As you grow older, you find yourself doing things you genuinely had no idea you’d be doing. At least I do. Perhaps other people have all their plans worked out way further in advance.
When I was growing up, we had little money, and I couldn’t dream of owning my own home.
At age 30 I found myself living alone for the first time, it still wasn’t on the radar. It took me until 35 to get to the point where I could buy.
Through my 30s and into my 40s, things have really come together moneywise. Good steady job + low interest rates + house appreciated markedly (roughly doubled in value; I couldn’t afford to buy in Bentleigh now).
Last year I wrote about money, and that I was pondering buying an investment property. This came about via refinancing my home loan at the suggestion of my sister, and chatting to a mortgage broker about it.
My house was revalued by the bank. It’s worth just on double what I paid for it. Based on that, the mortgage broker said I’d have no trouble borrowing enough for an investment. Rent could be expected to be roughly in the zone of the interest payments.
Virtually any other type of investment would have to be self-funded. I’ve dabbled in shares (disastrously), and the bank wouldn’t lend to me to buy a race horse or gold!
10+ year objective: boost my retirement fund, and help my kids buy when the time comes.
So I decided to try an investment property. But where to buy?
Daniel’s theory of property investment
Let’s assume I want something in the same city where I live, rather than some far-flung location.
First of all, I’m aiming at something within walking distance to a railway station, shops, parks, other amenity. Similar factors to where I would want to live — it seems to be a good formula.
If one assumes the jump in prices has started in the inner-suburbs and is steadily working its way outwards (with gentrification etc), then the strategy is to buy just ahead of that wave. To go with a stereotype, as the CBD gets busier and the commuter population gets larger, then you aim to catch the next lot of CBD white-collar workers moving in.
In the Frankston line corridor, this wave of house price rises has obviously already gone through Bentleigh (where I live), Moorabbin, Highett, Cheltenham, but then you get to the beachside suburbs like Mentone which have been expensive for some time. I’ve missed that wave.
One could look in other directions, such as west, but what about along the Dandenong line? Oakleigh, Clayton, Springvale have already gone up or are doing so now.
For bonus points, look for government infrastructure upgrades in the area to provide a boost, a rejuvenation of some kind. For instance, level crossing removals.
So I ended up targeting Noble Park, which has the following going for it:
- Still affordable for townhouses/units (which I’d prefer over apartments… a house would be ideal of course, but out of my budget)
- local shops including a Coles supermarket (unlike nearby Westall, Sandown Park and Yarraman)
- quite a walkable suburb
- 37 mins from city on the train – making it much closer to the CBD than the booming outer suburban fringe
- By 2018, will have local crossing removed and a shiny new station, which is likely to spark urban renewal
- Also new trains coming on line about then
- From 2026 the Metro tunnel will mean direct access to Domain and the University/Hospital precinct
- Possible future airport rail link in the next couple of decades
- Fairly close to Monash Uni
Down sides? Well despite being close to Monash Uni, the public transport links to there aren’t very good. In fact all the local buses are fairly appalling.
The area has a reputation for crime, though perhaps undeserved. Parts of the suburb seem a little run down, though not really worse than anywhere else.
Remember, it’s about investment potential. I’m betting that the whole area will get nicer over the next (say) ten years.
Unknown: Will the impact of skyrail be positive, or negative? I’m betting positive. If the open space isn’t totally dominated by car parks, and if they keep it clean, it’ll add to the neighbourhood rather than detract from it.
In contrast to areas like Carnegie, where it’s seen as controversial, it seems pretty accepted in Noble Park, in fact I even saw one real estate ad crowing about it.
I started hunting for a property late last year. Scoured the web sites, and drove down regularly on Saturdays with M, whose patience never seemed to wear thin.
I went to a few auctions, even placed some bids. Gradually it became apparent that some types of property were probably beyond my financial means, if I wanted something in the area most desirable.
Finally in May I found something up for private sale, put in an offer, haggled a bit, and it was accepted.
A unit, with two bedrooms, at the back of a block of four. Brick, with a bit of a back garden, and very close to the station. So that skyrail had better work out!
A great deal of paperwork has followed, including applying again for the loan, even though it was “pre-approved”. But it’s done. I’m buying it.
It’ll be rented out to tenants. (I’m hoping to be a good landlord, not a git landlord as some were back in the days when my family rented.)
This is going to be interesting. Will the rental return be as healthy as forecast? Will it keep abreast of any interest rate rises? Will the area appreciate like I hope?
We’ll see what happens next!