Buying property interstate need not be a borderline decision
Buying property interstate has its challenges but the rewards can be lucrative if certain steps are understood and the appropriate research conducted.
Investors on the east coast are flocking to Western Australia after the 2023 capital growth results showed that WA suburbs filled the top 10, with many suburbs’ average property values increasing by up to (and some more than) 30 per cent in 12 months.
Perth and the surrounding suburbs are going through a period of tight supply and strong demand that has resulted in prices sky rocketing.
Investors are also cashing in on the more affordable entry point to buy an investment property and some first-time investors have finally been able to get a foothold on the property ladder.
Top reasons to buy property interstate
Portfolio diversification
It is important to diversify your investments so that you can mitigate your risks across markets, should one market not perform as expected. It is important that you aren’t relying on the performance of one market to determine the success of your portfolio as a whole.
Investing in the right real estate market
You might think you know the area you live in well, but do you really? You might know the street names, amenities and local schools but do you really know your locality from an investors perspective?
An investor will look at the 10-year average capital growth of the market, the one- and two-year growth figures, rental vacancy rates, hazard risks and zoning of an area, government spending in infrastructure, and more.
If you open your mind to investing interstate, then the whole country is your target market and you can aim at investing in the right market for your needs.
Your needs will be determined by your property investment strategy, which may lead you to investing interstate.
But what is most important, is that you invest in the right market for you.
One of the most important tips is to ensure you only buy properties that align with your strategy, as well as only buying property in investment-grade locations. Don’t be fooled by the cheaper price point, or better rental yields.
If the property isn’t in an investment grade location, then it will not prove to be a good investment over the long term.
Property management
With technology as good as it is these days, there is no reason that buying interstate should be stressful or challenging.
As a landlord, you do not need to physically inspect your property or perform any maintenance. You will employ a local property manager who will be able to manage your property for you, arrange any trades for maintenance, and send you reports of their property inspections.
You may even request to view the inspection live through a video chat so you can really see how your property is being looked after.
If you require any local experts, your property manager should be able to point you in the right direction.
Challenges to buying interstate
Physical obstacles
If you are unfamiliar with the location, it will take a lot of time to do research and due diligence so you can learn the area and know it like a local.
Investing interstate takes a lot of time, and we all live busy lives so you either need to dedicate adequate time to complete your due diligence or you need to employ a buyers agent who is well versed in the area.
Added property investment costs
If you are going to do it alone, the cost to travel for inspections can be quite costly.
Buyers agents come at a cost, however, the amount you spend on a buyer’s agent fee can save you a whole heap of time in research and due diligence, and it may prevent you from overpaying or buying the wrong property, as they have local knowledge of the area and understand the market intimately.
Although they come at a small cost, the benefit should far away this.
Make sure you do all the maths, including stamp duty, conveyancer fees, and land tax, which might differ from state to state.
Understanding the property transaction process
Each state has their own real estate legislation, and when it comes to owning properties in multiple states it is important to understand the differences and the contract.
It is important that you engage a solicitor/conveyancer who is well versed in the laws, and licensed in the state you are buying in so you don’t get caught up in legal red tape.
How do you buy property on the other side of the country?
It isn’t easy to buy property interstate.
It will be difficult to attend open houses, and you will need to rely on the strength of your internet connection to bid at auction.
Then there is the matter of understanding a whole new market and doing the due diligence and research on areas you have probably never seen before.
One thing to keep in mind is that real estate legislation changes state to state as well as the terminology used and common contract terms. This is something to be mindful of and ensure that you fully understand any contract before signing anything.
You shouldn’t be afraid to buy something sight unseen as long as you have a buyers agent or representative working with you who inspects on your behalf and can provide you with plenty of photos, videos as well as reports on research and due diligence.
