VIC Purchasing a land+ house in Doreen vs Beveridge

I'm very new to the property market and having lived only in the inner suburbs of Melbourne for over 9 years, I ventured out to rent in Mernda for a year. I quite like it here and I don't see myself living anywhere further than 40km from the CBD.

It's about time I look into investing in a home I will be living in and I'm currently in a 4 bedroom house on a 300m2 land that is up for sale by the landlord for 520k which is a bit high for the amount of loan I can secure based on my savings.

I am only realistically able to afford a loan of $470k -480k(with 20% deposit) and don't know if It might be worth buying in a suburb like Beveridge where I can get a 4 bedroom with double garage for under $450k, but an infinity away in terms of driving to the city or other suburbs in the south east or spending upto $500k and buying a place in Mernda or Doreen where the commute is still manageable.

I've never taken out a loan in my life and mentally am able to justify a figure of 450.

Donnybrook, Mickleham or kalkallo are not a possibility as they share the same postcode as Craigieburn and i will be sharing the rent with my younger brother who is only able to live in certain suburbs of melbourne that are considered regional (due to his migration visa reasons) for the next 5 years.

The other reason is that my parents might be moving to Australia for a few years and I would like to have a place with enough bedrooms to either rent a room out to someone or have my parents live with me when they are here, hence the 4 bedroom instead of a 3. Might even invest now and sell in 5-10 years to get another house closer to the city.

I know it's a long winded question, but any recommendations if the CG in Beveridge has the ability to appreciate as well as Mernda/ Doreen?

Or would the extra $50k in an already built home in Mernda/ Doreen be the better option for selling within 5-10 years?

 

Just realise these two sentences are inconsistent. If you are at all interested in property investing, or even upgrading your PPOR later, you need to understand how to assess debt.

If you went for 90% LVR loan, then you could afford to buy what you are living in now (IF you think that's what it's worth), since you have a 100k deposit.

Not saying that you should go above 80% LVR and borrow more, only that your decision not to is from fear, not objective weighing of the risks. A ppor is an emotional thing, and the irony is that you are deliberately choosing a location you don't like, only because you are emotional about the loan.

It can be argued that younger people can better afford high LVR loans. They don't have much deposit because they have to save it, they get savings on stamp duty, their pay is likely to increase with time, and they can more easily get a job if they lose one.

Think about your own situation. Are you better off using all of your savings and go for 80% LVR, or go 90% LVR for the same priced property, and keep some money in the offset for emergencies?

 

Thank you for the response

You summed it up really well and it's really got me thinking in a different way now. Which i guess is a good thing.

The house i'm renting at the moment is really not the kind of place I would consider purchasing. It's just not my kind of house, but for the price and the land, it is by far the most spacious in the area and I've lived here so I know the area (Plus the train station is only 3km away). that's one of the reasons I'm really puzzled whether I should move further and drop an extra bit of money to get larger land and build something that suits my design for a PPOR or consider growth in the short run and make do with a property.

The other think about for me is if I go with 90% LVR, the LMI kicks in, which makes the property cost go higher in the long run too. It would really be nice to have some savings in the bank though.

I'm 30 currently and my income at the moment is $72k per year pre tax with the possibility of my next upcoming role being $82-87K and I have $80k saved up currently.

But it looks like I have to weigh my options better and see what's more important. Location and convenience, or Size and being able to build what I have in mind for an equal amount.

Any recommendations of whom I can speak to regarding land valuation or get an idea of capital growth in suburbs? I'm really new to all this and there are so many consultants out there, but i haven't a clue whom to approach

 

First step is a good mortgage broker to understand your lending options. The ones on here are generally good (because the experienced investors on here flay the bad ones).

LMI is a cost, yes. But what do you get? A better (more expensive) place? Ability to borrow more and so keep a bigger buffer for emergencies?

Whether you buy the house you rent now isn't the point. The point is increasing your budget gives you more options. Could you buy a house with a better layout that you like in the area where you are renting now? Have you looked? Do those options justify the cost of LMI? At least find out how much LMI would be (it changes depending on the exact LVR) to make a decision objectively.

What you should NOT do is dismiss options until you have checked out the cost and evaluate it objectively.

At 30, you really should go for growth. Your income will increase, but it's hard to save your way to an upgrade. Think about when you have a family or, if you already have one, as they get older. You probably won't save much more than you do now.

 

Excellent advice by @Trainee already.

As for the area to live in, are you able to look at the Geelong area or is that too far/away from mates/family? For your budget there are a few decent areas with good sized blocks and 3/4 bedrooms. What I mean to say is, don't lock yourself into a suburb or two unless there's a compelling reason. Geelong's got train stations galore should you need to commute into the city. Plenty to do too.

 

I bought (built) in Mernda 14 years ago and my sister will be building in Beveridge as she can't afford Mernda (14 yrs ago Mernda was equivalent to Beveridge in affordability for the FH buyer). To answer your question about CG, I believe you will eventually get it in Beveridge, it's position on the Hume is good but it will take a LONG time. It's a very new suburb with masses of land to be developed so you'll need to wait many, many years until a buyer can't just get a block of land easily and build new so prices will be supressed. Does this work for you? It depends on how long you intend to stay. If you and your brother buying together is a 5 or 10 year plan I'd stretch to Mernda (Doreen has a premium so Mernda is much more affordable) as supply will be much smaller, prices are more likely to hold or grow. In Beveridge in 5 or 10 years there will still be new developments popping up. I've been in Mernda 14 yrs and when I built it was a little like Beveridge is now (no supermarket, plenty of blocks for sale) and after that time my property value has only increased by what I've paid in holding costs so no real CG yet. It's a long term game for investment in the outer suburbs so if it's likely you and your brother might want to start your own families and need to sell, Beveridge may not be the place. The other consideration is if you are car based or public transport based. If you're car based you might know that driving towards the city from Mernda is a nightmare, but there are 3 train stations close by. In Beveridge you're on the Hume so driving towards the city is much easier, but public transport is poor and will be for a very long time. Hope that helps somewhat.

 

I have lived both in Mernda and Doreen for the last 15 years and operated as New Homes Consultant there for 10 years of it.
When it comes to finance you need to 'cut the cloth according to its width' as my mother used to say.
We can all think of somewhere better to live but the basic rules are buy where the services are and Mernda and Doreen is now very well serviced.
It seems the 1 or 2 car debate should be traded off against the extra miles of travelling further afield and less services and to me it's a no brainer.
You live in Mernda and have settled there and I guess you like it. On capital gain. Mernda will outstrip ground further out and as one who knows the local area intimately regarding pricing the $520k price seems extremely reasonable.
I found your post because I searched 300m2 Lots in the local area and purchased one at $279000. Now I have to build the house and landscape it and its won't come out any cheaper than the $520k you are paying. If you want to know how the market is travelling search the median price of homes in the Mernda area.