Investing Interstate: What You Need to Know
With the median house prices in Sydney and Melbourne rising, some are tempted to search further afield to invest in property.
Investing interstate can help diversify your portfolio with property at a lower price point, but it also involves spending serious money in an unfamiliar market.
Scott McGeever, Managing Partner at Property Searchers, has seen investors fly into Queensland for 15 years and says for the uninitiated there is plenty of room for mistakes.
So what is the right approach to investing interstate?
Have a clear goal
McGeever says investors should start with a clear goal about the property type and areas to target.
“You need a strong idea of what your desired outcome is likely to look like to avoid wasting time and spreading yourself too thin across a city you don’t understand.
“Once there, start hunting for the right asset – and building a rapport with agents to build up a picture of what the right property at the right price looks like.”
Do your research
Knowing your outcome presumes you have done quite a bit of research so you know what is possible with your budget.
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McGeever says that online tools can help potential buyers work out how a budget translates into bricks and mortar.
“Websites like realestate.com.au are an investor’s best friend,” he says.
Beyond looking at prices, maps and photos, McGeever also suggests comparing the numbers of properties listed with completed sales to gain an insight into the health of a location.
Target the right area
McGeever says he targets locations which are at least 60%-70% held by owner occupiers as residents are more likely to look after their properties attentively – a factor noticeable even to the outsider.
“You should also look carefully at local amenity and infrastructure, especially roads, schools and hospitals; but test it in person and don’t rely on media reports.”
To be certain, he suggests using a buyer’s agent with experience in the area.
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“An investor doing it on their own needs to visit a city three to five times to get a good feel for it, and see at least 80-110 properties or their decision is fraught with danger.”
Look for warning signs
According McGeever, inner Brisbane is well placed to perform compared to pricey southern capitals, but investors should steer clear from high-density developments close to the CBD.
“Some have the classic warning signs for an investor such as offering free Foxtel for tenants and rental guarantees for the owner, a common signal that supply has outpaced demand.”
“I would also keep an eye out for rental discounts as falling yields is a pretty sure sign of a market that has topped out.”
No place like home
McGeever stresses you should never compare properties in an interstate market with the city you are from.
“A house selling in Brisbane for $500,000 which would fetch $1 million in Sydney does not indicate good value. It’s just as true in reverse; thinking a $700,000 apartment in Paddington (Sydney) is too expensive because it would sell for $400,000 in Toowong (Brisbane).
McGeever also reminds investors that the right property must stack up after an analysis of supply and demand and comparable sales.
“The old saying remains dead right, if it’s too good to be true, you’re about to buy a dud.”
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