IP in Melbourne - CBD proximity - how far out is too far?

D

Davothegreat

Hi all,

I'm currently scoping the market for my first IP but being from Sydney where everything just seems too expensive I'm currently eyeing Melbourne. I wanted to gauge what people working down there generally consider to be an acceptable travel time/distance to the CBD for work to help determine how close to the CBD I should be looking to buy.

My PPOR happens to be 15km from the Sydney CBD and my commute to work (not in the CBD) is 19km/35 minutes. I don't mind this time but wouldn't like to see it extend past 45 - 50 minutes regularly. The PPOR location was chosen based on proximity to my wife's family, work just happens to be the distance it is.

I know this is a 'how long is a piece of string' kind of question but if there's any general guidelines or unwritten rules that people have come across with relation to people's stigmas or whatnot regarding Melbourne CBD proximity then I'd love to hear about them, particularly if people have had tenants move out of their IP due to a job change revolving around the CBD.

Cheers,
Dave
 
The yellow parts on this map is what we call "Zone 1" and in essence what I consider "inner suburbs"

http://ptv.vic.gov.au/assets/Images/maps/Network-maps/Train-Network-Map-updatedOctober2013.gif

These days, we're finding anything other than 2BR apartments unaffordable, so if you want villa units and houses, suggest you follow the blue linesout. Train rides even from the end of the lines are considered quite acceptable to the city IMHO. It's usually getting to the station itself and finding a place ot leave the car that is more the pain.

The Y-man
 
Davothegreat said:
I know this is a 'how long is a piece of string' kind of question but if there's any general guidelines or unwritten rules that people have come across with relation to people's stigmas or whatnot regarding Melbourne CBD proximity then I'd love to hear about them, particularly if people have had tenants move out of their IP due to a job change revolving around the CBD.
Click to expand...

Perceptions, misconceptions, unwritten rules, stigmas and preferences are often shaped by where one lives in Melbourne IMHO

The biggest ones you find in the discussions here on Somersoft for example are:
  • East vs West
  • Outer fringe (on all sides)
  • Bayside
  • Concentrations of various ethnic and religious demographics

For example as someone who has lived in the east/southeast for almost all of my life, I have certain perceptions attached to suburbs like (probably mostly through urban myth and various hyped stories rather than any facts):
  • Box Hill, Richmond, Springvale, Footscray (why travel to SEA? It's all here)
  • Dandenong, Doveton, Noble Park (knives, drifting and donuts)
  • Melton (Might as well go to Adelaide...)
  • Brighton, Beaumaris, Sandringham, etc (where do people get that sort of money from?)
  • Sunshine, Coburg, Fawkner, Clayton (if your tenant needs to be near a Mosque, and have easy access to a good variety of Halal foods etc)
  • Caulfield South (if you need thing Kosher)
  • Tarneit - where????


To get a more objective view, you migth wish to go to the stats link

http://www.censusdata.abs.gov.au/ce...11/quickstat/SSC20867?opendocument&navpos=220

The Y-man
 
The Y-man said:
The yellow parts on this map is what we call "Zone 1" and in essence what I consider "inner suburbs"

http://ptv.vic.gov.au/assets/Images/maps/Network-maps/Train-Network-Map-updatedOctober2013.gif

These days, we're finding anything other than 2BR apartments unaffordable, so if you want villa units and houses, suggest you follow the blue linesout. Train rides even from the end of the lines are considered quite acceptable to the city IMHO. It's usually getting to the station itself and finding a place ot leave the car that is more the pain.

The Y-man
Click to expand...

Commutes of up to an hour are pretty common but it depends on what you can afford and the type of tenant you want. There are plenty of professionals putting off marriage/kids who are not ready (or can't afford) to buy their own place and want easy access to the CBD.

http://jp.ptv.vic.gov.au/ptv/XSLT_TRIP_REQUEST2?language=en
Journey Planner can be used to get an idea of public transport access but you won't know where your tenants will work and there are many other factors to consider than just the time to get into the CBD.

What can you afford? What sort of tenants do you want to attract? Are you focused on capital growth or yield? As far as I'm aware, most Melbourne suburbs have pretty low vacancy rates at the moment but also relatively low yields.

- For the South Eastern Bayside suburbs, most people want to be on the beachside of the Nepean Highway.
- Properties near Universities, Hospitals, Airports or suburban hubs (Ringwood, Dandenong, Frankston) can be attractive rental properties for tenants who are not necessarily concerned about getting into the CBD.
- There is an over supply of apartments in many inner suburban areas.
-Homes in a number of suburban public school zones have a premium price compared to homes just out of the zone (McKinnon, Glen Waverley, Balwyn, etc)
- Some train stations are on two train lines and the major/junction stations get the express trains stopping which can make a big difference to the commute.

Hope that helps. Let me know if you want more specific info.
 
Chris B said:
What can you afford? What sort of tenants do you want to attract? Are you focused on capital growth or yield? As far as I'm aware, most Melbourne suburbs have pretty low vacancy rates at the moment but also relatively low yields.
Click to expand...

At this stage my budget is around the 350k mark. There is some wriggle room in this in case I need to increase my deposit in order to bring a low yielding property closer to neutral gearing as I don't want to be out of pocket more than 5k p.a. excluding unforseen maintenance costs.

I'm not really fussed re: sort of tenants in terms of walk of life or blue/white collar as long as the rent is paid on time and the place is looked after. My focus is long term CG, 15 - 20 years, so as to be able to help out my kids when the time comes for them to buy property. It's not intended that my family will ever live in the IP.

Cheers,
Dave
 
JacM said:
Hi Dave

I couldn't help but wonder why you would consider a low-yielding property?
Click to expand...

Sorry, I wrote my post early this morning with not a whole lot of sleep (thanks to my 2 year old). I wasn't implying that I want a low yielding property, only that my budget is flexible so that if I need to spend a little more to get into an area with good long term CG then this is an option.

Let me clarify my position. I have around 250k sitting in offset (courtesy of my mum selling off her IP) against my PPOR in Sydney (490k owing) but since I want to own that ASAP I don't want to spend more than 50 - 75k of that money on deposit/stamp duty on an IP at this point in time, at least until I pay down the PPOR further.

If I can get away with spending no more than 50k of the offset money it'll only add 1 year onto the loan time remaining on the PPOR so I'm happy to do that.

Cheers,
Dave
 
Just reading your last post theres one option you might want to look into further

Instead of using the cash straight from offset, use the amount of cash you need for ip and pay down ppor loan and then withdraw it for ip deposit and costs etc.

This makes that portion of the loan tax deductable while lowering your non deductable debt at the same time.

Cheers
 
Beanie Girl said:
Hi Davo,
http://www.realestate.com.au/property-apartment-vic-box+hill-115687591
Click to expand...

Thanks for the links, Beanie Girl, but I don't think either of those places will work for me.

The place above is for sale for offers over 360k yet there's a unit in the same complex for rent and only asking $285 p.w.

http://www.domain.com.au/Property/For-Rent/Apartment-Unit-Flat/VIC/Box-Hill/?adid=8711890

Both places look about the same condition, certainly both kitchens are original.

A quick number crunch would have a 360k purchase price costing 36k deposit + 17.8k stamp = 53.8k out of pocket and with a loan of approximately 325k @ 4.79% costing $22300 p.a. yet only generating $14820 of rental income. And I haven't factored in body corporate, council rates etc. No chance of this coming close to my budget limit of 5k negative geared.

Cheers,
Dave
 
Hi Dave,

Melbourne yields are pretty crap for the most part, as you've noticed. Is there some reason why you're preferring melbourne over anywhere else in the country?

Stuff around Epping, Lalor, Broadmeadows seems to be around the price range you mention and the annual deficit you mention. Probably not within your distance range though. Can't win them all :)
 
Davothegreat said:
A quick number crunch would have a 360k purchase price costing 36k deposit + 17.8k stamp = 53.8k out of pocket and with a loan of approximately 325k @ 4.79% costing $22300 p.a. yet only generating $14820 of rental income. And I haven't factored in body corporate, council rates etc. No chance of this coming close to my budget limit of 5k negative geared.

Cheers,
Dave
Click to expand...

Hi Dave,
Are you doing Principal and Interest
or Interest only loan?

best regards,
beanie girl
 
Dave,

I think I have found a worthwhile proposition for you.
it's a solid brick and hardwood HOUSE, 3 bedrooms, 1 brick lock up garage, 1 bathroom,
The bedrooms and lounge are HUGE and a huge rumpus room can be divided into 2 MORE rooms making it 5 bedrooms altogether!!!!

The rent you could charge for a 5 bedroom house! :eek:
And there's more, there's an attic downstairs and the agent thinks that the house/unit comes with its own land (300+ sqm) Section 32 comes out in 1 week.

PM me!
 
dtraeger said:
Stuff around Epping, Lalor, Broadmeadows seems to be around the price range you mention and the annual deficit you mention. Probably not within your distance range though. Can't win them all :)
Click to expand...


Epping is 40 min by train to F-St, Lalor 37 min, Broady 34 minutes - so not too bad

The Y-man
 
dtraeger said:
Hi Dave,

Melbourne yields are pretty crap for the most part, as you've noticed. Is there some reason why you're preferring melbourne over anywhere else in the country?

Stuff around Epping, Lalor, Broadmeadows seems to be around the price range you mention and the annual deficit you mention. Probably not within your distance range though. Can't win them all :)
Click to expand...

I haven't ruled out anywhere else, was just researching Melbourne thinking that the lower buy in price versus comparable Sydney property might offer up more manageable opportunities. The more I dig into this though, the more I'm thinking it's not actually going to work that way without spending a lot more of my own money which I don't want to do. Methinks it's time for a strategic rethink, possibly back in my own backyard.

Cheers,
Dave
 
The Y-man said:
The yellow parts on this map is what we call "Zone 1" and in essence what I consider "inner suburbs"

http://ptv.vic.gov.au/assets/Images/maps/Network-maps/Train-Network-Map-updatedOctober2013.gif
Click to expand...

Agents are still spruiking the appeal of 'Zone 1' but they're telling half truths since the benefits will spread Melbourne wide from next year.

http://www.danielbowen.com/2014/06/16/house-hunters-zone-one/

There may be benefits of buying inner suburban but cheaper trains will no longer be one of them.
 
My basic rule of thumb for the ideal radius to the city is from 2km from the cbd up to roughly 15km.

Use streets like Bells Road in the North, Warrigal Road in the East, Anderson/Millers in the West and South Road in the ...South as rough guide lines.
 
I'm looking at Glenroy,Hadfield and Reservoir at the moment for an initial PPOR and they all sit within the 15km zone to the BCD and there still seem to be some reasonable good deals in these areas! Might have to get your budget a bit higher than 350 though if you are after a house with a bit of land!
 
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