To invest interstate or not ?

We know from looking at the data that most investors buy property in their home state. Even though your home state or city may not be the best place to invest in, one of the great advantages of property is that you can see it, touch it and feel it.

Buying close to home, even if it’s an investment, feels more comfortable. It’s hard to touch your bricks and mortar if they’re 2,000 km away!

Buying close to home, even if it’s an investment, feels more comfortable.

But avoiding interstate purchases can limit the potential to increase your wealth by not investing in areas with growth or market demand.

Block of modern apartments

Imagine owning property in Sydney in 2002 and 2003 when property prices increased by over 40%.

Or owning property in Adelaide in 2003 and 2004 when property prices also increased by over 40%.

What about Brisbane property owners in 2002, 2003 and 2004 – with increases of up to 75%?!

If you’re in the right place at the right time, you capitalise on growth in prices and minimise land tax, which is state based.

For example, you could own eight properties in one state and your annual land tax bill might be over $10,000. However, you could own eight properties and possibly pay no land tax by owning one property in each state and territory.

If you’re in the right place at the right time, you capitalise on growth in prices & minimise land tax.

Californian bungalow Australian home

Traps

A common trap inexperienced investors fall into is taking as gospel whatever the interstate selling agent is telling you.

Remember, the agent is working for the vendor, not you the prospective purchaser. You need to do more research than normal when buying interstate.

Tips

  1. Do independent research. Use the Invest tool on realestate.com.au to research suburbs you’re interested in. You can find historical information such as growth in property prices and rental yields or houses and units. The Market Demand tool is also useful, revealing the number of visits to realestate.com.au per listing per month in a particular suburb. Learn about the neighbourhood and the demographics.
  2. Visit the area. Once you have done your research, I strongly recommend that you visit the area. You can see your area on Google Maps but if you’re going to spend hundreds of thousands of dollars on buying a property, spend a few hundred dollars on flights and accommodation to check out the area for yourself. Drive around the area; speak to the locals, including real estate agents and the council.
  3. Buy it. If you feel confident, buy it yourself. However, a good buyer’s agent can be worth their weight in gold. I know many people who have used buyer’s agents when purchasing interstate with some terrific results. A buyer’s agent can source the property for you, perhaps before it is listed on the open market. They can also negotiate the price and conditions on your behalf.

Source: http://www.realestate.com.au/blog/buying-property-interstate-traps-tips/

Date: 5th November 2014

Written by: Peter Koulizos

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