Five Top Tips When Buying Property Interstate

As a property investor you may choose to invest close to home or buy in areas with which you are familiar because doing so gives you the comfort that you are investing in locations that you know and understand, and with which you have some experience.

While this all makes sense there is a downside in that it can greatly narrow your choice and if you’re looking to buy in a popular area, pits you against other investors and owner occupiers, meaning that you may be forced to pay more than you should or, even worse, be priced out of the market.

One option to help overcome this is to cast your net more widely and consider buying interstate.

Property investors have over 15,500 suburbs from which to choose, with two out of every three being located in the eastern states.

And even within most states, there are literally thousands of suburbs available, meaning that you may be able to stay within your state borders if you wanted to.

The principles of buying interstate residential property are just the same as buying locally, although there are additional matters to consider.

I am thinking of buying property interstate

Set out below are the top five tips and hints to help you buy outside your own state.

Select Your Property Wisely

It may sound obvious but you must apply the same disciplines when investing interstate as you would locally.

This means that you must consider and research the drivers of long-term capital growth with a particular focus on those factors particular to the interstate region or suburb.

Typically, this will include considering things like population growth, infrastructure, the level and diversification of local industry and employment levels.

Ask the Experts

It can be time consuming and expensive to research interstate markets yourself, especially if you are looking widely.

For most of us, it is simply not feasible to make numerous interstate trips to inspect properties and get a feel for an area. You could spend literally thousands of dollars on plane trips and accommodation without any payback.

This is where using the services of property research companies can pay real dividends as they can provide independent research on suburbs, streets and properties as well as predictions on price and rental yield growth.

The good ones will also provide economic and property updates on a state-by-state business, which provides useful macro-insights on where and where not to invest.

In addition, you also need to identify a good local property manager you can trust to manage the property on your behalf and deal with all those day-to-day matters that would be impractical for you to manage since you will be thousands of kilometres away.

To help find your property manager you could start by speaking with estate agents who have a national network (they would also be helpful in providing interstate property advice) and of course you can jump online to see who’s active where you are looking.

Avoid Buying with Your Heart

Do not fall into the trap of buying an interstate property as a result of a holiday. You might get seduced into buying because property is cheap or less expensive than your local neighbourhood. But if it is cheap, it is so for a reason and, thus, you need to be objective in your decision-making.

Another trap to watch out for is those idyllic interstate bush retreats – a tree-change holiday if you will. Again, you might have had a wonderful experience but it does not mean that buying such properties is a good investment.

You also need to think about the risks of such properties, such as bush fires, accessibility and the likelihood of vandalism.

Another thing to be wary of are those free holiday offers from spruikers who promise to fly you interstate for free to check out one of their developments. Just remember that there is no such thing as a free lunch and you will pay for it one way or another, including possibly getting pressured into buying a property you do not want and cannot afford.

Understanding State Property Cycles

Property values move in cycles and it is not always the case that each state’s cycle moves in the same direction at the same time. For instance, some state markets may be ahead of others or may be moving in opposite directions.

This is important to note because while your local market may be booming other markets may be heading south and are probably ones to avoid.

Again, this is where independent property research organisations can provide guidance on where individual interstate markets are heading and where in the cycle they currently sit.

This information can prove valuable when discussing interstate selling agents’ views on their market’s outlook, especially if the two differ.

Do Your Sums

Of course you have to make sure that you can afford your interstate investment property (as you would any other property you buy), but you also have to be across the different costs of ownership as each state has different stamp duty and other charges.

In addition, you should factor in and be aware of what can and cannot be claimed for tax purposes.

For instance; generally speaking, you could claim travel costs to inspect your property, but the tax office may take a dim view if it believes that regular inspection costs are nothing more than an opportunity to get a tax-deductible holiday. So speak with your accountant, financial and property advisors and get their guidance on how your tax, acquisition and ownership costs may change if you buy interstate.

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