Is Investing Interstate Right for Me?
Your Own Back Yard is Fruitful But, What Else is Out There?
Property investors traditionally invest in their own backyard. That is, many only think locally and don’t expand their investment dollars beyond their local markets. Investing interstate, however, could be a much smarter move.
Not only can it be a great way to snag a real bargain, but it can also provide a better return for your hard-earned investment dollars.
Since different states are often in different property cycle stages at any given time, investing interstate may allow you to invest in an area offering greater capital growth potential than your home state.
In fact, here’s what the Real Estate Institute of Australia (REIA) president, has to say on the matter: “The advantage of buying interstate is that you can benefit from the different peaks and troughs of the property cycle. If you do your homework, you could buy at the bottom of the cycle in an up-and-coming area interstate and enjoy strong capital gains in the near future.”
That being said, doing your homework and being diligent in your research is key. Regardless of where you’re looking to buy, you need to dig deep to understand the market, its opportunities, and any potential risks.
Nonetheless, despite all of the potential upsides of interstate property investment, such as greater portfolio diversification and capital growth potential, according to figures from LJ Hooker’s 2015 Investor/Tenant Survey, only 14 percent of Australian real estate investors own interstate properties.
However, as they often do, the times are changing. With the Sydney and Melbourne property markets cooling down, more and more investors are looking interstate for investment opportunities in alternative markets.
If you’re one of these investors, here are some easy ways to minimise risks and maximise your investment success.
View the Property in Person
A picture may say a thousand words, but seeing a property in person is critical, especially if it’s out of state.
While a buyer’s agent can recommend a property as a sound investment and an inspector can inspect any structures for both major and minor problems of concern, there’s nothing like viewing a potential investment yourself with your own eyes.
Pictures can be deceiving. By viewing a property in person, you’ll be able to get a much better sense of room sizes and a real feel for the home to see whether or not it fits with your vision or investment goals.
Be Aware of the Legalities
Sales and leasing contracts vary from state to state. When purchasing an investment property out of state, it’s important to understand these differences, or at least have a qualified solicitor or conveyancer explain them to you.
Some legal differences may include:
- Property title transfer requirements
- Rules pertaining to the purchase of property by a foreign investor
- Zoning certificates and permitted uses
- Local planning controls
- Required sales contract terms and conditions
- Cooling off periods
- Rental rules and agreements
- Off plan rules and regulations
- Corporate body rules and restraints
Understand the Costs
As an interstate investor, it’s important to understand the different costs that may be associated with purchasing property in another state.
Stamp duty, insurance, council rates, strata fees, water rates, and more will be different than those in your home state and can have an impact on your bottom line.
It’s always best to perform proper due diligence and know these charges beforehand to make the best investment decision.
Talk With Your Mortgage Broker
When investing in a property, good credit advice and getting pre-approved for a property investment loan can be critical to your success.
- This is where a mortgage broker comes in. In addition to finding loan solutions tailored to your specific circumstances and needs, a reputable broker can be an excellent source of help and advice throughout the buying process.
- With a qualified broker on your side, you will be able to avoid or plan for the pitfalls of interstate property investing, minimise your risk of loss, and maximise your success.
- Since where you decide to invest can have a substantial effect on how much a lender is willing to risk and the rate you will receive, it pays to talk with a reputable broker like Vie Financial early on in the buying process to discuss your investing plans.
If you’re planning to invest interstate, we’re here to help answer any questions you may have and get things organised.
At Vie Financial we’re more than happy to help you get the ball rolling in the right direction, so contact us today and let us go to work for you to help you reach your property investment goals.