Did you know that investing interstate is something that few Australians do?
I can understand the reluctance.
For most people, handing over several hundred thousand dollars for an investment property is a psychological challenge in itself.
No matter how much research you do, there is always the concern that the property you invest in won’t perform.
Add an interstate location to the mix – meaning you’re not able to see, visit and drive by your shiny new asset whenever you like – and it can create enough ‘fear of the unknown’ to stop investors from taking any action at all.
The Big Mistake
It leads to a common and costly mistake that many landlords make: only investing in their own backyard.
They do this because it’s in their comfort zone, but currently, there are many regions in Australia where doing this makes extremely poor financial sense.
While strategic property investors from interstate have had no problem turning their attention to markets such as Sydney, Melbourne and Brisbane, with the expectation that sectors of these markets will outperform the average in the medium term; others will miss out – held back by their fears and inhibitions.
Unfortunately, some will take action, but without the benefit of experience or local market knowledge behind them, they’ll invest in the wrong areas or wrong property types.
How can you make sure you’re not one of these who lose out?
Don’t fall into the trap of the following common mistakes made by inexperienced investors:
There are too many of these properties coming on to the market in our CBD’s, which means there is no ‘scarcity’ value and no supply pressure to underpin price growth.
The off the plan and high rise apartment market is dominated by investors who are often speculating, rather than owner occupiers who will underpin property values.
Ultimately, you wind up paying a premium and will have minimal capital growth and rental growth due to oversupply.
2. Buying in outer suburban areas:
This includes new house and land packages in master-planned communities.
They may seem like they have all the right ‘bells and whistles’, but when you invest, you have to be mindful of the essential fundamentals that drive price growth.
These outer-suburban segments of the market have underperformed historically, and are likely to continue to do so in the future because of the typical demographic who buy there – young families who are price and interest rate sensitive.
3. Buying sight unseen:
It’s incredible what you can achieve, and the unsightly features you can avoid showcasing, when using a good camera and exploiting the right camera angles.
I’ve heard horror stories of people who have bought sight unseen thinking their investment property had an incredible view (it did – but only from the laundry) or who didn’t realise that power lines dominated the streetscape, because they relied on agent’s photos only.
Moral of the story: don’t risk purchasing site unseen unless you have a trusted representative (such as a local – not interstate- buyer’s agent) review the property on your behalf
4. Buying from property marketers:
I’m not saying all property marketers are trying to scam you – but, there are a fair few rogue operators out there who add a significant premium to the property’s sale price to account for their commission.
There’s only one person likely to make a decent profit from this transaction – and it isn’t the investor.
There are far safer, easier, smarter ways to invest in property than this.
5. Buying under advice from out-of-town advisors:
Most importantly, don’t use interstate buyers agents who fly up, see a few properties, make an offer and fly out again.
They don’t have the perspective and depth of experience that one needs to understand what makes a great property – and what doesn’t, why one side of the street is worth more than the other, or why one particular street in a suburb is worth considerably more than other.
You need to rely ‘on the ground’ experience to ensure you minimise the risks.
Buying property interstate can be a savvy and financially rewarding way to grow your property portfolio.
As with every investment you consider, you need to evaluate whether the opportunities on offer align your goals and your investment strategy, rather than jumping into a market because it’s generating positive headlines.
If you’re looking at buying your next home or investment property here’s 4 ways we can help you:
Sure our property markets are improving, but correct property selection is even more important than ever, as only selected sectors of the market are likely to outperform.
Why not get the independent team of property strategists and buyers’ agents at Metropole to help level the playing field for you?
We help our clients grow, protect and pass on their wealth through a range of services including:
- Strategic property advice. – Allow us to build a Strategic Property Plan for you and your family. Planning is bringing the future into the present so you can do something about it now! Click here to learn more
- Buyer’s agency – As Australia’s most trusted buyers’ agents we’ve been involved in over $3Billion worth of transactions creating wealth for our clients and we can do the same for you. Our on the ground teams in Melbourne, Sydney and Brisbane bring you years of experience and perspective – that’s something money just can’t buy. We’ll help you find your next home or an investment grade property. Click here to learn how we can help you.
- Wealth Advisory – We can provide you with strategic tailored financial planning and wealth advice. Click here to learn more about we can help you.
- Property Management – Our stress free property management services help you maximise your property returns. Click here to find out why our clients enjoy a vacancy rate considerably below the market average, our tenants stay an average of 3 years and our properties lease 10 days faster than the market average.
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