lalor or Noble Park or even Bayswater.

5. Suburbs inaccessible by train - Wantirna or Mulgrave (thought that suburb is spruiked up by Monash Uni).

 

The trouble I have found with options 1,2,3 are that the yield will be terrible.
Option 4 seems the least bad to me, but I am new at this so I could easily be wrong.
Option 5 somewhere inaccessible by train concerns me. In a more affluent suburb maybe everyone uses cars, but since those are not the suburbs this is referring to I wonder if it makes it less "liveable" in those areas. There are other factors at play regarding how good a location is, so maybe if all the other boxes are ticked this would be less of a problem(?) - I don't know.

 

Regardless, in this market - you'll get pretty low yields. I'll use an example even dating back a few years. I have a relative who purchased in Clayton - quite close to the station (1km walk) and town centre, 3 bedder plus study, she dumped $30K in renovations before renting it out. Purchase price was $715K, all up inc Gov costs etc plus renovations, say it's $790K - that was back in 2014!

She rents it out to a mother/daughter who both work and pay her $430 a week or roughly $1850 a month or $22,500 a year. Less agency fees, land tax, sewerage etc it's about $17,500 back before tax, that's give or take 2.2% return on investment per year. Given prices rises now within the Clayton area as of late and assuming $1mil all up, had she purchased today, she would be 1.75%!!

No matter how much you increase your rents by per year, I doubt it could catch up to what purchase prices are nowadays, especially in hot suburbs like Rezza. If you're into rental returns you may as well look at apartments...

When I look at my own situation, I see that a increase in my budget (without being too much) seems to be the way to go assuming rates won't increase up to ridiculous amounts. All that means is that I get a suburb I prefer (e.g. access to trains and schools and reasonably close to the CBD) but I'd probably stack another 2-5 years onto the mortgage, which I can live with.

I have heard from some friends who went down the path of cheap but inaccessible suburbs - and some who even went cheaper but really inaccessible parts of the suburb really regret their decision because they found it much longer to rent on the market.

The only other alternative I have come across is buying two smaller properties like townhouses in lesser expensive suburbs - rent them out and hopefully garner a much better cashflow. For example if I was spending $800K in Rezza, I'd split that into buying two townhouses in say, St. Albans and get 2 x the amount of income for not much more on capital purchases.

 

Yeah so in that case wouldn't it produce a higher total return since you are paying a similar amount, getting a similar amount of growth, but you get a higher yield?

Also would this also be the case with just getting 2 smaller blocks (ie stand alone house each separated on their own block) instead of 2 town houses ?

 

Damn you, I was wondering how you bought in Ascot Vale at that price. Can you PM a link to it?

Yup, it's scary isn't it... I foolishly was waiting for it to slow down on this basis, not realising how many houses are left vacant. Ridiculous

 

@The Y-man good one with the Clayton South. Do you think that market is peaking or has some steam left to go?

 

IMHO some it has peaked....most of the activity seems to now been shifting to the West and North. When that closes I believe it will either stablise or drop,

 

@willister Saw this Ad - seems more clayton & clayton south seems like it is still flying - sold out in 14 days Stage 1