Investing interstate: essential tips for interstate investors targeting the Perth market
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 also be a great way to take advantage of wider capital growth opportunities.
Consecutive months of growth in early 2020 signalled the start of a recovery phase in the Perth property market, and the State’s swift response to the COVID-19 pandemic has seen the market continue to show improvements following the easing of lockdown restrictions. Combined with the market’s relative affordability and a rapidly tightening rental market, these conditions offer an exciting window of opportunity for investors looking to target capital growth and enter the market with a strong rental yield.
Property markets across Australia differ vastly in terms of price range, housing stock, and stage in the property cycle. As an interstate investor, there are several key differences you must be aware of when investing in the Perth market, as well as the steps you can take in order limit your risk and make more informed investment decisions.
Focus your research
Whilst understanding the general state of the Perth market is a vital element before investing, it’s equally important not to stop your research at this broader market level. In Perth, like in every city, the performance of the property market can differ considerably between suburbs and locations depending on individual area factors such as local supply levels, demographic shifts and trends in buyer demand. Even then, there can be significant differences in growth potential between individual streets and properties. This can pose a barrier 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 if you don’t have your ear to the ground. For example, are there high crime levels in the suburb? Is the property situated under a flight path? Is there a busy road nearby? Is this location considered to be a good distance to the CBD and other amenities by local standards, given that the city is smaller than some of its interstate counterparts?
If you don’t have a chance to visit the suburb and property yourself to gain this level of insight, you may need to consider engaging someone who is familiar with the local market to carry out this due diligence on your behalf.
Get to grips with local planning policies
As well as State-wide planning frameworks, local government areas in WA have their own town planning schemes as well as council-specific building policies and regulations. As an interstate investor, particularly if you are seeking a property for development, it’s important that you familiarise yourself with the zoning of your prospective property, as well as any additional Council policies that apply to the asset. These policies can have a big impact on the long-term potential of your property as well as your immediate development plans.
While these planning policies can seem like a minefield for property investors, this complexity also offers unique opportunities to buyers who are seeking a development opportunity for their portfolio. Investors who work with a local specialist buyer’s agent prior to purchasing a site can not only ensure their plans are feasible – they may often identify lucrative development opportunities that less informed buyers might miss.
Be aware of differences in local legal requirements
As well as individual zoning policies, it’s important to be aware of any local variances in the legal requirements involved in the property purchase process. Documents such as sales contracts and strata disclosures often differ between states, so it’s vital to understand these differences before you sign on the dotted line.
In Western Australia, a large percentage of properties are sold via private treaty, and, unlike in Sydney or Melbourne, these contracts are often prepared by real estate agents rather than conveyancers. This gives buyer’s agents a unique opportunity to negotiate not only the purchase price, but also the terms of the property contract. This often allows the buyer’s agent to achieve cost savings for the buyer throughout the purchase process.
Beyond the paperwork differences, costs such as stamp duty, land taxes and transfer fees will vary between locations. It’s therefore important to 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, especially when you live thousands of kilometres away. Given you can’t be actively on-the-ground yourself, you also want a property management team who will proactively identify opportunities to add value to your property and further the success of your overall investment strategy.
How Momentum Wealth’s buyer’s agents can help
Expanding your search to different property markets can significantly broaden your investment opportunities, but one of the challenges buyers face in investing interstate is not having the local knowledge to make informed investment decisions.
Our buyer’s agents are local area experts who consistently monitor the Perth market for new property listings, as well as keeping abreast of policy or market changes that could impact the long-term appeal of specific suburbs or locations. In addition to ‘insider’ knowledge of the local property market, our buyer’s agents have an in-depth understanding of investment policies, extensive experience in property negotiations and an established network of real estate professionals within Western Australia, which can prove an invaluable resource for interstate investors in their property search and purchase.
If you are looking to invest in Perth property and would like to speak to our buyer’s agents about potential opportunities, our team would be happy to discuss your investment needs in an obligation-free consultation.