The proportion of property investors who are buying across state boundaries has increased during 2023.
According to PropTrack, 23% of property purchases this year have come from out of state. This is up from 17% last year and 15% in 2021.
Added to this, research from MCG Quantity Surveyors showed that the distance between landlords and tenants has nearly doubled in the past year, with the average distance now at 1,502km, up from last year’s 857km.
These two pieces of information indicate a significant increase in borderless investing.
Buying property interstate
Buying property interstate can be a great way to diversify your investments and take advantage of different market conditions. But, because of the distance involved, it can be more complicated than buying around the corner.
Benefits
- Affordability
With property prices varying throughout the country, buying in a different state could be a better fit for your budget. You might not be able to afford an investment property in Sydney, but Perth or Brisbane, which have more affordable markets, could be good options.
For an investment property, you should also consider the median rental prices and rental vacancy rates in the cities you are looking to buy. This will help determine what sort of yield you’d earn and your likelihood of finding a tenant.
- Tax benefits
Spreading your portfolio across several states may also give you the chance to avoid land tax (which applies once the cumulative value of all your properties in a particular state reaches a certain threshold).
- Diversification
Buying in multiple states offers diversification. If you buy in only one state, your portfolio might experience unnecessary losses if that state’s property market was to experience a downturn.
Potential negatives
- Regulations and costs
Stamp duty, legal fees, conveyancing fees and settlement costs can vary from state to state, as can rules around auctions, leasing, building and renovations.
That can make the buying and leasing process more complicated, although you can mitigate any risk by using a buyer’s agent and local property manager.
- Market research
Buying interstate means you probably won’t be familiar with local property trends, demographics, school zones, transport routes and development applications.
However, you can use property research companies like PropTrack and Domain to help you bridge this knowledge gap.
Working with professionals
Buying interstate may mean you will need to rely on the services of others.
It may be helpful to engage a buyer’s agent to do the market research, inspect the property and negotiate on your behalf.
Failing that, you might want to hire an experienced property manager to inspect the property and make sure it aligns with your investment goals, and then manage your asset post-purchase.
You will also need to engage conveyancer from that state.
To make sure the home loan process goes smoothly, it’s a good idea to work with an award-winning mortgage broker, like Shore Financial, that has participated in many interstate transactions.
A mortgage broker will compare home loans for you, help you get a pre-approval and manage the loan application process from start to finish.
Ready to diversify your portfolio and buy interstate? Let Shore Financial help you through the process. To discuss your options, call us on 1300 416 700, email us on info@shorefinancial.come.au or fill in this online form.
