The keys to successful interstate real estate investment

 The keys to successful interstate real estate investment

You’ve watched enviously as confident investors spread their risk and purchased property interstate - but how do you undertake the same strategy? How can you cope with an investment that’s thousands of kilometres and a plane flight away?

Before you put it in the too hard basket, consider this: as a shareholder, have you ever walked up to BHP head office or your NAB branch and knocked on the door to see how things were going? Not likely - and nor should you with an investment property. It may be bricks and mortar, but you need to keep your distance… whatever distance that may be.

When you take this approach, investing interstate becomes no different to investing on the other side of town - and I’m going to show you just how to do it.

If interstate investment has piqued your interest, what are you trying to achieve?

Consider the stage of your investment journey before you decide what you’re going to look for and where. This may be your first residential investment property, you may be seeking to build an existing portfolio or start a Self Managed Superannuation Fund. Alternatively you may be looking for a truly diversified real estate portfolio with a spread of investments nationwide, lessening the risks of having all your eggs in one basket and subject to the rise and fall of one State’s property cycle.

A clear goal will help guide what you need to buy, where, when and how. Seek professional advice from a property portfolio specialist if you’re uncertain or need clarity with your intentions.

Deciding what and where to buy - essential considerations

Generally, most investors are looking for strong rental returns, capital growth and quality/value for money. As Smarter Property Investing principal, I’m guided by Australia’s top research agencies to help pinpoint quality real estate to meet my clients’ individual needs.

This research starts with looking at infrastructure nationwide and narrowing down on areas that have attracted both government and private infrastructure spending. It needs to be backed up by our macro indicators of supply and demand, steady or growing population and demographics, economics and employment.

Once these have been identified, I use the following micro-indicators as to where to buy, seeking areas with proximity to:

  • Transport
  • Employment
  • Schools
  • Shopping centres
  • Sporting facilities
  • Medical centres
  • Hospitals

I then go into specifics of housing type (house, apartment, unit etc) by combining the micro indicators with the demographic information available with our macro indicators.

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How to invest interstate with confidence

Now that you’ve worked out exactly where you’re going to invest, it’s essential to have these key elements in place for wealth building success:

  • Arrange for an independent building inspection from an accredited provider - ask your property portfolio specialist for a referral.
  • If you have an overwhelming urge to jump on a plane and inspect your potential investment property, then do so - especially if it helps you sleep at night. This can be a good idea if you’d like to compare particular areas, but it’s not essential.
  • Be comfortable with your property manager - they should be alert and know the area better than your real estate agent. After all, this is your main contact between your property and potential tenants. They need to know supply and demand, trends, rental prices. If you have any doubts, look elsewhere.
  • Ensure the property is compliant with the particular State’s laws regarding rental properties and tenant/landlord rights and obligations.
  • Have up-to-date certification regarding building and maintenance works.
  • Don’t invest interstate with a second agenda in mind e.g. Tax deductible flights to Queensland each year. Airfares shouldn’t be a reason to invest, they should be a bonus. You shouldn’t treat this investment any differently to a property you’d buy over the other side of town to where you live.
  • Landlord and property insurance costs may differ from State to State and there may be different levies regarding flooding or fire.
  • If your key property portfolio specialist and advisers in your current state don’t have interstate contacts in your chosen area (brokers, property managers, insurance providers etc), you will need to find someone who does.
  • Note that the property market has different cycles within different states and you’ll need someone working with you who’s right across the situation.

Conclusion

The decision to invest has to come from a solid financial basis, rather than a property owner’s convenience of having your investments nearby. It’s essential to keep your investments at arms’ length no matter where you live. Remember that you don’t have to get on a plane to fix the hot water service - this is up to your property manager to arrange. If you’re not prepared to trust your property manager, you shouldn’t be doing it. The disadvantages of not sleeping or being able to put your trust in your key personnel will soon outweigh the advantages.

Otherwise, if you’ve worked through the roadblocks to interstate residential real estate investment, set your goal with confidence. Contact your property portfolio specialist and get into your desired area as soon as possible - remember, the longer you’re in the market, the more gains you’ll stand to make!

 

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