Can’t afford to invest locally? Looking interstate could help you start your property portfolio now.
“Rentvesting”, or choosing to continue renting while buying an investment property, is growing in popularity. A recent Ipsos poll released by Westpac shows two in five Australians are open to the idea. And with rising median prices in many of Australia’s capital cities, it’s easy to see why.
For Australians choosing this strategy, buying property outside their own capital city in another state or territory may seem like the only way to get a foot on the property ladder. Some of Australia’s capital cities and metro areas still offer affordable property, along with good rental returns and the potential for strong capital growth.
Before you decide to invest interstate, though, there are a few details you need to consider.
Do your research
It can be nerve-wracking investing in an area with which you’re unfamiliar. That’s why you need to do your own research to get a handle on the suburbs with the strongest investment potential.
Pay attention to demographic trends, historical sales data, local amenities and a host of other information. Fortunately, detailed suburb profiles are available through services like CoreLogic. These reports can help you identify areas with strong rental demand and good capital growth trends.
Recognise areas to avoid. For instance, if the economy of a town or suburb is overly-reliant on a single industry, you could find the rug pulled out from under your investment if that industry falters.
Use research to help you identify good deals and avoid paying too much. While lower prices in some capital cities may appear enticing, you need to know what you’re actually getting for your money.
Find some knowledgeable help
Doing your own research can help you sort through all the options to develop a shortlist of investment areas. Once you’ve done this, find a local expert who can help you in your property search.
A licensed buyer’s agent can help you find a property most likely to suit your needs and goals. Buyer’s agents can save you time and money by scouting out different locations, attending property inspections and even bidding at auction and negotiating a good deal on your behalf.
While it’s always preferable to be able to inspect an area of property yourself, when you decide to invest interstate, personally inspecting properties might not be feasible or practical. If you find a buyer’s agent you trust, you can feel confident knowing they’re inspecting properties with your unique goals and circumstances in mind.
Know the costs involved
Once you’ve found a property you think suits your investment goals, you’ll need to know all the costs involved. While you might be familiar with the costs that come along with buying a property in your own state, these costs can differ significantly from state-to-state.
One of the major costs you’ll face, aside from the purchase price of the property, is stamp duty. The cost of stamp duty varies in different states and territories, so you’ll need to familiarise yourself with what you can expect to pay. You can read about the different stamp duty rates for each state and territory here.
You’ll also want to know if any stamp duty concessions exist in the state where you’ve chosen to buy. Most states offer some form of exemption or concession that can drastically reduce or eliminate the cost of stamp duty. While most of these schemes require that you live in the state where you’re buying, some states have exemptions for off-the-plan properties. It’s worth researching to see if you can minimise the cost of stamp duty.
It’s also important to research other costs of buying property in the state where you’re investing. For example, land taxes, title transfer fees and settlement costs can vary from state to state. While you might be getting a good deal on the property you’re buying, some additional research can ensure you’re not caught off guard by additional costs.
Know the legalities involved
Once again, each state and territory will have its own laws and regulations governing the sale and transfer of property. There are a few important details to research before your property transaction.
- Legalities. You’ll want to familiarise yourself with the contract of sale in the state where you’re buying. Contracts of sale and some of the other forms involved with the transfer of property vary by state. It could be helpful to engage the services of a local conveyancer to help you navigate the legal paperwork in the state where you’re investing.
- Cooling-off periods. Second, you should research the laws relating to cooling-off periods. A cooling-off period is the time you have to change your mind after you sign the contract of sale for property. Some states have cooling-off periods up to five business days, while some have no cooling-off period at all. Moreover, the proportion of your deposit you’ll forfeit should you decide not to go ahead with a sale varies.
Find an experienced property manager
A good property manager is an asset to any property investor, but is particularly crucial for an interstate property investor. You won’t be around to keep tabs on your investment property, so you’ll need to find someone you trust to help you with a number of management tasks:
- Finding the right tenants for your property
- Collecting rent
- Looking after bills
- Liaising with you to handle repairs or complaints
- Using local knowledge and experience of advertising to attract good tenants
- Pricing your asking rent competitively
To learn more about finding a good property manager, read our guide.
Investing interstate can be a great way to begin building your property portfolio. Doing your research beforehand will ensure you make an informed decision and set yourself up for success.