For some investors, buying close to home may feel more comfortable than buying property that is 3,000km away. However, there are a number of benefits of investing interstate.
Limiting yourself to just your home state could limit your potential to increase your capital gains and rental yield if you are not investing in areas with potential growth or demand. It is also a way of diversifying your risk by investing in different locations. There are a number of simple things you can do to limit the risks of buying interstate and improve your chances of buying in a strong market with a lot of potential.
Do you own research
It is important not to just rely on what others tell you about a property and the area. Selling agents may have a lot of knowledge about the area, but they may only highlight the positives and not reveal all of the negative points.
There are a number of different resources you can use to do your own research. Some include: local newspapers, internet searches, property magazines and property reports. The State Custodians free online Property Report provides a 9 page report detailing recently sold properties, rental yields and statistics for specific suburbs across Australia. This will give you the facts straight up, without any bias.
Visit the location
No matter how much research you do on the internet, you probably won't get a complete picture of the property and the area if you don't visit it. You are going to be spending hundreds of thousands of dollars purchasing the property, so it may be worth spending a few hundred on flights just to be sure.
While you are there, drive around the local neighbourhood and see what the area is like. Are there shopping centres, schools and public transport nearby? Does it look like a neighbourhood with potential or does it look run down?
Visit the local council and see if you can speak to a town planner about what the council has planned for the next few years. You may find they are preparing to start new developments which may help boost population. Don't forget to visit a couple of local real estate agents to get different views on the location you are interested in.
Consider property management options before buying
Have you thought about how you are going to manage the property interstate? You may find it more difficult to self-manage a property that is thousands of kilometres away, so it may be best to invest in a property manager. Have you included their costs in your budget or which management company you are going to go with? These are important considerations to think about before you sign the dotted line.
Get the right advice No matter how far away the property is, you should seek professional advice before buying. This may be from a range of people who are able to advise on different aspects of your purchase.
You may find it worthwhile to use a conveyancer or solicitor who is in the area that you are buying. This way they will know about the state specific rules for purchasing property (such as the cooling-off period) and they will also hopefully have some knowledge of the area you are buying in too.
Having the right home loan advice is also critical. Make sure you speak to your lender about the area you are looking to purchase in. Lenders can have postcode or location restrictions on what is acceptable security for their home loans. It is good to know this early on so you can explore your options. Accountants and financial planners can also assist with advice from a tax and investing perspective.
If you are looking to purchase an investment property and are considering home loan options, check out the State Custodians’ range of home loans. Our Lending Specialists are also on hand to chat to you about what you are looking to do, so don’t hesitate to give them a call on 13 72 62 to discuss your options.