3 tips for investing interstate
When an investor first starts on the road to building a property portfolio, the default position seems to be to choose a property close to where they live. There is a misplaced feeling that they somehow ‘know’ their area better than they would some other, and a sense of comfort in knowing that the property is close by and that they can keep an eye on it.
It’s a fact that while most owner occupiers may know their area, the facts they know usually have little to do with ensuring that the investment is a sound one. Important facts like vacancy rates, population and demographic information and infrastructure planning are all important in the decision making process about where to buy, and few people know this kind of detailed information about their own area.
And so, whether it be because you would like to ensure that you have a wide and diversified portfolio of properties bought in areas that have the best chance of growth, or that your own area has become too pricey or too low yielding to make it a viable investment, the time should come in every investor’s life that they think about buying interstate. While doing so will probably bring the reward of a well performing investment, for most, the task seems both daunting and dangerous. It doesn’t need to be so, and here are some tips to help you along.
1. Know that each state has different conveyancing laws
From the complex NSW process of contract exchange, 10% deposit and 49 days till settlement, through to the relatively simple WA method of offer and acceptance (and as little as two weeks till settlement), there is a vast array of different legal systems in place for the conveying of property titles, and you need to be familiar with how it is done in the state you choose to buy.
To avoid finding yourself in a contract you cannot extricate yourself from, jump on google and find out how things are different from what you are used to.
2. ‘Knowing’ the area
Just because you don’t go there (and you should not be jumping on a plane to view every area you have an interest in) does not mean you cannot become fully informed about an area before you decide to buy. If you follow my 20 Must Ask Questions®, you will be sure to carry out the right kind of research and end up with a complete picture of the area and everything it has to offer from a future growth potential point of view. The best thing is that, by not visiting, you’ll protect yourself from falling in love with an area that actually has very little going for it from an investment point of view.
3. Choosing the right property
Once you’ve narrowed down the area, you want to be sure you don’t choose the lemon property. Those pictures on the internet can make any trash look like treasure, so you need some people on the ground to be sure you get a good buy, and not a money pit. Always get a pest and building inspector to carry out an inspection, but before spending your money on something which you end up not buying, contact a local property manager who has no present interest in the property and ask if they would mind checking it out with a view to getting the management contract if you buy. They should be able to give you a solid ‘habitability report’, which is a great start. Let’s face it, if they do this for you, they’re probably also a good property manager.
Not only is buying interstate easy, it’s imperative if you are going to have a diversified portfolio with strongly performing properties. Areas definitely grow in cycles, and different cycles all over Australia, and you want properties everywhere so that something in your portfolio is always on its upswing!