In the past, investors have utilised this method to generate wealth in their portfolios by purchasing properties outside of their own neighbourhoods. Since video conferences, live internet mapping, and a variety of service providers can now assess and analyse properties on your behalf, buying interstate has become a popular investment strategy.
However, it carries some danger. Investing your hard-earned money in a property on the other side of the state has several disadvantages.
A number of factors must be considered before deciding to invest in the property beyond state lines, whether you’re an experienced investor or a novice rentvestor trying to get your feet wet in the business.
Property prices in Melbourne have risen by more than 7%, while rental yields have only increased by roughly 2.9%, according to data from the Australian Bureau of Statistics (ABS). For this, informed investors are expanding their horizons to include other states in their real estate portfolios.
As a wonderful way to take advantage of the non-uniform Australian property market, this approach is not without danger and necessitated a great deal of research, laborious effort and in-depth knowledge of the market itself in order to secure a successful investment outcome.
GreenShoots gives you a rundown of buying interstate to help you plan your property purchase better. Let’s start with the positives.
Pros of buying interstate:
- The property market is not uniform
Investment opportunities in Brisbane are becoming more attractive as Sydney’s property prices continue to rise, and the city’s rental yields are expected to increase as a result.
- Savings on Taxes
Stamp duty rates vary from state to state, and many states provide discounts on stamp duty for the new buildings.
Buying interstate can save you money on taxes because of the different tax rates in each state. Having a few properties in New South Wales means you pay tax on the sum of their values. Spreading your investments over multiple states can help you avoid paying state taxes, which might save you a lot of money.
- Having a Wide Range of Assets
It’s possible to diversify your portfolio and lessen the market risk by investing in interstate property. Investing in a property outside of your immediate area can be more cost-effective than limiting yourself to your own neighbourhood.
For investors, this implies that property markets across the states follow various cycles, allowing them to balance capital gains and rental income.
Cons of buying interstate:
- Distinctive sets of rules and laws
Even though the process of purchasing a home may appear uniform, state laws and regulations vary. In Sydney, for example, it’s standard practice to not secure financing in advance, whereas in Queensland, it’s more common practice to sign property contracts only after receiving financing clearance.
Before attempting to buy in another state, you should know the following:
- Shouldn’t you get legal advice before signing anything?
- How long do you have after signing a contract to cancel it?
- How does the State’s auction process work?
- The contract for the sale is drawn out by whom?
- Are there any state grants or loans that you’ll need to take advantage of?
- Distance
Purchasing a home in a new neighbourhood is difficult because of the distance involved. The cost of a property acquisition includes the cost of flights and accommodations. Even if you’ve already purchased the property, managing it from afar can be a challenge.
Before making a purchase, conduct extensive market research. In order to finance the costs of engaging a property management… Because without a property manager, your long-distance difficulties will be exacerbated!
3) Having little knowledge of the market
It is imperative that you are well-versed in the new market before making a purchase in another location. What’s better, a house or an apartment? In your neighbourhood, it may make sense to invest in an apartment, but tenants in your investment region may prefer renting a house.
The following are a few helpful hints:
- For your research, don’t cut corners. Make the perfect choice with this one simple trick.
- Since if you don’t, you won’t be able to take advantage of the tax advantages or make a high return on your investment.
- Don’t be fooled by online photos and videos of a property if you’re looking to buy. Hire a buyer’s agent or go on-site inspection with a real estate professional.
- Be careful not to wind up penny-wise and pound-foolish! A property manager will take care of everything for you, including finding renters, managing them, and dealing with any issues that arise. This will save you a lot of time, energy, and stress.
- Make sure you have a team of professionals ready to go ahead of time. There are a number of professionals you’ll need to hire, including a lawyer, an accountant, a real estate appraiser, and a property inspection specialist.
You can save money and time by using a mortgage broker to help you secure a mortgage. Have your questions answered by Team GreenShoots, who can assist you in finding the best home loan rates for your situation.
