Tips for investing interstate
So first of all, why invest interstate? This may be your first major investment and you may be thinking it a safer option to keep your money to an area you know well but this isn’t always true. Many suggest that an interstate investment is best for those who want to expand and diversify their portfolio but there is no reason why a first-time investor can’t look beyond their backyard.
Investing interstate is not only just as safe an option but it can work out to be a smarter option for your wallet. The city you live in may have high property growth but low rental yields. In this case, you will be stuck with the very old question of which is more important. Investing in areas interstate with strong rental yields but lower property growth can be a way to smooth out these differences and enjoy the returns of both.
Beyond the opportunities that exist in growth or stronger yields, there are also the many ways you can now secure the safety of your interstate investment.
Should you buy ‘sight unseen’?
The short answer? No. The long answer? It’s the same as the short answer.
Consider the following services before buying: a buyer’s agent, pest inspectors, builders, legal representatives and local property managers. Do your research. Compare property reports and the advice of those professionals who inspect your property. But the big lesson is: don’t rely solely on them.
New developments will certainly carry less risks in terms of structural damage or pest infestation, so use the money you save not using these services to visit the property yourself. In terms of the money you are putting into your investment, the cost of an airline ticket should not break the bank. It may also be possible to claim some of that expense so it is worth seeing your tax accountant for advice.
Find the right property manager
Property managers are a competitive lot, and if they aren’t, they should be. Use this to you advantage and find a property manager who knows the local area. They should offer an attractive rate and be able to show the work they are doing for you. Do not be afraid to be ruthless in finding the right manager for your investment. A buyer’s agent may be able to make suggestions for finding effective property management.
Using a buyer’s agent
One of the major pitfalls with investing interstate is not having local knowledge to make informed purchases. A buyer’s agent has this local knowledge and can save you time in finding investments with strong growth potential.
What makes a good buyer’s agent? Quiz them about the area. What are the vacancy rates in that suburb as well as surrounding areas? What about crime rates? Are there any flight paths that intersect with your property? What local developments are there and are they good or bad for your property? The agent you choose should be providing you with this information first rather than you chasing them for information. An effective buyer’s agent wants you to be as informed as they are, rather than leaving it all to them.
How does your state differ from others?
A local solicitor as well as good old fashioned Google will help you find out the differences between the acceptance process in each state as well as stamp duty and land tax rates. For instance, what is the cooling off period in your state? In WA there isn’t one but in NSW it is five days, so make sure you write down these things and keep them in mind throughout the process of buying.
Avoid rental guarantees
That is pretty much it: try to avoid rental guarantees from developers. In many cases the cost of the guarantee is just factored into the cost price of the property, so you are essentially paying the developer for the money they will return to you in the form of rent. As long as you have done your research about the local area and are confident in the structural and economic integrity of the property, then you shouldn’t need to worry about finding tenants.