Advice for Buying an Interstate Investment in Australia
The majority of property investors usually begin with a property in an area that's familiar, but buying an interstate property can also be a smart strategic move.
With more and more information being made available online, it's now easier to consider investments in other states.
There are a number of benefits to this strategy, yet at the same time some important considerations to keep in mind.
The property cycle impacts different states differently.
Your particular state may be at the bottom of a property cycle, while others are at the top or vice versa.
If properties are booming in Melbourne they may be slow in Perth.
If your own suburb is at the top of a cycle, you might be able to find a better investment elsewhere.
Another potential benefit to purchasing an interstate investment is the difference in land tax rules.
Each state has a certain land tax threshold before tax is payable.
If you've already reached your limit in one state, you can start anew in another state.
Finally, purchasing investment property in another state provides you with a way to diversify your portfolio.
Properties may slow down in some states while others are growing.
This will protect you against being forced to refinance when market values are down.
Challenges to Overcome
There's something to be said for investing in an area you're familiar with, particularly if you're a first-time investor.
When you invest out of state, you'll need to try your best to become an expert on a completely foreign real estate market, both at the city and suburb levels.
You'll need to rely on your own research as well as the advice of professionals you hire, which is a bigger risk.
Laws, regulations, and property taxes all vary from state to state as well, which can make it more confusing to purchase property out of state.
You'll need to speak with property owners in the area to gain a greater understanding of these local regulations.
It will most likely be necessary to hire a property manager for your investment property, because you won't be on hand to find tenants or take care of repairs.
How to Get Started
To start formulating your investment strategy, you'll need to conduct in-depth research of the interstate area that you're most interested in.
Research the suburb online to learn more about the area's rental demand, potential for capital gains, and fluctuations in the local economy.
It's also best to visit the area in person to speak to property owners and meet with real estate agents.
Investing in out of state property involves a certain degree of risk.
Purchasing and managing property from a distance is no easy feat, after all.
Yet an interstate investment is a great way to diversify your portfolio and allows you to ride the property wave in the most favourable way.
Because of this, it can be well worth the risk.
It's important to understand what you're getting into and be prepared to dig your heels in to research your options thoroughly