We had an exciting brief for two lovely Sydney-siders; to find a suitable apartment within easy walk to shops and train station for close to $350,000. They had targeted Melbourne’s inner west for value, rental yield and sheer opportunity.
There are not many suburbs in the inner ring suburbs that offer such buying conditions. From Footscray to Altona, Sunshine to Newport; we tackled every option which arose.
Our first issue related to outgoings.
Many apartments had exorbitant Owner’s Corporation outgoings and we often found ourselves throwing cold water on the suggestions from our active interstate investors as they spotted listings on the search engines. An apartment might be well located and it might have a fantastic tenant paying a great rental, but the returns are whittled away if the outgoings are $4,000 per annum for body corporate fees alone.
Our second issue related to zoning.
Our energized investors often drew our attention to glossy online ads but in many cases these new developments were either above shops, located on busy main roads and in many cases, zoned for mixed use or the like. The problem with these types of assets is that banks consider them quite differently to residentially zoned assets. If a buyer can’t finance a property with a ten per cent deposit, then it means that no other buyers can either. The pool of potential buyers reduces from a large crowd to a particularly limited cluster of buyers. Competition is so reduced that prices are forced down. Growth is impacted and other sales in the block dictate values each time a property is sold.
We always avoid investments with non-mainstream lending characteristics and we certainly avoid properties which high outgoings. There is little point in funding an asset which will deliver limited growth and adversely impacted rental returns.
In the search for the ideal investment for our Sydney-siders, we discussed the possibility of a cosmetic renovation on a discounted property in a great location. They were open to this approach so when a 3BR dated apartment in a boutique block of just eight in Altona’s Blyth St came up, we wasted no time inspecting the property.
This upper level unit was no luxury penthouse. The wallpaper was peeling from the walls. The carpet was worn and the walls were marked from years of wear and tear. But the floorplan was great with three genuine bedrooms (all with wardrobes), bathroom with adequate room for an inclusive laundry and kitchen large enough to facilitate a small dining area. Armed with a satisfactory building inspection, our buyers left the negotiating to us. A late Friday evening battle between two buyers resulted in a final purchase price of $316,000. Based on a current rental return of 4.6%, our investors could have held the asset as-is, but by scoping out a sensible cosmetic clean up by way of new carpets, repainting and installation of laundry taps, their possible rental return could be lifted to $300pw and a quality tenant could take possession as soon as the works are complete.
Just 13km from Melbourne’s CBD and within easy walking distance to the bustling Pier St cafes and wine bars, Altona beach and Altona’s rail station, there is no doubt that $316,000 for a 3BR boutique apartment is clever buying.
Altona is on our hot-list for up and coming suburbs for all of the right reasons.
The growth drivers are evident based on commuting distance, a rapidly changing demographic, and the love affair that Melburnians seem to have with our beaches. The proliferation of quality new cafes, combined with the construction quality of new houses and townhouses in this exciting growth suburb are testament to the growing popularity of postcode 3018.
Photos sourced from googlemaps and REA