Hi guys.
I am undecided if the following property is a good purhase or not. Details are…
PP – $295,000
Rentl return $270/w (conservative price)
Property is off the plan
2 BR unit.
Below on ground level is a shop. 2 units are pon level 1. Both facing the street.Place is 80sqm
2x bedrooms are 2.8m x 3.2m each
comes with dishwasher, washing machineArea is 13.5km from Melbourne CBD. Area is booming with strong rental demand.
However, my issue is that the unit is located in an area that has a reputation of being 'rough' Research tells me that it was the area where street fights were a common theme in the 80's. The reputation still lingers although the area has cleaned itself up considerably.
From the above information, Do you feel as if this is a good deal?
Buying units that are new or relatively new suit my purchasing interest due to low maintenance required. I am not savy enough when it comes to building or repairs so buying property that requires work is not for me.
Hi EdmundSt
I don’t consider an investment property to be a good deal unless the rental return (pw) is equal to the purchase price (minus the zeros) so for example, if you purchased the property for $295k, I would want to be confident of receiving at least $295 pw rent. There are plenty of areas in Australia that fit this criteria and also have potential for good capital growth.
I can understand you want a property with low maintenance, I feel the same way. However I don’t think you should only focus on buying a property off the plan or brand new. I bought a 10-year old property a few years ago and apart from some minor repairs every now and then its been pretty good. Just make sure to get building/engineering reports prior to buying.
Cheers
Hi Edmund st,
it depends what your after, but if your looking for cash-flow its no good so I assume you are looking for growth which I think you will see little in the near future as Melbourne as a whole hasnt been booming, auction clearance rates have been flat and in a slow decline, average days on market have increased over the last 12 months and private treaty discounts are also up in the last 12 months slightly (reference Australian property monitors) these are negative signs in a market if you are after growth.
There is no opportunity to value add to off the plan stuff as its new also its very difficult to get new properties under market value as there is a developers premium so they wont budge much on price.
Without knowing more info and your situation, I would pass on it myself.
main reasons being Negative cash-flow and negative growth potential in the short to medium term in summary it has the potential to be a burden on you.Does anyone else agree with wren10 { unless the rental return (pw) is equal to the purchase price (minus the zeros) }?
That would be 5.2% gross. Is that a good figure to aim for? What about net %?Information from the next hot spot web site on melbourne
The Melbourne oversupply story has been running for some time now and it keeps getting bigger and scarier.
The nexthotspot.com.au were concerned about the melb inner city about 2 years ago when banks scaled back lending around Southbank and Docklands.
It has become increasingly clear that Melbourne is oversupplied with dwellings in many areas and more stock is being built.
Also sadly true is that in the big picture, Victoria lacks investment in new industry creating jobs. An absence of demand has already hurt top end property (affordability) and the prospects for Melbourne are bleak.I agree with wren10, there are a lot better opportunities in faster growing areas. I would suggest to look at regional towns that have strong education facilities, health facilities and if possible some impact from the mining sector.
renel wrote:Does anyone else agree with wren10 { unless the rental return (pw) is equal to the purchase price (minus the zeros) }?
That would be 5.2% gross. Is that a good figure to aim for? What about net %?I'd say that's any standard run of the mill property. Your aim if possible is more than that. Steve Mcknight says to aim for 10.2%. My own target is not shy from that mark.
Just starting myself, yet personally I look for 7% from first looks, then will negotiate/get creative to see how I can increase it to at least 9%, otherwise I have no interest. I'm sure others on this forum would not even look twice at that sort of return and aim for much higher.
The melbourne property is a mess, I have to agree with Brian that their is a large over supply in properties,
I am also starting to notice that homes are taking a bit longer to rent out then they did before.I was looking a new off the plan apartment but after a good pointers from other people on this site, it has turned me off.
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