I'm a big advocate for people becoming a borderless investor — and, of course, Melbourne and
Sydney have done really great over the last part of the cycle.
But what if you actually don't live in Melbourne and you want to know some of the quirks about
investing in Melbourne?
What should you be looking for?
So I thought I'd give some the top five considerations when investing in Melbourne.
My first one is — well, it seems pretty obvious to me living in Melbourne, but for
a lot of people it may not be — but the first one is auctions.
Most investment-grade properties typically go to auction in Melbourne.
So if you're not comfortable with the auction process, you need to come up-to-speed very,
very quickly.
Because chances are, if you're found a property you really like that's close to the CBD, the
agent’s going to want to take you to auction.
And there is a real art and a real skill around buying properties at auction.
If you think about the fact that most people would rather be in the casket than deliver
the eulogy through fear of public speaking — the same thing applies when you're going
to an auction.
It's a public speaking environment; it's very intimidating, and you can have ice running
through your veins.
But, unfortunately, it's a high-value transaction, which you're entering into through this process.
So, for me, the number one consideration for anyone who doesn't live in Melbourne who wants
to buy property as an investment in Melbourne, is understand the auction process.
Become comfortable with it very, very quickly.
View my Auction Tips here.
The second thing for interstate people to consider is coffee.
Melbourne people love coffee.
If you think about the fact that we've got four seasons in one day — it's not as if
we're always flocking to the beach, or you know flocking to our bikes.
The lifestyle component for us is learning to deal with the fact that the weather could
be quite cold and miserable.
So we're used to going to cafes, we're used to going to restaurants, we're used to socialising
with people indoors.
And, invariably, this comes to having a good cup of coffee.
Personally, I love the smell and hate the taste.
But I am well and truly in the minority.
Lots of people will drive across town to their favorite café for a wonderful cup of coffee.
So when it comes to investing in property: if you can be near these villages, you can
be near these lifestyle locations.
People can walk there on the weekend and go and get their favorite Eggs Benedict with
that beautiful barista cup of coffee.
This will help you get an understanding of what drives the culture here in Melbourne.
The third thing I'd say is really important is: it's a big city with lots and lots of
people — and the population is set to double in the next 30 years.
So there are lots of people moving around this city.
Therefore, you want to make sure you're considering trains.
Because a lot of people don't want to drive.
It's not like you're in Adelaide — you get in the car, you go to the city, you can find
a car park very, very quickly — in Melbourne you can't do that.
So it's important you take into account the Train Network and how far away the property
is from the nearest train station.
But a little footnote: it's trains over trams.
If you think about the postcard view of Melbourne — so the MCG, Flinders Street Station or
a picture of a tram — and the tram looks really great, the tourists love jumping on
it; but for the locals they prefer not to commute on a trend.
They actually prefer to commute on a train because a tram stops and starts; it's on the
road; it's usually following other cars; there’s pedestrians everywhere.
It just doesn't feel as efficient getting into work when all I want to do is get from
A to B as quickly as I can.
So that's another quirk about investing in the Melbourne marketplace: take into account
the trains.
And have trains over trams.
Another consideration, number four, for interstate investors is: you're probably going to spend
a bit of money on due diligence without a guarantee of an outcome.
So, by that I mean: if I'm in Queensland, if I'm in Brisbane for example, it's quite
common for me to put in an offer — subject to finance, subject to building and pest — I
get the offer accepted, and then I can do my due diligence after the date.
And if it gets satisfied, I can then make the contract go unconditional.
But in Melbourne, quite often you're buying at auction; under the hammer, unconditional.
So you have to get your building and pest inspection done in advance; you have to get
the solicitor to check the contract in advance; you may need to fly down and check out the
properties — all those travel costs in advance —without any guarantee of getting that property.
It's not uncommon for people to spend two, three or maybe even four sets of building
and pest solicitor’s fees and still miss out on properties.
This really goes back to my first point of understanding the auction process, and understanding
how the price guides work in this city, so that you don't get caught spending heaps of
money on due diligence when you know that there's no guarantee of the outcome.
And the fifth point is: it's a very eclectic and diverse Market Mix.
In this country, a very high percentage of this population in Melbourne, many people
were born somewhere else.
So there's all these areas within Melbourne — if you think about the East, there's lots
of Chinese; you think about the inner north, lots of Greeks and Italians; you think about
over in the West, there's a culture of Indians; down to the south, the Europeans, particularly
the English stay around the Bayside and they go up in the hills.
You need to understand the mix and the cultures that exist in this city but, most importantly,
find the properties that actually cater to that cultural mix.
The Southeast Asian population are used to living in higher density, whereas if you think
about people who come over from England; they're used to having a little bit more space.
So it's important that you do not buy a property in a cultural mix that doesn't suit those
people.
Understanding this is really, really important.
Melbourne is the most livable city in the world, seven years running.
I mean, it got 97.5 out of a 100 in the most recent survey with the Economist.
So it's a very, very desirable city.
But the important thing is down impose your interstate paradigms when you're buying in
Melbourne.
Queensland has that laid-back lifestyle, Sydney has that beach culture; but in Melbourne … it's
very, very different to a lot of the other areas around Australia.
I guess it just highlights how Australia is not one big market — it's made up of hundreds
and hundreds of sub markets and within Melbourne, you need to understand the quirks that exist
before you buy in this city.