While owning property in different areas and in markets that experience growth cycles at different times provides the benefit of diversification, failing to ensure you have received the correct information and advice can make it a nerve-wracking experience.
It is unreasonable to expect that those looking to invest interstate would have all the answers themselves. That is why I believe it is essential to follow certain steps to steer you away from common pitfalls.
Here are some considerations that should be taken into account when investing interstate:
Find a mentor
Find someone who has already successfully invested interstate, whether this is a friend, a relative or a professional. You need someone to mentor you, be a sounding board and even push you to keep moving forward. Who better than a person with a proven track record?
Think about strategy
Considering your strategy is a good place to start. Are you trying to buy a property or are you building a portfolio? Investing in property is a long-term strategy. Regardless of where you end up investing, when it comes to property investing and all investing for that matter, it is important to have a long-term view.
Look at your borrowing capacity. If you don’t have the capacity to buy in a certain market, there might be other markets that offer similar growth prospects but are affordable and within budget.
Surround yourself with the right team
Trust is a big issue. Investing in property interstate is a big financial commitment and you want to ensure your investment is set up in the right way from day one. That is why I believe it is essential to find a core team to guide you. From my own experience investing interstate, along with finding a mentor, I strongly recommend sourcing a mortgage broker (or banker), conveyancer and accountant who understands the local rules and regulations.
Find the right property manager
Managing properties can involve a lot of time and effort – particularly when your investment property is in a different state. It is best left in the hands of a qualified professional with a good reputation and record. A property manager can pay bills, manage rent and inspect properties regularly. Property managers typically charged between 6 and 8 per cent for their services. On a $500, 000 property, renting for $450 per week, that works out at $1870 per year, or $36 per week. That may be the best money you spend in the year.
Take the emotion out of it
We put 500 clients into Sydney from 2011 to 2014. The properties nearly doubled within five years. Yet at the time all our Sydney based clients thought we were crazy. Why would you invest in Sydney? Why would you invest in those suburbs within Sydney? Make your investment decision with the guidance of a mentor and based on the data. Doing so will usually provide you a significant advantage and allow you to take advantage of opportunities that the locals can’t see!