Investing Outside your Neighbourhood
By Greville Pabst on 20 Jun 2013
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When investing in property, it is typical for buyers to purchase in areas they know well. Unfortunately, this strategy can sometimes be at the expense of investment performance.
Astute investors select property based on the facts. Selecting property from a range of suburbs or interstate can be appealing for many reasons; to diversify your portfolio, to access more affordable or upward trending markets or to access state or property-specific benefits. Whatever the reason, the common goal is to maximise the benefit of owning an investment property.
Despite the added complexity of distance, the process of investing interstate or in unfamiliar areas isn’t fundamentally different from investing in your own neighbourhood. So what are the key things to consider before buying a property in an area you don’t know?
What should I buy and where?
The geographic location and property type you invest in depends on your personal circumstances, including your budget and goals.
The key is to ensure your investment strategy is based on thorough analysis and research of the area, the street and the particular property before deciding to buy. Consider those areas that are supported by sound employment, a permanent population (as opposed to one supported by a transient or temporary workforce or community), well-established infrastructure, including transportation, education, retail, medical services, recreational and entertainment facilities.
What’s the best way to research my investment?
The costs associated with visiting an interstate property can sometimes compel investors to purchase a property without physically inspecting it. This can result in false expectations about the condition of the property and the neighbourhood it is located in. Always view the property, or have someone you trust do it on your behalf.
Research the local property market by reviewing local property prices, the population demographic and amenities. Also, ask the selling agent to provide you with recent comparable sales to support the asking price.
When is the best time to buy?
The property cycle moves differently in each market. While it is inadvisable to attempt to ‘time’ your entry into the market, you must consider the ebbs and flows of the marketplace in relation to the property you are considering. Ask yourself, “has this property performed in the bad times, as well as the good?” Remember, a property’s historical performance is a good indication of its future performance.
What do I need to know before I buy?
It’s important to know the real estate and planning laws employed in the state of purchase. Practices differ from state to state and what’s considered normal practice in Victoria may not apply in Queensland or other states.
When buying an investment property it’s wise to protect yourself by engaging a professional who knows the local market. A local buyers advocate can assist you in identifying, inspecting, negotiating and purchasing a property, while reducing risk exposure. Likewise, it’s wise to engage a solicitor or conveyancer in the state of purchase to ensure you have satisfied all of the legal requirements of the purchase. When compiling your team of experts ensure you enquire about their qualifications and experience and ask for references where possible.
