Over the past 5 years many of my clients have built multi-million dollar property portfolios investing solely in ‘growth suburbs’. I have done the same without spending a dollar over $360,000 on any of my land purchase’s.
The question to ask yourself is do I believe in the growth of Melbourne long term, with relation to - Population - Economic prosperity (more work) - New infrastructure
If the answer is yes, then here is what you can also be certain of; the largest quantity of home purchasers are going to be driven willingly or otherwise to the least expensive suburbs in Melbourne for one simple reason: there are more people in this household income cohort than any other!
The below images show Melbourne’s least expensive and most expensive suburbs expressed as a % of household income required to service a mortgage
Check out these stats for Melbourne
All private dwellings - 1,832,043
Average people per household - 2.7
Median weekly household income - $1,542
Median monthly mortgage repayments - $1,800
Median weekly rent - $350
*Source: 2016 census data.
Something to consider when selecting a location to invest in, is your margin of safety:
1. Do you want to invest where there are the greatest number of buyers?
2. When would you prefer to buy a property, when property prices have risen $50,000 or when they have dropped by $50,000?
The answer to the last question should be obvious!
Here is another real-life example of two different types of property
2BR Home in Toorak – Value $1,400,000 | Rental $680 p/week
4 x 2BR Homes in Roxburgh Park – Value $1,400,000 | Rental $1,440 p/week
Which would you prefer in a flat market?
If your plan is to buy and hold, growth areas are an amazing option because:
a) They are present a lower entry point.
b) They have the largest cohort of potential buyers
c) Their value can significantly increase over time as infrastructure and the community expands.
So number 1 tip on how to build a million dollar+ investment portfolio, is to just get started and get in the market! Sitting back and watching from the sidelines will not add any money to your bank account!