Investing in real estate is neither simple nor easy. And when the investment opportunity is in another state or city, the challenges multiply. However, buying property in other states may seem lucrative, especially if you live where owning a property is relatively expensive. Additionally, it can be better if you have a home and you're planning to broaden your real estate portfolio.
Real estate is one of Australia's most common investment opportunities and an excellent way to grow your capital. Yet it's not for everyone because it's a long-term obligation. The logistics involved when buying interstate property are demanding, and if you don't take calculated manoeuvres, you may lose your money. However, the trick is to learn to avoid unseen mistakes while guaranteeing that you're always ready to grab a great opportunity to purchase property in another city.
It would be best to consider buying property in a city you know, and if you don't, plan to visit before you purchase. The API Magazine is an excellent place to learn more about the state where you want to invest. Ensure that you inspect the property, then hire a property management company to help you manage your investment while away.
Otherwise, here are the things you need to consider before investing in a property located in a city far away from where you live:
Do Your Due DiligenceThe cost of property varies from one state to another. Don't presume that the factors determining real estate prices in your city could work in another state. You must conduct due diligence checks to understand the state's future development plans, rental yields, historical prices, and taxation laws. Moreover, you can seek to understand what factors drive the growth of the real estate industry in that city. The elements could be tourism forecasts, population growth, employment opportunities, infrastructural investments, and affordability.
However, doing your due diligence may be cumbersome if you've not yet identified a property of interest. Thus, locate a property first, and then plan to visit it to see if it fits what you have in mind.
Visit The CityEven if you read and understand all the laws and regulations on real estate ownership in your target state, you must still visit the property's site. This is because whatever you see on paper may not always match what's on the ground. For example, you may like an online post for a residential apartment, yet it doesn't have a lift when you visit it. Remember, a residential apartment with lifts can be an added advantage for tenants, especially those with mobility issues, and you’d want to capitalise on such amenities.
So, take your time, visit the locality, and engage with local property owners to get insight into the local problems. You can begin with properties scheduled for inspection and visit as many as you can. In cities like Sydney, most properties are sold in auction-like conditions, so you may not have room for a bargain. However, in Brisbane, sellers are flexible, and you'll have an opportunity to bargain as a financial contractor or any other type of contractor.
Create An Out-Of-State NetworkNow that your property is in a different city from where you live, you may need to make good contacts in the other state for you to succeed. A good network can comprise the following:
A Property Management CompanyFinding a good local property management company is the secret behind any successful interstate investor. An experienced manager will advise you on the property's status, the maintenance costs, vacancy rate, ability to attract tenants, and management costs, and help you calculate the property's cash flow. It would be best if you avoided property managers that manage more than 200 properties because they may not give your property the attention it needs unless they head a firm with enough staff.
Hire a conveyancer proficient in managing conveyancing and real estate matters in the city where you intend to invest. Note that statutory requirements vary from one state to another. For example, New South Wales doesn't have finance and standard building inspection clauses, unlike Queensland, where all contracts must adhere to the building inspection and financial report. Therefore, an experienced local conveyancer or solicitor understands the laws and should guide you accordingly.
A Buyer's AgentGetting a buyer's agent that's conversant with the area you desire to purchase property is invaluable. Besides, investing in a different state without an agent who understands the problems of the local market is a ticking time bomb. If you're investing in South East Queensland, be careful not to fall prey to two-tier property marketing, where you may buy property at a higher price than the locals.
Conclusion
After you've done your due diligence, visited the property, consulted your conveyancer, and the property manager has offered his advice, it's time to do the math. You need to calculate your possible return on investment (ROI). A good ROI can help you secure a loan to purchase the property. Interstate property owners who fail to research adequately before buying property may end up owning properties that are either liabilities or generate low income. Don't fail in your quest to increase your investment portfolio because of poor research. Many investors have succeeded in the investment they’ve chosen, and so should you.