Investing interstate: 6 essential tips for interstate investors
Whilst diversification has long been considered a strong strategy for property investors looking to mitigate the financial risk of investing in a single market, expanding your property portfolio into different locations can be a great way to take advantage of wider capital growth opportunities, especially when your home market isn’t performing strongly.
With the Melbourne and Sydney markets cooling down, a rising number of east coast investors are beginning to look towards alternative property markets in Australia for investment opportunities. If you are considering investing interstate yourself, here are a few simple ways to limit your risk and maximise the success of your investment.
Do your research
Before you invest interstate, you will need to compare different locations to identify a property market that fits your buying strategy. Property markets in Australia differ vastly in terms of price range, housing stock, and stage in the property cycle, so it’s important to ensure your market of choice matches your expectations in terms of rental yield and capital growth. Researching local property statistics as well as wider economic factors that influence the performance of the property market such as population growth, job opportunities, and public & private investment will be key to informing your understanding of where the market is in the property cycle, which is an important factor in determining the market’s long-term potential for growth.
Identify any warning signs
Whilst understanding the general state of the market is a vital element of investing interstate, it’s equally important not to stop your research at this broader market level. In a single city, the performance of the property market can differ considerably between different suburbs and locations – something we’ve seen recently in Perth with the emergence of the two-speed market. However, this can also be the case with individual streets and properties, which can pose a particular problem for interstate investors who aren’t familiar with the local area.
Whilst a suburb might look great on the surface in terms of location and nearby infrastructure, there are a number of additional factors that can influence a property’s value, many of which are difficult to identify without an in-depth knowledge of the area. For example, are there high crime levels in the suburb? Is the property situated under a flight path? Is there a busy road nearby? If you don’t have a chance to visit the property yourself to gain this level of insight, you may need to consider engaging someone who is familiar with the local market to ensure you’re making an informed purchase decision.
Get to grips with planning policies
Australian states, and even suburbs within those states, each have their own local planning policies and processes in place when it comes to property. As an interstate investor, and particularly if you are seeking a property for development, it’s really important that you familiarise yourself with the zoning of your prospective property, as well as any additional Council policies that apply to the asset. This can have a huge impact on the long-term potential of your property as well as your immediate development plans, so you may want to speak to a local buyer’s agent or property developer prior to purchasing a site to ensure your plans are feasible.
Understand local legal requirements
As well as individual zoning policies, it’s important to be aware of any local variances in the legal requirements and processes involved in the property investment process. Documents such as sales contracts and strata reports often differ between states, so it’s really important that you understand these differences before you sign the dotted line. In addition, costs such as stamp duty costs, land taxes and transfer fees will vary in different locations, so make sure you research these costs and factor them into your budget when planning your investment.
Enlist a good property manager
A good property manager is a valuable asset for any investor, but even more so for interstate investors who don’t have the time and ability to self-manage their property. As an interstate investor, it’s important to find a property manager you can trust to carry out regular inspections and maintain your investment property whilst you’re away. Ideally, however, you also want a property management team who will be proactive in helping you identify opportunities to add value to your property and further the success of your overall investment strategy.
Consider using a buyer’s agent
Expanding your search to different property markets can significantly broaden your investment opportunities, but one of the biggest downfalls of investing interstate is not having the local knowledge to make informed investment decisions. If you don’t have the time to research the market and compare different properties yourself, consider enlisting a local buyer’s agent to identify and secure a property on your behalf. In addition to ‘insider’ knowledge of the local property market, a good buyer’s agent will have an in-depth understanding of investment policies and an established network of real estate professionals within the local area, which can be invaluable when it comes to negotiating a great deal on a property with high potential for growth.
If you are looking to invest in Perth property and would like to speak to our buyer’s agents about potential investment opportunities, our team would be happy to discuss your investment needs in an obligation-free consultation.
Alternatively, if you would like to find out more about the Perth property market, download our latest research report, Residential Property Spotlight: Perth.