I am constantly having discussions with clients and friends about what area is good to invest in. Often people think that investing in and around the city area is the ideal as they’ll get better capital growth than outer Melbourne, alternatively I have clients that have purchased investment properties in area’s such as Clye and Pakenham because the rental returns seem very high so the gap between mortgage and income is minimal.
However, I’m quite passionate about the fact that Maroondah and Yarra Ranges are some of the best area’s to invest in and here are just a few of the main reasons for my argument:
Firstly, if you look at buying in this local area you will be able to purchase 2-3 properties for the price of what you would in Albert Park or Balwyn and other area’s closer to the city. So you may be able to buy more long term as you can invest in smaller amounts and not have too many eggs in one basket.
Secondly, the gap between income (rent) and interest payments is a critical consideration for your cashflow. Rental returns inner city are considerably lower than Outer East. Inner city you could look for rental returns in the vicinity of 2%, whereas Croydon, Kilsyth you are looking closer to 3% returns. The more cashflow you have the more properties you can buy, or better lifestyle you can live.
Thirdly, area’s in outer Melbourne in growing suburbs such as Clyde are cheap and may offer good returns, however my experience with these properties is that they can be hard to rent and often owners are having to reduce rents when the first tenant moves out due to high supply. The other important issue to consider is also the fact that they can be very difficult to sell and capital growth is a lot lower due to the huge supply of housing. People aren’t wanting to pay top dollar for a 3 year old property when they can buy new properties in that area for the same price.
Lastly, it is a misconception that inner city suburbs offer more capital growth. The fact is as a percentage many outer east suburbs perform as good if not better than the inner city area’s. As an example stats from realesate.com.au data shows that housing prices in Albert Park Prices have gone up 56.6% over the last 5 years, whilst Croydon has increased by 74% over the same time period – but you’ll be less out of pocket due to higher rental returns, Albert Park returning 1.9% compared to Croydon at 2.8%
I hope this has helped encourage you to buy in Maroondah and Yarra Ranges…… I might be a little biased too, but honestly, to me it just makes short term and long term financial sense!
For information on buying in this area and investing in property please feel free to call or email me for our New investor Information Booklet for Investors – tamara.lloyd@raywhite.com or 0408 585 319
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