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Where You Should Buy In Australia for $750k? · The Follio Property Podcast

• 0:05
  So Lachlan, we have a question come in from a listener, which actually when I was about to reply to him, I thought it'd be good to actually do a whole episode on it. Yeah, really? Because I think it's quite a valid question we could use across several different markets across Australia. The question, I'm not going to read it word for word, but it essentially was asking our advice on should they...
• 0:27
  Should they be buying an established property in some areas that have probably gone on a run in Perth recently, looking at a house play but probably a little bit further out from the city? Or should they be looking at a unit townhouse villa close to the CBD? Budget was $750,000.
• 0:47
  Okay. So what I thought would be interesting is if we had a look in each market, saw what 750 gets you from a unit perspective. And ideally we're looking at probably for more of an investment lens. So I was standing clear of apartments. So something with a bit of a land component to it. Um,
• 1:03
  Also, what we could get from a house perspective as well. Yeah, it's a really good question. I think a lot of people are at a similar level on a single income getting capped out around that $750. So, it's quite relatable for anyone in the country and where the market's got to. And as we'll speak about, there's not a lot of options out there in particular markets.
• 1:21
  And it's a great entry price for a first time investor. A lot of the people we see on that first time. Yeah, single incomes for sure. This is sort of, we see it a lot, 750 is the cap, and we've seen that market from sort of 550 to 650 surge in Australia over the last couple of years because of that reason. Yeah. So what I did is I went to realestate.com, filtered out, I wanted to have some parameters around it just so we didn't have a wide search. So to narrow the search, minimum three bedroom,
• 1:48
  sold price in the last month. And that's kind of given me some data on what we're looking at from each. So what you can buy in Australia for 750,000, state by state. Markets are moving quickly, so I did it as recent as possible. First one, so we'll start with Perth, bearing in mind the listener was from Perth, so this could be relatable. First one I had on the list there that I've kindly sent you from a villa perspective was in Yokine. Property address here, 2 Bryan Avenue, Yokine, for those playing at home.
• 2:17
  square footage is 116, three by one. That's internal. If you look at the externals here, we're looking 350 square meter block, three by one in Yokine. Rear unit, look, it's pretty good value when you look at that. And when I'm looking at units and villas for investment, there's a few things we're looking at to land a value ratio. So we still want to stick to the fundamentals of buying
• 2:41
  Although it's a unit, although it's a villa, you still want the largest portion of value in that property to be in the land, not in the improvements. And this ticks it off, so visitors, or visitors, viewers at home, listeners at home, can't see arguably what we're looking at, but it's an older 70s, 80s brick-style home, so you're not paying too much for the improvements. It's not a brand new townhouse, brand new off-the-plan type product. And the fact that the rears are good, typically when you look at it.
• 3:07
  a complex whether it's one five or eight you want the front first and foremost the second best opportunity in that complex is the the rear for privacy you don't have cars passing you on a daily basis so a lot of people and particularly downsizes to like the rear and if you're on a busier road you avoid the front sort of road noise so that ticks that box strong land land asset ratio and accommodation's good and you're under that 750 so
• 3:35
  Coming in under 715 as well. In a very dominated own-occupy area in the school catchment zones. Mind you, Yokine's gone through 25% growth in the last 12 months, so you're certainly not buying at the bottom of the cycle. 7Ks from the CBD from Western Australia, from Perth, so we're really comfortable with that.
• 3:54
  And yields on those unit assets as well, averaging about 5.5% in general. Exactly, yep. So you've almost got an each of the geared asset, seven K's from the CBD, in an owner-occupied dominated area, where land to asset value ratio is looking at that 70% to 75%. Tick, tick, tick, tick, tick. If you bought that, well done, congratulations. It's a good investment. It's going to serve you well. For those listening, we do have a screen recording of the exact property that we're talking about, and we will have for the coming properties as well. From a house perspective,
• 4:23
  Pulled out address in Balladjura, under 750. Gentrifying area. Gentrified area. Gentrifying area. I wouldn't say it's gentrified just yet. But again, what, 15K from the CBD, it's 500 square metres. So again, back to the fundamentals, land of value ratio on this, being that a late 80s, early 90s build sits well above that 70% to 75%. So tick from that perspective,
• 4:49
  comfortable with with the fundamentals distance from cbd school catchment areas so again something that we would consider for investment yields are slightly lower in the area you're going to get that for houses in comparison to units so that's the difference when thinking about this question and reverting back to that
• 5:05
  I've got 750K. What and where should I invest? Is it a house versus a villa? Is it Perth? Is it Melbourne? Is it Queensland? Trying to get to the bottom of that, and that's what we're going to work through. Looking at it in isolation, you're going to get arguably more capital uplifted and stronger land value assets. So this Balladjura house ticks that box, but you're going to take a little bit of a hit on the cash flow. It's not going to rent as well as the previous villa. As the YoKind one.
• 5:29
  And I believe, is there a Metronet gone out there now as well? Correct. Yep. So that could help with the growth. For those who aren't familiar with Metronet, I think the new train station about three or four months ago, I think, launched there. 15Ks from the city. So for those outside Perth, that seems pretty attractive. So next step up is Adelaide. Yes. Looking at, same thing, looking at the townhouse unit, Villa first.
• 5:55
  And noting that Adelaide, again, similar to that of Brisbane, has gone on for a run. Now it's in its 10th year of growth. So just to give you context of what you may expect, Perth is on now its 6th year, Brisbane 11, Adelaide 10th. So these are markets that have been on and run for a number of years, almost a decade.
• 6:15
  Ethelton is the suburb we're looking at, and you're right there with the growth. Still experienced medium 8.4% in the last 12 months, so decent uplift. Obviously, not from the heights as it probably would have been earlier in its run. Yields 4.3% on average for that townhouse and proximity to the city, similar to the Baladjura property we said in Perth, 15Ks. So a little bit further out than what you're going to get in Perth. So a little
• 6:43
  Just to repeat, Yocon was 7Ks from the city for a similar asset. We're buying 15Ks here. You're buying on a busy road. That's a main road. Close to Powerlines. Looks like a project build. So you're buying a newer type dwelling. So if I look at this, house to land ratio is lower than we would like. We're getting closer to that 50% because it's a very small land content. On this land content is only 175 square metres.
• 7:08
  house contents 150 three by one built in the last decade this is what we want to sort of start to avoid so you can really see the contrast between just perth and adelaide alone that you're starting to to lose value in an asset like this and your 15k's from the cvd yeah and the yields aren't super strong on those those properties anyway yep um next up is salisbury salisbury
• 7:32
  in Adelaide where we're looking at a house on that front. Three by one, four garage as well, it looks like. So nice decent space there. Square, what was that one coming in? Just under 700.
• 7:47
  Yeah, 688 square metres, three by one, back to the fundamentals, albeit we're giving up proximity to CBD, which for the Fadalite, you're a long way out, you're in the sticks. So again, ticks boxes, land to value ratio is high, probably closer to that 85%, which is what we want to see. But in comparison to Bellagura, you're sort of almost seeing like for like, albeit Bellagura is a lot closer to the CBD.
• 8:14
  similar, I guess, what we call it, similar affluence. How do you put that without insulting anyone? Similar demographic? Similar demographic, right. Similar demographic. And in terms of growth as well, I mean that's had some serious growth over the last 12 months, 26 and a half percent. So from a starting point, you could say it's probably gone on a bit of a run in the last 12 months where maybe it wasn't the most affluent area to get into initially.
• 8:43
  Yeah, but when you look at Adelaide, a lot of the Northern Corridor has experienced advanced growth in comparison to other areas. So it doesn't surprise me. You're starting to get out into high stock environments where there's a lot of supply coming on, more north of that area. But yeah, certainly something that if you've invested in that over the last 12 months, you have seen growth and potentially some a little bit more upside. But as we've seen on this podcast before, I have concerns around where Adelaide's moving forward.
• 9:12
  Yeah. Now let's move to Brisbane. From a townhouse perspective, we've got a property here in St. Lucia. St. Lucia. So very similar in terms of proximity to the city to Yokine, which we were talking earlier from a Perth perspective. Growth very similar to Yokine as well. So Yokine experienced 25% in the last 12 months for those particular assets. St. Lucia experienced 22%. Yields are a
• 9:39
  lower than what they're in Yokine. But in terms of the build, looks relatively new compared to what we're probably dealing at with some of that stock in Perth. Yeah, early 2000s build, three bedroom, two bathroom. Not in the best pocket of Brisbane, but that's what you come in to expect there. You know, complex of five, so that's a tick. We prefer, you know, sub 10, complex of sub 10 when you're looking at units and townhouses. So we tick that box there.
• 10:06
  You are close to the university, so you're gonna have no issue in terms of securing a tenant. So we're comfortable with that. Land to value ratio is lower. This is where we're getting closer to 50% to 60% at a max. So again, it doesn't tick the box of trying to get a stronger land value. But this is what we're starting to see more of and probably highlights the inaffordability and inaffordability, unaffordability, unaffordability. I think both work.
• 10:36
  Highlights the unaffordability of the Queensland market. Cool. Next up was Fitzgibbon. So from a house perspective, having to go...
• 10:45
  much further out, so similar to what we saw in Adelaide and a little bit more than what we saw in Perth from a similar asset type. 20Ks to the CBD, yields below 4%, so starting to now start to see some lower yields when we're comparing with the other capital cities. But they did experience a bit of growth over the last 12 months as well, so 14.4%. So definitely, you know, we've spoken on previous podcasts, you've kind of alluded to there, on its last legs in terms of a run, but a healthy growth.
• 11:14
  healthy growth over the last 12 months. Yeah, it is. But again, this is not your typical house that you would see, or as you have seen in Adelaide and Perth, for instance, right? It's still very much that unit style, a glorified townhouse, three by two, you know, land asset valuation is probably less than 50%. So again, probably highlights...
• 11:35
  The affordability issue in Queensland went to get a house. We're still left with, you know, for 750K. How many kilometres from CBD? It was slim picking as well, trying to find a house. I think this was the best I could come up with when I was doing the filters. Yeah, so we're 20Ks from the CBD. We're buying a glorified unit in the form of a townhouse. 12 years old, so depreciated on that point.
• 12:00
  And we're looking at a land of value ratio of probably 50%, if not less. So certainly concerning if investors are taking positions in these types of properties, and you're within 5Ks from the house and land package sort of areas, which, as we know, dilutes the pool with, dilutes the scarcity factor.
• 12:18
  So that's why, again, when we repeat our concerns with Queensland, we're starting to see that market run away from affordability. If you have $750,000, we would, based on these two examples in isolation, certainly put a cross through both of them.
• 12:32
  Yep, 100%. Melbourne, we've spoken in previous podcasts about Melbourne and I guess where it's come from, where it has been over the most recent six months. But overall, we know the market's down. So the data points we're probably going to be saying on this is going to seem negative to other options. However, we are coming out at the bottom of the cycle, so there could be potentially opportunity there.
• 12:56
  Looking at the townhouse side of things, I found one in Preston. Yep.
• 13:04
  which we're very familiar with. Yields from a Melbourne's perspective in a Melbourne metro average, pretty strong, just under 5% at 4.9 for Preston. Last 12 months, down 2.3%. However, we know that most of the market in Melbourne was negative. 10Ks to the city, though, which is huge. Yeah, within 10Ks to the city, circa 700K,
• 13:29
  lander asset ratio sitting around 60%. So this is what I would say is for those investors that are pro cash flow and looking for something more neutrally geared, this is the type of asset that they're going to have in their portfolio. It's the front unit in a complex of six. So again, a smaller, tighter complex, really comfortable with this and it'd be yielding upwards of 5% from day one. So that's the type of asset that we probably want to start to see in portfolios.
• 13:57
  And under $715,000 as well. That one sold at $714,000. Yeah, there you go. So you're comparing that to Queensland and you're out 20Ks from the CBD. And again, it comes back to that value play in Melbourne at the moment where you can get within 10Ks. Yeah. Compare that to Queensland. That's a great asset to show people. The differences between Queensland, even Adelaide, what you're getting and how cheap Melbourne currently is in comparison to the rest of the country. Yeah, absolutely. From a house perspective as well, the one I've selected here is Hoppers Crossing, an area...
• 14:26
  we're pretty familiar with as well. Similar story, yields probably aren't stacking up there, 3.9%. Pretty neutral in terms of the last 12 months. There was a slight decrease, but not much. 30Ks to the city as well. So a bit further out than the other cities that we've mentioned, but you'd expect that from a major capital city and going to be the
• 14:49
  If you compare this to Sydney, throw another 10 to 20 Ks in that to get a product like this that wasn't 1.5 or 1.6 million. So yeah, 529 square metres, 5 by 2, albeit on a busy road. That's the sort of context that you're getting in comparison to say what we saw in Adelaide or even Brisbane where houses are not ever an option.
• 15:10
  Very much something that you would see an own occupier strive to own as an asset, which makes for a great investment, as we've touched on the show before. Yeah, beautiful. And under $752,000, so that one's coming in at $740,000. Finally, Sydney, and I think Sydney was the most challenging one, so there wasn't anything I could find. It's no surprise it doesn't exist, right?
• 15:33
  No surprise doesn't exist, couldn't find any houses. And with the units, I was trying to stick to something with the land component, which I wasn't able to do either. So I've just kind of highlighted two apartments here in two different areas. Silverwater apartment is the first one.
• 15:48
  Yields just below 5%, so 4.8%. That's where the prison is, right? So to give you context, you're buying a three by two within a kilometre from the prison. So we've been talking about amenity. It just, I guess, highlights the affordability issue in Sydney, right? This is a perfect example of why Sydney's become so unaffordable. And the floor plate on those apartments is not something we'll revise. It doesn't appeal to own occupiers, very much a purpose-built investment product.
• 16:17
  So again, all the things not to buy an investment property is sort of highlighted in these two examples. Yep, absolutely. 19Ks from the city, but as you've highlighted there,
• 16:28
  It's close to homebush as well, which is a football stadium out there, which people notoriously struggle to get out to from the lack of the trains that go out there. So that's what that gets you from a Sydney perspective. The other one we've got here is Camp City. Yields looking over the last 12 months, 4.7%. So not too bad on the yield front. Has seen some growth everywhere in Sydney. 6%, 15Ks to the city, but you are getting...
• 16:54
  This is an older style of villa. So this is what I like. So when looking for an investment into the higher density space through the form of units, villas, apartments, this is more of the style of asset I'll be recommending to clients. That previous example was a very dysfunctional investment grade product.
• 17:10
  This has got some character features to it. It's well located in terms of 15Ks from the CBD. It's been depreciated. We're talking 30, 40 years old, albeit that comes with some issues in terms of maintenance issues. You're paying more for the land to asset ratio than you are in that previous example. When you say classic features, what do you mean by that?
• 17:31
  Classic features is referring to some of that character charm. So this would have been a 70s product. So you do have things that you just don't see in Mod Up product or if you go and buy things that were built in the 80s or 90s, they're really that sort of social housing, almost grey and orange brick. This was pre that period. And you're looking at no more than typically two or three storeys. So again, accessibility's good for downsizers.
• 17:57
  Floor plates are typically larger than more modern apartments, so they built them with more size back in the 70s and 80s. Or may not have aircon and a few of those things, comes with a few more maintenance problems. You get the benefit of bigger floor plates, slightly wider hallways, higher ceilings, all those sort of features that you're not seeing in modern day units or apartments. Nice, mate. Okay, so let's do a bit of a summary.
• 18:20
  what are we saying from a villa unit perspective? So we referenced the Yocaine property there, strong yields. So based on these examples, from an investment point of view, we tick off the Yocaine Villa, we tick off Belladura House, both in your portfolio. We're really comfortable with that. Yep, yep, perfect. Adelaide.
• 18:37
  No, we had a cross on the townhouse. The land to asset ratio wasn't there. And you're starting to get in some of those house and land package areas. And the Salisbury house, probably not all the fundamentals we're looking for, but out of the two, we're certainly leaning towards that. But again, probably highlighting some affordability issues in Adelaide.
• 19:00
  yeah brisbane was was across i think across on both i think it sort of highlights what you you know what you now can't get in brisbane and certainly highlights that even up to 900 000 trying to get an established house in an area that that we're comfortable with is is out of reach so certainly across for the townhouse in the house on that on that equation
• 19:20
  Yep. And then Melbourne, Preston we really like. Preston is a tick if that's in your portfolio. Cash flow is going to be strong. Land asset ratio is strong. Hoppers Crossing. It's got the fundamentals and own occupier, which I like. Decent site land size too on that one. Tick, tick. Just avoid the main road. Correct. Correct. And then Sydney, people in Sydney aren't investing in Sydney, so I wouldn't be advising others. They aren't. But if you are to get something and you had to take a peek and you won't invest outside your backyard, certainly the camps of your apartment over the Silverwater apartment is my recommendation.
• 19:50
  So Lachlan, we've gone through all these different markets to answer the initial viewer's question on where he should invest. He was specifically saying Perth, but let's open it up to all the cities because we've gone through it. If you had 750 to invest, where would you be investing from a unit perspective and where would you be investing from a house perspective?
• 20:09
  So to answer that, we'd be looking for a unit or a villa for cash flow, and that's important, right? Not everyone has the ability to take on a significantly negatively geared property. So that villa unit cash flow asset would be Western Australia. I think that Yocon example that you highlighted, three by one, rear complex in a complex at three, ticks all the fundamentals that we would like, and we're looking at a yield somewhere between 5% and 6%.
• 20:33
  tick housing perspective where we're looking at capital growth and only capital growth and have complete disregard to cash flow to a certain degree then we're looking at melbourne houses i think that example highlights you know the affordability in the melbourne market your land to value ratio is the highest in the country of what you can get for seven seven fifty so for long-term capital growth with sort of disregard to cash flow melbourne
• 21:01
  For those that have any questions that they'd like us to answer or specifically Lachlan, the email address, contact address will be in the show notes, in YouTube and in Spotify. Or hit us up on Instagram. Or hit us up on Instagram. Make sure to join us next episode. Stay informed, stay curious and keep calling out bullshit.