5 common mistakes investors make when buying interstate
Did you know that investing interstate is something that few Australians do?
I can understand the reluctance.
For most people, handing over several hundred thousand dollars for an investment property is a psychological challenge in itself.
No matter how much research you do, there is always the risk that the property you invest in won’t perform.
Add an interstate location to the mix – meaning you’re not able to see, visit and drive by your shiny new asset whenever you like – and it can create enough ‘fear of the unknown’ to stop investors from taking any action at all.
The Big Mistake
It leads to a common and very costly mistake that many landlords make: only investing in their own backyard.
They do this because it’s in their comfort zone, but currently, there are many regions in Australia where doing this makes extremely poor financial sense.
Most people are aware that Brisbane is a property market in a new growth phase, for instance.
Smart and experienced investors from interstate have no problem turning their attention to Brisbane, with the expectation that sectors of the market will outperform the average over the next year.
Many more investors will miss out, however – held back by their own fears and inhibitions.
Others still will be spurred on to take massive action, but without the benefit of experience or local market knowledge behind them, they’ll invest in the wrong areas or wrong property types.
How can you make sure you’re not one of them?
Don’t fall into the trap of making the following mistakes, common of inexperienced investors:
Buying off the plan:
There are too many of these properties coming on to the market in Brisbane, which means there is no ‘scarcity’ value and no supply pressure to underpin price growth.
This market is dominated by investors, which will do you no favours when it comes time to rent your property out.
Ultimately, you wind up paying a premium and will have minimal capital growth and rental growth.
Buying in outer suburban areas:
This includes new house and land packages in master-planned communities.
They may seem like they have all the right ‘bells and whistles’, but when you invest, you have to be mindful of the essential fundamentals that drive price growth.
These outer-suburban segments of the market have underperformed historically, and are likely to continue to do so in the future.
Buying sight unseen:
It’s incredible what you can achieve, and the unsightly features you can avoid showcasing, when you’re using a good camera and exploit the right camera angles.
I’ve heard horror stories of people who have bought sight unseen thinking their investment property had an incredible view (it did – but only from the toilet) or who didn’t realise huge powerlines dominated the streetscape, because they relied on agent photos only.
Moral of the story: don’t risk purchasing site unseen unless you have a trusted representative review the property on your behalf.
Buying from property marketers:
I’m not saying all property marketers are trying to scam you – but, there are a fair chunk of rogue operators out there who add a significant premium to the property’s sale price to account for their own commission.
There’s only one person making a decent profit from this transaction – and it isn’t the investor.
There are far safer, easier, smarter ways to invest in property than this.
Buying under advice from out-of-town advisors:
These people don’t have the perspective and depth of experience that one needs to understand what a good property is – and what isn’t – and why one side of the street is worth more than the other, or why one particular street in a suburb is worth considerably more than other.Most importantly, don’t use interstate buyers agents who fly up, see a few properties, make an offer and fly out again.
You need to rely ‘on the ground’ experience to ensure you minimise the risks.
Buying property interstate can be a savvy and financially rewarding way to grow your property portfolio.
As with every investment you consider, you need to evaluate whether the opportunities on offer align your goals and your investment strategy, rather than jumping into a market because it’s generating positive headlines.
Thinking of investing Interstate?
If you’re looking for independent property investment advice, no one can help you quite like the independent property investment strategists at Metropole.
Remember the multi award winning team of property investment strategists at Metropole have no properties to sell, so their advice is unbiased.
Whether you are a beginner or a seasoned property investor, we would love to help you formulate an investment strategy or do a review of your existing portfolio, and help you take your property investment to the next level.
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