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Every budget, every market: Where investors can find their next deal
While market uncertainty keeps many investors on the sidelines, those ready to transact could get ahead of the next cycle, with opportunities ranging from $350,000 units to high-yield regional houses, especially in Victoria.
Property investors are on the lookout for their next opportunity in a tough property market, with those willing to take on risk positioning themselves for the next phase of growth, according to a buyer’s agent.
KTG Property Advisory’s Kev Tran said that while softer market confidence had weighed on overall market movement, it had also created an opening for experienced investors.
Tran said the changing market was creating opportunities for investors at different stages of their property journeys, although their ability to move depended on their financial position.
Before the federal budget, he had seen a relatively even split between experienced investors and first-time buyers.
Since then, however, newcomers had become more cautious as market conditions shifted.
Tran said that experienced investors with established portfolios were increasingly looking to capitalise on the conditions and secure their next asset.
“They’re coming in really motivated, and they see the opportunity that’s in the market,” Tran said.
However, he said investors did not need to rush into a purchase to make the most of the market, with financial readiness remaining key to a successful acquisition.
“You could make a purchase right now, but it’s going to be super tight, and if you get another interest rate rise, you’re going to be really stressed, and that’s the last thing you want to do.”
For those unsure about their financial position, Tran urged caution rather than stretching their budgets to secure a property.
“If you don’t know, just hold off.”
For investors ready to act, Tran said there were opportunities for every budget, especially in Victoria.
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Here is where to look for your next property:
Those with a tight budget
According to Tran, walk-up units in Melbourne’s inner ring were proving to be a strong investment opportunity for investors with a stretched budget, as the city prepares to bounce back after years of underperformance.
Tran said the units could offer a much more affordable entry point into suburbs where houses had grown too expensive to be a strong investment.
He said that investors could get around six to eight per cent yields on units for between $350,000–$450,000, while houses in the same area were upwards of $1.5 million.
According to Tran, Thornbury, northeast of Melbourne’s CBD, was a suburb where investors could really benefit from this tactic.
In addition to an affordable entry point, Tran said that many of these boutique units could be purchased at below replacement cost, with a typical two-bedroom build costing around $770,000.
“We’re seeing a lot of value with boutique units in Melbourne. The fundamentals are really stacking up.”
“A lot of them are really healthy and well maintained. Some of them aren’t, and you have to watch out for that, but there are many that have stood the test of time.”
For investors looking for land
For investors willing to spend a bit more to chase greater growth potential, Tran said houses with enough land to add a granny flat would be a strong opportunity.
Tran said a recent purchase in Narre Warren, Melbourne’s south-east, was secured for $692,000, less than the price paid for a vacant block just two streets away.
When buying with the intent to subdivide, Tran said it was important to remember that the second dwelling should feel separate from the original to maintain owner-occupier appeal.
He said investors should consider individual entrances and fences to create privacy and boost appeal for future buyers.
“With granny flats, you need to get that right, because if not, then you’re going to lose your owner-occupier appeal.”
Away from the capitals
To build a strong portfolio that resists all market conditions, Tran said acquiring a mix of asset types and geographic locations was essential.
Looking outside of Melbourne, Tran said that investors could find strong long-term value in regional towns driven largely by owner-occupiers.
“There are many areas around the country that are driven by investor activity, and they’re the ones that are going to be feeling the pinch when investors pull out,” Tran said.
Tran said the regional town of Warrnambool offered the opportunity to enter a market supported by local buyers, with a five per cent gross yield.
He said investors could buy quality brick houses on significant land blocks and still benefit from strong yields, supported by local buyers.
Additionally, Tran said focusing too heavily on one market was a risky play for investors, with assets across a range of locations and types helping create a more balanced property portfolio.
“I wouldn’t load up on six, seven or eight units; some people will, and that’s great, but it depends on your risk appetite and what you want to do.”
“I would rather diversify a bit.”
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