VIC Most Affordable Melbourne Suburbs Within 25km

Hi Guys,

I spent some more time searching for most affordable Melbourne suburbs within 25km. Basically my budget is around 500k and I would like to get a rental yield of 4% or higher. As discussed with my broker, I could afford to get one more expensive house with a lower rental yield, or 2 x 500k houses at 4% yield. I think the latter is a better idea.

So far this would be my top 10 list (much more DD required, but all your input would be invaluable):

1. Truganina: 22km to CBD, 436k median, 4.3% rental yield
2. Kings Park: 20km to CBD, 408k median, 4.2% yield
3. Deer Park: 17km to CBD, 440k median, 4.1% yield
4. Jacana: 16km to CBD, 408k median, 4.1% yield
5. Tarneit: 25km to CBD, 443k median, 4.1% yield
6. Broadmeadows: 16km to CBD, 402k median, 4% yield
7. Albanvale: 19km to CBD, 420k median, 4% yield
8. South Morang: 23km to CBD, 500k median, 4% yield
9. Hoppers Crossing: 25km to CBD, 410k, 4.2% yield
10. Not sure yet haha

Thanks a lot!

P.S. Are the yields above realistic? They seem too high for Melbourne.

 

Hi Mate,

Your research is awesome. Basically it lists all suburbs that are hot or grown well over a period of time. These fit your budget too.

If you move in vicinity of these suburbs, figure out the prices in some outer suburbs than these, check the yields again and you might find better gems in terms of yields and prices as well.

But you would be moving out. So your 25 km constraint does not gets met.


Regards

 

Hey, thanks, good to know that I'm on the right track.

What other outer suburbs are you referring to if you don't mind sharing?

I quite like St Albans, however it doesn't offer the yield I'm after. I know @albanga puts them on his hot list.

 

@melbournian @albanga your comments on these suburbs would be much appreciated as well.

I do have constraints though:
1. One property up to 600-700k, 3.7% yield, OR
2. Two properties each up to 500k, min 4% yield, OR
3. One property 550k, 3.8% yield and one 500k min 4% yield.

I thought options 2. and 3. would be much better.

 

Option 1. Don't know your financial situation (ability to service, or then purchase additional properties), but if this is your first IP I would chase the larger initial PP, in a suburb that has performed consistently over a period (% av annual growth) above that of average suburbs.

It is difficult to build savings again for another deposit and takes too long for equity to recover if initial purchase was not as good at it should have been. Time usually heals all though.
End game is equity/cash flow (depending), so number of properties is just an ego thing.

But put the larger purchase in perspective of where we are in Melb on the property cycle, don't want you to buy now and it straightlines for 4 years. A lot of variables to put into context...

We bought 2 in Logan region for $300k mark each in 2015. Yes they have seen some modest growth, but had we stretched the equity and bought in Melbourne for 650-720k, those areas I was looking at are 850k plus now.
Again it comes down to variables as we didn't wish to service the investment loan out of pocket each month as we were saving for other things at time. So the set and forget properties in Logan were better than lazy equity in the existing property.

Unless you are a skilled niche investor like sash, you require a good foundation property to get the equity moving in your portfolio (Nathan Birch attests to this also). Don't fall into the trap of looking for a "bargain" property or suburb by not outlaying additional cash. If servicing is not an issue then that $50-$100k is not much at the end of the month extra and could put you into a better performing suburb..

Others may shoot my post down as they are experts in the cheaper suburbs, but I have 2 great buys in those types of suburbs so I can talk from experience.

 

Forgot to mention,
I have a property in Albanvale.
The magazines will show you good growth in the suburbs you have listed, over the past 18 months.
But please be very careful, it's not an indicator of what's to come! Many of these suburbs have now finally moved in price because of the consistent growth in the better suburbs around them, so they have benefited from the "ripple effect". Supply and demand I guess.
People buying in Jacana as the cheaper side of Glenroy/Hadfield has gone up.

Same goes for Albanvale. It has not done much up until the last 12 months. Suburbs around it started to move 18 months ago.. then came the bigger price differential and people realised they could buy a modest house for 310-330k still, so now prices are at 400-420. But prior to that prices stayed at 290k for 3 plus years, while better suburbs around slowly ticked away.

Don't get caught in the hype of the "hot moving suburbs".
It's all cyclical. The big move has happened in these suburbs already.
Not saying there won't be continued growth, but the reason the majority of theee suburbs jumped was just because of affordability issues, not gentrification or improved infrastructure. Pure ripple effect.
But hey I'm not complaining, my Albanvale property has gone from 280k to 430-440k since I purchased it. I purchased it in the last boom as a novice, prices actually retracted to $260k so I **** myself, first home buyers inflated the lower end market.

I see you are referring heavily to yield.
If yield is such a concern (cashflow), I would purchase a better property via interest only that has lesser rent over one that would put an extra $20 a week towards the mortgage..

Albanvale was getting me $290 a week for the longest time, now $320 a week. So yield has dropped from 5.3% to 3.8%. But id rather have an extra $80-$100k in equity than $800-$1000 in extra rent a year.

 

Hi GG,

Thanks for such a detailed mail. This will be our second property only, so yes you were right, absolute beginners here. Very happy to have the opportunity to learn from you guys.

Well done on your Albanvale property. I haven't done much research about the suburbs I listed. I was just looking what's most affordable in that 25km ring and the yields I was after. I was hoping they will continue to perform as they are much cheaper than the suburbs of equal distance on the south and east side. Now the hard part, to figure out where the infrastructure is, jobs, demand etc.

If you have any good suburbs in mind, I would be happy to consider them.

 

Hey Realist35,
I don't really follow yields so cannot really answer this question based on that alone. Would need a lot more information before I made a decision in which one to buy.
I have only been paying attention to Melbourne West and North West TBH and have listed preferences for those suburbs.
Honestly what your looking to buy is all dependent on your strategy. If your in it for the long term game then I'd put my money in St.Albans in a block that can be developed up to 700k. The yields will be terrible but that's the CG game.

Failing that if you want to TRY and combine yields with some CG then head to Broadmaedows. It has lots of upside but still suffering from a horrible name that will take a while to clean up. When it does though *cha ching*

 

I agree.
My one caveat on Broadmeadows is that there is a very large Arabic community there and in surrounding suburbs. Footscray has the same thing with the Vietnamese community, however for mine (and not trying to start any issues) I find that the Vietnamese integrate better into society than some of the Arabic communities.

I find Broadmeadows to be "harsh" and I don't see that changing in the medium term.
I grew up there and went to the Catholic High School (Penola) there (Graduated in 2003).

People have been buying closer to Broady coming from Westmeadows and Gladsone Park, but it has become a definite Arabic Hub - predominately from Dallas and Meadow Heights based Arabic Communities.
I don't see this diminishing any time soon ( ie - more middle class diluting the mix).

 

You have to call a spade a spade. The stigma attached to Broady is deserved. Spend some time at the local shopping plaza or train station and get a feel of the vibe of the place. It certainly won't inspire confidence to invest. And you don't often hear of anyone 'wanting' to move to Broady.

But, that being said. We're talking about investment. Will this affect CG?? thats the million dollar question.

IMO, no, I dont think it will. We've all witnessed areas such as this defy stigma and achieve good CG.

A potential development site would most likely be a good investment over the medium term.

 

I don't think Broady is *that* bad but there is one thing that would stop me investing or living there.

That is that the suburbs west of it (like aforementioned Gladstone Park and Westmeadows) are much nicer, and don't really cost a whole lot more when considering like for like properties. Not to mention, it's a lot easier to find a proper triple fronted home on a big block in those other suburbs, whereas Broady is mainly houso stock.

So that begs the question - if I'm looking in that area of Melbourne for a family home, why buy in 'dangerous' Broady when Gladstone Park, Westmeadows and Tullamarine aren't that much more expensive? And it's easier to find a quality home in the latter suburbs?

Same goes for Woodridge and Slacks Creek btw

Edit: That said, development is a different kettle of fish. Who cares if the home you buy is a fibro houso shocker when it can become a couple of brand spanking new townhouses?

 

I would personally go for St Albans

 

6 years ago I sat around a table with some friends and mind you I knew nothing compared to what I know now and said to them "If I had money (i was broke at that time), I would buy a property in Sunshine".

They all laughed at me and said the likes of "Your kidding yourself, anywhere their is a Centrelink you can be sure will always be the pits". This was 6 years ago and back then yes it was "Scumshine". Fast Forward 6 years and I have not heard the words "scumshine" spoken in years, if anything the area is spoken about as SUNshine these days

Point being is that areas with key drivers WILL eventually detatch the stigma and I have absolutely no doubt this will happen with Broadmeadows. If I had to give an answer I would say give it 5 years.

I appreciate people's comments as to "why buy there when you can buy at Westy or Gladstone Park?". The reason I would definitely go Broady over these as the key drivers are in place. Train, shopping, freeway access, hospitals.etc are all located their. The other areas only have a few of these and mostly you need to drive to access the others.

 

To be honest both communities stick to their own circle there are some Vietnamese been here 20 years and struggle to finish a sentence in English. That said they have capacity to really save money and also do business and they have a lot of connections to get things done. I have seen a few very rich overseas viets buying up here in melb similar to the Chinese.

Arabic communities there are poor and rich in btw them. Pick Preston double block on sale last week at auction only 2 individuals both middle eastern belting it out at 2.8-3 mil. The thing with. Broadmeadows is it is not really that safe of a suburb to be in. And other area would have to rise first before it does. I would say give it another 5+ years etc. even reservoir, Glenroy and Preston are still rough with some of the demographics

 

No rougher than walking down Fitzroy st or chapel st.

 

Yep it does have the infrastructure. Hence why I've been reluctant with westmeadows, Gladstone park. Tulla is slightly different because it boarders airport west and has larger blocks with can be developed to fit more units.
None have trains though

 

When my parents bought their place in glenroy 950sqm in 98 for 114k (now selling for 900k plus), my mother said they saw 3 houses in a row (commission style concrete) for sale for $84k lol.
Still broady suffered a bit of a correction after the 2010 boom. Like parts of glenroy, developers are driving prices in broady with townhouse construction.

 

I would add the below. these are areas i researched when i was looking to buy a property under 400K in melbourne. Although i also researched Frankston North and Karingal

Coolaroo
Dallas
Meadow Heights (I have an IP here returning 5.36 % yield)

Edit: all the above are within 20 km of city as well.

 

+1 for Meadow Heights, also have an IP here with 5% yield

 

Just wondering what people think of the suburb
HEIDELBERG HEIGHTS
understand it is just outside the 20km mark