What are the main pitfalls of buying property interstate? And the main benefits?
The economic diversity of our eight states and territories presents a smorgasbord of opportunity for property investors. However, opinion is divided between the benefits and pitfalls of investing beyond home turf.
Most of the commonly argued pitfalls relate to the tyranny of distance.
Unfamiliarity with new territory exposes investors to dubious development schemes, dependency on strangers and lingering concerns that rental property can't be managed profitably from afar.
While thousands of Australians are proving otherwise, reservations about property ownership in a location far from home are not unreasonable. Laws and regulations vary from state-to-state and the prospect of starting from scratch can be daunting if you don't have local contacts.
The remote investor will be dependent on a property manager to handle day-to-day transactions: maintenance issues with local contractors; tenant turnover and complaints; and any emergencies.
The manager will be your eyes and ears, a trouble-shooter who should keep unnecessary expenses and other worries from your door. It is possible.
The larger question is whether an interstate investment is for you? A pitfall can be a benefit in the eyes of someone else.
If you do decide to invest in one of those property hot spots cresting on our minerals boom, or a sunny coastal community with a view to retiring there when rent has paid the mortgage, be sure of your commitment to the long-term about 10 years for maximum gains based on historic performance. Explore all the pros and cons.
The good news is that distance can be managed.
Among the benefits of investment in the digital age is that much of the initial property scouting and research into local communities, their economic growth prospects and potential risks, can be done online.
By exploring options in new territory, investors open themselves to the best Australia has to offer at any point in time.
For those willing and able to look farther afield, there's greater likelihood of finding more house and land for the money in another state, a more affordable property that could get you started as an investor.
By investing interstate you not only spread your risk but you can also reduce or eliminate land taxes by remaining below individual state and territory thresholds.
Cross the border and you might get a better deal.
Tony Winterbottom is a general manager of Defence Housing Australia. Reproduced in full with permission: News Limited Network Buying beyond your home turf. 7 March 2013
Attention: This article is intended to provide general information only. Every attempt has been made to ensure the accuracy of this information at the date of publication. The opinions expressed in this article do not reflect those of DHA, its staff or agents. Property prices are subject to fluctuation. Prospective investors should seek independent advice. DHA will not be liable for any loss, damage, cost or expenses incurred or arising by reason of any person relying on information in this article.