How to buy an investment property in another state
When buying an investment property most people look close to home because they are comfortable with the area, know it well, and can easily inspect and manage the property.
While this makes sense, they are limiting their options to invest in other areas that may have higher potential growth and rental demand.
Thankfully, there are a number of ways that you can buy an investment property interstate. Here are some tips:
1. Research the area
Because of the distances involved it is not financially viable to inspect a large number of areas and properties interstate. Instead, you can focus on research that includes metrics such as price, rental yield growth and capital growth.
You should also find out about the area's population growth, demographics and employment levels so you know who your rental market is.
2. Don’t buy with your heart
When buying an investment property, some investors pick out location because it’s their favourite holiday destination or they would like to retire there someday. However, you need to keep in mind that you’re buying for investment purposes.
If the area has a high vacancy rate like many holiday towns, steer clear. You should focus your attention on locations that are likely to experience capital or rental growth not on personal favourites.
3. Take note of the different costs
Buying property interstate will also mean different rates of stamp duty, land tax, and other government costs such as transfer fees and council rates. It’s important to key in these costs ahead of time so you can factor them into your budget, and avoid cash flow difficulties.
Find out more about the costs of investing in property.
4. Hire a professional
Part of investing in a property is managing the asset. Doing so thousands of kilometres away from home is especially difficult. To help you out, you can hire professionals including:
- A buyer’s agent: They can help you search for properties that meet your budget and also negotiate price on your behalf or bid at auction.
- A conveyancer: Hire a conveyancer early and they can tell you the rates of stamp duty and other costs in the local area.
- A property manager: They will be the one to manage the property on your behalf. This includes finding tenants, handling complaints, collecting rent and evicting bad tenants.
Hiring professional help can ensure a smooth and hassle-free process without you needing to travel interstate.
5. Bottom Line
It’s good to know that you’re not limited to investing solely in your local area. Talk to your lender about the location you're buying in so you can get the right investment home loan when buying a property interstate.