Melton Victoria !

If I can find a positive property anywhere I am open to invest, providing I study the area etc.

if you can find a house you can also add value and build equity for another purchase and have insurances to cover your ass.

were is the risk?

Hi Shehan,
I had held off responding, as I have absolutely no knowledge of Melton, nor Melton South. From your short description, it does appear to be a new development area. Even today, you are saying there is a lot of new development going on. Now, that could be good, or bad – for these reasons:-

If it already has some history (years of development behind it) as an area, then it might be that infrastructure has begun to catch up, with schools, shops, transport hubs, hospitals, etc being built. Usually this does not happen immediately, but means new buyers must travel (by car?) to find what they want. Over a period of years (even decades) an area becomes “settled”. Also, any new development is usually sold off at premium prices, such that capital growth is likely to be negative or flat for up to 10 years after initiation. This kind of area often suits owner-occupiers, with young families buying into them using Grants etc to help them into the properties. An investor doesn’t have that option, but of course, can choose to buy there – BUT they are buying a “solution” property, that will likely be doomed to have no growth for at least 5 years, and maybe more than that.

But then, if one is looking for deals, one might just happen upon someone who is wanting to sell up in this “new area” after having spent the last 5 years or so adding bits – paths, garages, planting trees, gardens, etc – all of which add value to a place. But, it is also 5 years old, or more, and might have had the new edge knocked off it – the occasional broken tile, paint a bit scuffed, Dad backed into the fence once, etc. And in such a case, with a family who now “wants out at whatever price”, there might be the chance of a deal.

Using the stats that you can glean from RE agents, you can find out how “sought after” this area is, and even the demographic that suits the area – who is looking to buy, and what price point can they go to? Look too at other positives and negatives about the area – e.g. how many homes have an extra car jacked up on the front lawn? Are the houses (generally) well-kept? Is there a good community feel about the place? Are there sufficient shops, schools, etc?

Talking of negatives, how much other land surrounds Melton or Melton South? Is it jammed against a river or a mountain range? Or is there land in all directions for Kms and Kms? See, there is not much scarcity to push up the price of land if there is heaps of it available. I know the Councils tend to keep some “locked up” – but hey, at some point, a new land release will make it all available. and, when you think about it, it is the land value that appreciates while the buildings on the land DEpreciate. If no-one overly wants ot go there, prices will languish or fall. If everybody wants to go there, land values will climb.

Same principles apply everywhere. Now tell me how YOU see Melton, based on all that….. ;)

Benny

Hi Shehan,
There is a mixed message to be given when the property is newish areas with a high rental return.

First, it SOUNDS very attractive .. as in melton .. returns of 6-7% are actually possible.

But it falls short in a couple of necessary areas.

One of the main factors for keeping and holding a property is its placement in convenience.

In the good ol’ days the placement of convenience used to be close to the CBD as most of the business and jobs and commerce was in or close to the city or surrounds.

Nowadays that criteria has been extended towards any area with a decent shopping centre / district and a couple of good restaurants.

For instance Glen Waverley which all my compatriats tell me is overvalued .. has a sweet zone with both good restaurants of quality surrounding the shopping centre, easy parking and multiple options to choose from within either the shopping centre or surrounds.

It makes for a very attractive zone to enjoy and participate in.

Melton is a bit of a muchness, and always has been. It has areas of shopping that are ok but not great, it has Woodgrove for shopping which is ok but not great, and it has a main strip that always looks half dead towards dying .. with that deathly cheap look being todays fashion statement.

I remember going to Melton for one of my first real estate job interviews .. and it being the only time I wanted the guy to say .. sorry .. you arent for this job.

The returns are attractive for all the wrong reasons.

The neighbourhood of Melton is for the people who are prepared NOT to go to the city (its too long a distance) and not worry about working anything but local.

So even expanding the amount of people who live there (and are prepared to live there) its not going to change into a major tourist destination overnight (or even in the near future).

Your bank, and your interest and your returns will always be about going into an area where you can guarantee the return without risking proportionate or excessive risk, and having a capital gain within a period within your lifetime.

Melton falls short because of extended risk components based on tenancies, and lack of demand for property at a higher level or higher rate.

There are still areas across Melbourne within 50km of CBD that are value and in demand regularly so there are a lot better purchases to be had.

As a kid I used to pooh-pooh the dangerous aspect of some suburbs and the risk factors involved. Until that is, my father and I went to look at a couple of properties in Sunshine (this is 1990s Sunshine) that the tenant had been in dispute and had successfully burnt the property to a crisp.

You can think the risk is imaginary until you walk into a situation in Ballarat where the tenant wants to burn your property AND BLAME YOU because that means he gets to go back to a government backed property at no cost.

That happened .. thats real .. and you have to realise what is possible on a bad tenancy.