Borderless investing is a great opportunity to diversify your portfolio and take advantage of the different property cycles across Australia, but it brings with it a unique set of challenges. How do you ensure a property in another state will meet your investment goals? Will you be caught off guard by additional costs? Here we give four smart tips to help make wise choices when investing interstate.
1. Use online data to make a shortlist
As with any property investing, research is an essential first step. With borderless investing, expect to spend significantly more time in front of your computer to thoroughly research unfamiliar areas.
Market reports will give you an understanding of the local economy, the rental demand and potential for capital gains in areas that interest you. Look carefully at suburb insights and statistics that show how properties have performed historically.
For an accurate picture of how well individual suburbs fair for finding tenants, look at rental yield and vacancy rate data. Is there population growth that would fuel demand for rental properties?
Research the demographics in your chosen areas to help with tenant targeting and understanding the type of properties that might appeal to them. Don’t assume that tenant appeal in one area is the same as the next. For example, buying near a train line might be a plus for tenants in one state but not crucial to tenants in another.
2. Take this shortlist and go local
Although you might feel comfortable using your existing conveyancer, keep in mind that they might not have a licence for interstate conveyancing.
Once you’ve got your short list of investment suburbs, find a local expert who can help you in your property search. Factor this expert assistance into the cost of your investment.
A licensed buyer’s agent can save you time and money with their valuable local insights. They can expand the knowledge you’ve gained from online research into areas like vacancy rates, crime, transport links and growth potential. Use them to scout out different locations, attend property inspections and even bid at auction for you.
When you’ve narrowed your shortlist, it’s a good idea to start looking around for other local experts that you’ll need down the track, such as a conveyancer and property manager. Although you might feel comfortable using your existing conveyancer, keep in mind that they might not have a licence for interstate conveyancing or experience in local legislation.
As you can’t be on the ground every time maintenance and repairs are required, a local property manager can take away this hassle. Better still, their fees may be tax deductible.
A property manager can use local knowledge to advertise for the right tenants and price your asking rent competitively. At year-end, they’ll supply you with a schedule showing rental income and the cost of repairs and maintenance.
3. Get on a plane
You’re about to make a considerable investment, and you don’t want to get it wrong. For the cost of a plane ticket (which might be tax deductible anyway), it’s a small price to pay for peace of mind. Seeing a property with your own eyes doesn’t compare to seeing it in photos, videos and virtual tours. If it’s not a new property, there’s the risk of unwelcome surprises that you’ll only discover by visiting in person.
4. Negotiate armed with a knowledge of local differences
From strata reports and title transfer fees to land tax rates and settlement costs, each state can have variations in their documents and processes. Knowing these differences can help in negotiations to save money, so it pays to have a local conveyancer or buyer’s agent who can explain what you’re signing. For example, stamp duty is a tax deduction in some states and others not.
The contract of sale can also vary, especially regarding the cooling off period and building inspections. Some states have cooling off periods up to five days, while others have no cooling off period at all.
Need help securing finance for your investment? Your experienced Yellow Brick Road adviser will walk you through a range of competitive investment home loan products and help make your interstate property purchase a reality.