VIC Need help narrowing down area/strategy

Discussion in 'Where to Buy' started by kermut, 5th Feb, 2020.

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  1. kermut

    kermut Active Member

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    Hello community.
    Been a long time since my last post. I took most of the suggestions from last time, and have concentrated on paying down debt. It took nearly 1 year, but I got there in the end. Now, with the help of a really good broker, I have been able to re-finance my house and am now in a position to purchase an IP. My upper limit is 450K, but I would prefer to keep it at 400K purchase. The balance, I would like to keep in the kitty for any bargain deals that may come around the corner.

    The trouble I am having is narrowing down area/state/strategy. ( I live in Melbourne). I am conscious of the fact that Australia is not one market, and even within a city there are markets within markets. Hence the confusion where to go.

    I have gone to the domain website, and typed in my price and it shows the list of suburbs in Victoria with a median price of 400K. Funnily enough, only 3 suburbs came up that I knew of, and the rest were all regional or very far out country. The areas that I know by name were Frankston north, Brookfield( Melton area), St Albans Park (Geelong).

    Secondly, I have read a lot about the QLD market, and how certain areas are ripe for a boom (eg SE QLD), plus the fact that it is quite possible to get a cash flow positive property up there. These two factors seem enticing.

    As this will be my first IP, I understand that the first one is the most important to get right. It is what can set you on a winning trajectory, or stagnate your portfolio. I would prefer to buy something that will give me reasonable capital growth in the next few years, as this would allow me to be in a position to use the equity to purchase the next one (in combination with generating equity in my PPOR).

    Re confusion about strategy, would I be better off taking the standard route of buy, hold and wait for capital growth, or buy something where value can be created eg buy something that needs a small refurbishment? As I would like to generate equity in the IP rather quickly, the second method seems better, but for this, I would have to spend the entire 450K (purchase price + cost of refurb). Most places I have seen still end up being negatively geared even after doing the above.

    To buy in QLD I would almost definitely need to use a BA, as I do not have the time or the capacity to take time off work to go there to do on the ground research.

    Thank you to all in advance for your suggestions and guidance.

    Regards,
    K.
     
  2. Westie

    Westie Well-Known Member

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    For that money, look at Ballarat. Solid rental demand if you buy well. Head over to the Ballarat threads started by @Ko Ko Naing and others for more information.

    Perth/Adelaide too? They say Perth is at/almost at the bottom of the market, so you could snag a decent property for your money.
     
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  3. Propertunity

    Propertunity Exclusive Real Estate Buyers Agent Business Member

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    For your first IP, I think most people feel comfortable buying somewhere they can drive past every now and then. I'd personally do something in Geelong - easier to do a small cosmetic reno and not too far to drive for a week-end's worth of painting, etc.

    I admit to being a bit MEL - SYD focused - within a 1 hour commute of either. Broad sweeping statement: PER is still struggling, BNE has been "ripe for a boom" for years - but still hasn't, ADL & HBA - nothing to get too excited about and NOT HBA at the moment. Cheers, ;) and congrats on getting the bad debt under control.
     
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  4. The Y-man

    The Y-man Moderator Staff Member

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    Thank God! I am not the only one to talk IATA codes!! :D:D:D ... although if we are talking Geelong, do we go with AVV?

    The Y-man
     
  5. Propertunity

    Propertunity Exclusive Real Estate Buyers Agent Business Member

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    As an IT consultant in a now long-ago-past life, I flew 2 - 3 weeks out of 4 to most AU-NZ capitals. Airport codes just became second nature. Some make no sense like PQQ for Port Macquarie, AVV for Avalon (I guess your just have to be a local from Geelong to know). I'm surprised that Mumbai (previously Bombay) was allowed to keep BOM after 911. I sat staring into space at KUL waiting to board a Mumbai flight when they called "Bombay" now boarding.....:confused:
     
  6. The Y-man

    The Y-man Moderator Staff Member

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    Here - near a major station, major shopping centre, centrelink office (uh wait...), in a neighbourhood with reputation to match Broady.... and bonus already tenanted!!

    1/12 William Avenue, Dandenong, Vic 3175

    (Actually, if these photos are of the current tenancy, they look very orderly)

    The Y-man
     
  7. Ko Ko Naing

    Ko Ko Naing Mortgage Broker Business Member

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    Broady and Dandenong are not for faint-hearted. ;) Being an IP and being unlikely to live in as an owner occupier, if one could find a gun property manager, the property should be looked after well.

    With $400k budget from @kermut, there are more choices available in Ballarat/Bendigo with a lot better reputation than Broady and Dandenong.

    But if you want to check out on your IP or tenants every weekend, regionals are out of question. I don't drive pass my IPs very often, so distance is not an issue. In fact, it's been more than 3 years, since I last visited one of my IPs in Queensland.
     
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  8. The Y-man

    The Y-man Moderator Staff Member

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    Some persuasion of tenants required huh?..... :D:D:D:D:D

    The Y-man
     
  9. JohnPropChat

    JohnPropChat Well-Known Member

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    With that budget you'll do well in Perth. Fancy a house less than 10k from the city and 5% yield and good CG prospects?

    #doyourownresearch
     
  10. kermut

    kermut Active Member

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    Hi Westie.

    Many thanks for the reply.

    I had started reading up on Ballarat last year, and agree that Ko Ko Naing has contributed so much information, that anyone can get a good head start to narrow down their research in Ballarat. My only concern with Ballarat is that the I seem to be quite late to the party. Reasonable capital gains have already happened, put the rents versus purchase price into Geelong category.

    The only thing I know about Perth is that during the mining boom, a lot of people made money, and when there was a massive downturn in mining, a lot of people lost money, or they were left with no capital growth for a very long time. Apart from this, know nothing else about Perth.

    Happy to be corrected anytime on anything though.

    Regards,
    K.
     
  11. kermut

    kermut Active Member

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    Hi Alan.
    Thank you. It has been a long and hard road, but finally got there.

    I grew up in Geelong, so know Geelong pretty well. One bad thing about this is I remember the prices as they were before areas like Norland and Corio shot up...

    I had a quick look online, and the only things I can find for my price range in Geelong seem to be in these two areas, or small units in better areas.

    Any suggestions from your end for Geelong?

    Regards,
    K.
     
  12. kermut

    kermut Active Member

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    Hi Y-man.

    Having been reading the forum on and off for over 1 year now, usually when you reply anywhere, I take notice. Many thanks for the suggestion.

    I had not considered Dandenong, for the simple reason that houses there are out of my price range. I would prefer not to buy a unit there, as I don't see much scope for capital gains on a unit in Dandy. I would prefer to buy a unit in "better" suburb as the quality of tenants would be better, and better chance of capital gains.

    BTW, I had a quick look at the previous sales history, and it sold 10 years ago for 260K. 100K capital gains over 10 years, esp over a timeframe where Melbourne has lifted all boats on a rising tide doesn't seem to instill confidence.

    Only my opinion, but you are more experienced than me, so always happy to be corrected.

    Regards,
    K.
     
  13. kermut

    kermut Active Member

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    Hi Ko Ko Naing.

    I have no interest in going to visit the IP at any given time, unless required to do so. If not to far, then maybe one a year to do annual inspection, but that would be dependant on the quality of property manager I could find.

    I know you are the Ballarat expert, so asking directly. Am I correct in thinking that most of the capital gains in Ballarat have been achieved for this cycle, and now it is just a matter of FOMO from out of town buyers? When I looked at Ballarat last year, I wasn't in a position to buy, but from memory, the rents where not that far off from being close to neutral, or very very slightly negatively geared. But that does not seem to be the case now.

    Regards,
    K.
     
  14. kermut

    kermut Active Member

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    Hi there.

    Thank you for your suggestion and input.

    While happy to consider anywhere, I must admit I know nothing about Perth. As mentioned above, the only thing I do know is when the mining slump happened, it killed the Perth market, and caused a massive amount of stagnation in CG for a lot of people who bought close to the peak.
    My understanding of this would be unless there is a massive uptick in mining,there is unlikely to be significant CG. imho though.As always, happy to be corrected in any aspect of my thinking.

    I spent a few days reading up on most of your posts in the Perth section, and you have given a ton of information on areas/suburbs. Am in the process of reading further and looking at Perth via google maps :) but like I said, I know nothing about any of the suburbs etc.

    Regards,
    K.
     
  15. The Y-man

    The Y-man Moderator Staff Member

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    ..and here lieth the core of the challenge :)

    You see, if it has grown, you feel like "it's already happened, I missed the boat", and if it hasn't happened, you feel like "crap this place is never going to work".

    It's certainly not just you BTW - I think everyone feels this at some stage or another (if not all the time).

    I must say I do look for places that have underperformed for the past decade or whatever and ask myself whether the surrounding subs are going up, has it got the right mix of trains, buses, shopping centres etc (we did this for Epping/Lalor and to a lesser extent Ascot Vale)

    The Y-man
     
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  16. Ko Ko Naing

    Ko Ko Naing Mortgage Broker Business Member

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    To be honest, I don't know the answer to that. I don't know how further it will grow. Only if one can tell the future on when the growth will end, he/she can easily tell whether most of the growth have been achieved so far. I personally thought the growth would be all vanished by mid last year. I was wrong. It is still going strong. This time around, I personally think the growth will slow down or be stagnant when all the infrastructure projects finish. As long as there are money coming into more projects and more population growth, the Rat will still shine. This is my personal view only and do your DD if you really want to make sure. :)

    Totally agree with this. 5 years ago, when I started investing in Ballarat, people told me very similar thing. "It's in the middle of nowhere, out in the far west. Will there be any renters out there?" Just bought one property in Bendigo last December. Let's revisit this thread in the next 5 years to see what would have happened in Bendigo. ;)
     
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  17. kermut

    kermut Active Member

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    I see what you are saying, and agree with you in a broad sense. However, for me it is not the case. I wasn't in a position to buy before, so have no regrets or fomo feelings. I am only concerned about where it is going after I buy. Especially since it is the first one which I am going to be relying to try to build CG quicker rather than later.

    Your strategy is quite interesting, hadn't thought about it that way. Have just read your reply on another thread on this with some explanation. Will try to incorporate this into my search strategy.

    Regards,
    K.
     
  18. Westie

    Westie Well-Known Member

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    That's right, that's why I said it appears to be at/towards the bottom of the cycle so if you buy well there should be money to be made. I suggest reading up on some of the Perth threads on the forum, valuable information in there. Make sure you read up on Adelaide too, people like @D.T. have made significant contributions in the forum, excellent information. Research... Research.. pull trigger.
     
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  19. kermut

    kermut Active Member

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    Hello everyone, back again. Am still stuck in my dilema, but have a bit more information about the numbers I am able to afford.

    420K max and it will need a gross yield of 4.6% atleast to keep the banks happy with serviceability.

    The broker has recommended I look at QLD or SA as these places offer properties in this range with the rent required. She has also suggested if possible, look for new homes, preferably new estates around up and coming areas (even if they are a bit out of the main cities). The depreciation on new houses will help to pay towards the IP or to be contributed towards paying of the PPOR. I've spent some time looking at the area around Adelaide and Brisbane, but to buy in my price range with the rent required for new houses, I'm having to go nearly 20 to 30km out. I know that is not much in Melbourne, but from everything else I've read on the forum, in these two cities, it might as well be like 100km out at that distance. SInce I am too not familiar with either city, any suggestions would be most appreciated.

    I do have the option of build and sell as cousin is a builder, but hard to get land in Melbourne or outer Melbourne within the overall budget. Any suggestions?

    Still unsure of areas to look at at this stage, because I can't seem to marry up the price with the rent, and the potential of capital gain.

    Thank you to all in advance for any suggestions and help.

    Regards,
    K.
     
  20. Westie

    Westie Well-Known Member

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    You need a new broker. 100%. Get that sorted first. Give @Redom / @Peter_Tersteeg a shout. Really, do it.

    Ballarat or Geelong for that price range.

    Look at this one: https://www.realestate.com.au/property-house-vic-newcomb-133229782
    Or this one: https://www.realestate.com.au/property-house-vic-newcomb-133652322
    Or this: https://www.realestate.com.au/property-house-vic-thomson-133207938

    My cousin has a property in Thomson on Olney Avenue, not far from the one above, never not tenanted and it's very similar. Decent rent too.
     
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