Next IP - Sydney Vs melbourne

Discussion in 'Where to Buy' started by RichardN, 8th Feb, 2018.

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  1. RichardN

    RichardN Well-Known Member

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    Need your guidance on where to buy my next IP. I know it’s all depends, no crystal ball and everyone’s situation is different but based on the info below, appreciate your comments. Happy to answer any questions. It was bit challenging to write my all my thought process here J

    I have one PPOR in Sydney (worth750K with 200K equity) and IP in Sydney with 800K worth with yield of 5.2% (with granny flat). Have savings worth $100K with borrowing capacity ~650K.

    I am thinking to buy two properties, one in Melbourne/ Sydney for around $650K and in Brisbane for around 200- 300K K at the end of year.

    Question is in regards to buying the next property whether to buy in Sydney or Melbourne.

    If I buy the property in Mel with duplex potential (thinking of middle ring as I believe CG will be high in this area), I need to purely depend on CG. Yield will be around 2.5% and to cover the mortgage repayments, I will be paying additional ~15K from pocket per annum, I can afford this but may not be good idea to go with such negative cash flow prop.. In long run, planning to sell or build duplex but that may be at least 5 years away. Since I am from Sydney, it may be challenging to plan and monitor the duplex build remotely.

    If I buy property in Sydney somewhere near new airport (Campbelltown, casula, leppington etc.), I’ll be buying the property with 3.5% rental yield and with GF, it will be easily 5+%. This high rental yield will cover me if Sydney growth is less than Melbourne (to compare). And also no need to pay additional amount from my pocket to cover mortgage. The down side I see to buy property in Sydney is that all my properties will be in Sydney, not diversifying and also perception at the moment is Mel will out perform Sydney in long term from CG point of view.

    In next 2-3 years I want to buy as many as properties I afford to without compromising the lifestyle, balancing the CG and yields.

    Family income: 150 (Mine) +20 K (wife) – if positive cash flow prop, it will be on my wife’s name

    Please advise if my thought process is correct and what would be the best decision. Apologies for long explanation.
     
  2. Propertunity

    Propertunity Well-Known Member

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    I'd consider buying in Melbourne next, purely from a diversification standpoint, but not at a 2.5% RY. But it is only IP number 2, so don't sweat it either way.
     
  3. icic

    icic Well-Known Member

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    One big thing you will need to consider is land tax, you might not have reach threshold but additional property might push you way over. The next thing you should consider is the which part of the property cycle you think we are in Sydney.
     
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  4. icic

    icic Well-Known Member

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    In regard to your statement that Mel will out perform Sydney(or any other cities) base on the last year's result can be quite dangerous. If anything, analyse which city will have the best medium term growth base in current fundamentals and historical price data over the last 30+ years.
     
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  5. melbournian

    melbournian Well-Known Member

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    @RichardN stick to an ip which is zoned rgz in Melb and most of the time u can’t go wrong
     
  6. kr11

    kr11 Well-Known Member

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    hi melbournian
    do u think there r any rgz properties in melbourne for 600k or less within 20km of cbd
     
  7. melbournian

    melbournian Well-Known Member

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    MAybe 25-30km or smaller blocks for 600k
     
  8. RichardN

    RichardN Well-Known Member

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    Thanks all for reply.
    Two current properties, I hold are on my name so I have oppty to buy on my wife's name and also if any positive cashflow, will be paying less tax due to my my wife's low income.
    Agree, I think in medium term,its Mel as we know no crystal ball.

    Could you please advise areas/ suburb names if you are aware of any. I have very limited knowledge on Melbourne and thinking to use BA.
     
  9. icic

    icic Well-Known Member

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    Hey @RichardN good to see you done your DD, but be very careful of Melbourne as it had 3 years of strong run. Lots of locals on the forum has indicated a bit of slow down and only patches of the market are active.
     
  10. RichardN

    RichardN Well-Known Member

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    Thanks icic, honestly I haven't done much DD, just started research. Looking at @melbournian [/USER] updates and it seems he has a wealth of knowledge about Mel. Purpose of this thread to check what would be the best place to buy my next investment property. At the moment, I am assuming that Mel will outperform at least 4% higher than Sydney. With that assumption to diversify investment, I am planning to buy in Melbourne.

    Then the next question is, If it's Melbourne, where to buy under 650K in Mel. I have been told that always buy within 15 KMs radius to CBD but not sure if I can buy with my budget and what is the best place as we are at the end of the boom cycle at the moment and I believe all hot spots become cold now?

    I was talking to BA yesterday; she was referring to Werribee.

    Need to consider that I am interstate to Mel, no development experience other than building the granny recently in Sydney. I might keep the property for the long term and look for CG.
     
  11. melbournian

    melbournian Well-Known Member

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    @RichardN

    I think it all depends on what property has more value on what competitive advantage or benefit.. having higher density zone (is no diff) to somewhat being in the right school zone (balywn high school or GWSC). Also no diff to being close to shopping centre. though it needs to be in a combination of these or one of these factors alone. Werribee is a ok buy but for your budget 15-18Kms is still achievable. price points wise makes a diff. Sometimes for example a lot of ppl are saying corio and RGZ but in my opinion if the house prices are 300-350K, the cost of the build of a townhouse is close to 250k and the townhouses are alike 275K there isn't much margin or even any at all to work it. And why would ppl fork out for townhouses when they can buy houses at not much diff in value loan wise of 75k is not gonna make a significant diff

    I went to a few auctions today - saw a large crowd in Ringwood what was 440K is now 1.25mil in 7 years which is a record price for the street (I thought it boomed in 2016 and flatlined but still records are achieved. while Brisbane is 0.4% for the year look at this below.

    upload_2018-2-10_20-16-10.png


    upload_2018-2-10_20-16-59.png


    Heidelberg Height & West had multiple bidders all bidding pushing up this run down ex housing house to 805K while the sales exec director of housing was happy to let it go at 700kish (I met him before coz he has to sign off on all DOH sales) - so signs of downturn? or still slowing going along?

    upload_2018-2-10_20-18-57.png
    upload_2018-2-10_20-19-48.png
     

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    Last edited: 10th Feb, 2018

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