Where to buy 1st IP in Australia for under 450K

I have been observing this forum for a long time and have learnt a lot from everyone's input. I was just looking for some tips suggestions on where to invest.
Would like it to be near train station ( not so sure if it makes any difference in Victoria)
I have around $300K in saving currently renting with my partner both on a reasonable income. We have been looking to invest in SYD(Western Sydney) area and Melbourne (Melton and Geelong )area with not much luck as both markets are still too hot.
Thinking of buying couple of properties by the end of year for under 400/450K with reasonable (600sqm?) that can be redeveloped/subdivided in next 5/10yrs time. Going with 400/450K just to keep things at low risk and to distribute my risk factors to different areas.
Your Thoughts?
Open to suggestions, Tips on area's (not too hot) that can and will grow in future and worth considering and what is good and bad about the areas.

 

Have you looked at Brisbane? Just thought I'd get in before anyone else Have a read of the Brisbane and surrounds threads.

 

Also have a look at the Adelaide thread, if you haven't already. There may be some great oprions there but I don't know the market. @DT knows the place inside out I think.

 

Thanks for the feedback but I would like to secure my first investment in Mel or Sydney market and once tight on cash flow move to QLD or SA market.
Again open to suggestions. Maybe there is something I'm missing. As I said I'm still learning.

 

Sorry, I thought you'd said you looked there but the market is too hot? Why are you interested in Melb or Sydney at this point in their cycles? Most investors have stopped buying in Sydney. There's alot of competition in Melb for subdivision potential, but there may be something somewhere at that price point if you're quick.

Have you chatted to a BA to see what's possible in your budget?

You could have a look at house & land packages in Outer West Melbourne if you can't find anything subdividable? There's a house & land thread that may give you some tips. Melb is hot at the moment though, even land and yields are miserable.

Whats your strategy, just long term hold?

Could you do better elsewhere?

 

Thanks for the tips.
No haven't spoken to BA haven't have heard good about BA's. I did consider. most of the L&H packages are small land.

The strategy is to buy and hold do some minor reno maybe, analyse after 5 years

 

No comment on location, but just on your use of funds.

A couple of years ago I had over 300k in savings and used it to purchase a 500k property.
Mortgage broker from Aussie Home Loans told me nothing about how to use this money more effectively. Don't make the same mistake I did!
Don't tie up your cash - you can use it far more effectively than this and produce at minimum the same result, and more realistically multiple times better results.

Some basics for your to investigate further

1. Use the minimum amount possible for a deposit (I believe 12% was the sweet spot but 20% might be better now I am not sure, but absolutely not over 20% - a good broker would be able to advise)
   
   
2. Put the rest into an offset account so that you are paying the same interest that you would if you actually put that into the loan. Then you can use that money from the offset for anything (property repairs, holiday, car, anything) and the money you used from there will increase the interest payable on loan by the same amount you have just spent, and the extra interest is tax deductible - yes the government pays 1/3 of the interest for you).
   
   
3. Even if you want to put no money at all into a property for maintaining it and want to have rent pay for all costs, a decent growth property on 50% LVR should be able to pay P&I on it, so with 300k cash I would think buying a 600k valued investment would be far more sensible (assuming you have a job and don't need to use rental income to provide you income to live off any time soon)
   
   
4. (and this is the big one and rarely mentioned since you are in a rare situation)
   Further to point the above points, you can use the extra cash in a way to allow you to purchase higher growth properties at incredibly lower risk. Normally higher growth areas have lower yields and you have to make up some of the monthly loan payment shortfall by yourself after rental income comes in. Normally this is precisely where the risk is when people talk about an investor being a high medium or low risk investor - if rates rise (or if someone loses their job), they may be forced to sell, and at that time the market will often be down when rates rise so you will often sell the property at a significant loss. With a massive cash buffer in an offset account, if this happens, you are covered for LOTS of years allowing you to purchase higher quality properties at incredibly low risk so you should have no problems holding the properties during any market corrections and make it through to the next boom to realise your gains. You should make up a spreadsheet showing approximate property value and rent increases over time so that you understand that if you can afford to hold it for 10+ years, by then the rents should rise enough not to need any more of the buffer so you can then understand this solution is only needed temporarily.

A huge buffer is a god-send of mammoth proportions. Don't waste this huge opportunity by putting it into paying down an investment property! Put it in an offset and use it to it's full advantage. A good broker hopefully can explain this better than I have.

 

Sydney is out fo your equation - 450k 600sqm House. You cant even get a 2 bed unit anywhere in Sydney for that price now.

 

Great tips regarding 12% deposit - many thanks can you please elaborate on

Are you suggesting I should be considering buying a 2 x 600k property instead of 3 x 400K or suggesting about the 12/88%

 

Ohhhh yeah true but for Sydney was looking more into 750K for a established house with 600sqm and option to add the granny flat and later buying 1 in Mel for under 400K and move on with my life

 

Both really

1. Put the minimum amount you can into the loan and keep the rest in an offset to give you cash to pay for holding costs and massively reduce your risk of having to sell if the market is unfavourable for a few years.

2. In this situation you can use that for holding costs for better quality higher growth properties which tend to have lower yield would lead my to want to purchase 2 better located 600k properties over 3x400. I would be going for outer edge of middle ring in West Melbourne/Brisbane where both are around 550-600, but you definitely should be asking other people about what to buy - I am not experienced enough to offer advice on this.

 

I guess I can look into what you suggested got to look into the areas... its interesting you also mentioning Brisbane.

 

Brisbane is nice and stable, plus $450k will buy you a quality property in a good area, much closer to the city than in Syd or Melb.

 

Thanks Tom, what you mean by nice. I'm looking for an investment property no emotions which area's in QLD you suggesting and why? I have been monitoring the QLD market it seems to be quite stable but I don't see any growth happening soon. Also with natural disaster such as flooding and cyclones its bit of a risk but again I'm open to suggestions.

Keep them coming

 

@Omar_wang

You are in a excellent position to build a real estate portfolio.

Some great advice in this thread.

As others have called out Sydney is not ideal, especially at this point in the cycle.

What have you heard about BAs?

A number of our Sydney and Melbourne based clients have worked with Andrew Allen in Brisbane (Andrew is on PC too) and have done well.

 

Do we really want another Brissy thread? Why not just read the current one which is now up to almost 1 mill posts?

 

and not booming yet

 

Lol, not for the want of hoping

 

If I have to look in Vic which areas are suggested in my situation? for some reason I feel like I want to have my first IP in Vic.

 

Have you already got your ppor? If not, you could think of buying where you live now to take advantage of FHOG, and later CGT exemption