What can you buy with $500,000?

I’m often asked if a $500,000 budget can secure a good property asset. Some capital growth investors may argue, but the answer is yes. It boils down to what you are asking you asset to do for you, though.

It’s fair to say that a high capital growth asset in a major city will require a stronger budget than half a million dollars. But not all investors are seeking outperformance capital growth.

Many are seeking a balanced performance.

For those who plan a ‘buy and hold’ strategy, a $500,000 spend could deliver a pleasing result, particularly if rental returns are reasonable.

Let’s examine some of the options I’d consider in this price range. All sales are recent and all are good examples of a moderated growth, reasonable rental yield strategy.

For those buyers who prefer a house on a full block, an exciting city to target is Ballarat. Located just ninety minutes outside of Melbourne, Ballarat is home to over 100,000 people and it is growing steadily in population for numerous reasons. Jobs are a strong attractor to this regional city, with the Ballarat Base Hospital a popular training ground for medical professionals, decentralised government offices such as Consumer Affairs, Emergency Services, Vic Roads and NDIS employing plenty of workers, and opportunities for visa holders. Ballarat’s university, (Federation Uni) is a significant employer also. Rail upgrades and the positive impact on the city with a rising wine and food scene post-COVID have Ballarat earmarked as a long term performer in my eyes.

We’ve been buying in Ballarat for over ten years and our past clients have enjoyed a combination of growth and yield in this time.

A different approach is that of apartments… and we are very fussy when it comes to apartments. Buying close to amenity, avoiding expensive strata issues, and targeting those that banks support is integral. There are plenty of issues that banks can find with some apartments and we avoid these properties. Some include;

• Internal floor areas below 50sqm
• Combustible cladding orders against the property
• Lousy floorplans and limited natural light
• Those apartments without car spaces on title
• Commercially zoned options

Interestingly, since our COVID recovery our inner-city market has not only performed well, but it’s been the out-performer as an SA3 market segment. Through the latter months of 2022 and into 2023, Docklands and our CBD were the only Melbourne SA3/s to deliver positive growth.

Many people gravitate to the older, boutique apartment blocks when they are in search of an apartment with less “bells and whistles”, such as gyms and pools. While the older apartments may need refurbishment, they generally have lower running costs. And more often than not, they feature larger floor plans, more generous natural light and some offer a garage or carport, (a welcome trade from car stackers and parks on different floors of a building). Some of our inner 6km radius locations offer such products, including Brunswick and Footscray. (For those who are old enough to remember, Franco Cozzo’s words are ringing in our ears).

Taking a 6km step further out, a villa unit or small townhouse is accessible with a $500,000 budget. A newish townhouse like this one below will deliver a reasonable rental yield for investors, and the depreciation benefits will also help with cashflow at tax time.

For those who are keen to have a little more space, one of our suburbs we’ve got an eye on is Altona Meadows, just 17km from CBD. While it’s established and offering good schools and friendly neighbourhoods, it doesn’t offer rail amenity.

House buyers can turn their gaze to a few outer ring ares including the South-East’s Frankston. Home to a university campus, great hospitals (public and private), a high-ranking, zoned high school and an impressive water precinct, this once-stigmatised city by the bay offers a lot. With Eastlink and Peninsula link enhancing commute times, first home buyers and investors in search of a house on subdivided land can certainly get a lot of value for their $500,000 budget.

And last, but not least, one of our favourite gentrifying areas is our very local suburb of Footscray. Now an eclectic mix of high rise apartments, riverfront low-rise townhouses, and some superb heritage apartments, Footscray packs a lot of punch.

Just five kilometers from the CBD, no other suburb within this distance offers such value.

This superb old building has been beautifully restored and is located in the heart of Footscray’s shopping precinct. The archives share some great pictures of yesteryears when a date at the cinema was the only chance to watch a movie. Built in 1917, this grand building has withstood the test of time.

Three things that a $500,000 buyer must consider are scarcity, amenity and maintenance outgoings. Land to asset ratio plays a strong role when it comes to capital growth prospects, but cashflow is also integral, particularly at this price point.