Buying property interstate. There are many opportunities to buy property throughout Australia. As market trends different in each state, the property markets will move in different cycles. This is why its important to know what you are doing in advance. In this market insight we highlight some of the advantages and disadvantages of buying property interstate.
Advantages of buying property interstate
There are a number of advantages you can take advantage, here are a list summarised below:
- Diversification – When accumulating an investment portfolio of any sort, diversification is a good means to reduce risk. Investing interstate allows you to expand your property portfolio.
- Location – Not all locations perform equally,. Expanding your property portfolio interstate may be a good way to reduce the location risk.
- Capital growth – Most investors have a primary focus of generating capital growth. Historically property has rewarded investors over the long term. Not all locations perform equally. Investing interstate may offer you an opportunity to gain capital growth as you expand your location.
- Liquidity – Extending your property portfolio can improve your liquidity. Spreading your portfolio interstate can present better liquidity if a market is hotter than in your home town. If you have everything invested in the same location and the market is poorly sought after, you’ll have great difficultly selling when needed.
Disadvantages of buying property interstate
Of course, investing interstate doesn’t come without risk. Here is a summary of some disadvantages when buying property interstate.
- Management risk – When investing in property, you’ll need a property manager. If you own property in various states, you will likely need more than one property manager. This can make things difficult as property managers service you and the tenant quite differently. Communication, work ethic and documenting paperwork may all be different.
- Strategy risk – The risk that an investment strategy will not continue to be appropriate for you. Following the impact of legislative changes, or changes to your financial circumstances or objectives, this can impose a restriction to your strategic plan. Each state is governed separately, which can sometimes cause issues, such as land tax.
- Inflation Risk – If your investments do not keep pace with inflation, the real value of your capital will fall. The largest states in Australia drive inflation, but that doesn’t necessarily mean the property interstate will accumulate.
- Legislative Risk – Rules and regulations governing property law in each state are subject to considerable change and this has been seem over the years. This is likely to continue. Any changes to legislation may have an effect on your investments if you have property in various states.
- Knowledge – When buying property interstate, you may be going beyond your investment knowledge. You may not have the same data to make an informed decision, such as demographics, vacancy rates or rental yields to name a few. You will need to reply upon the advice of professionals.
- Estate planning – In the event of someone passing away, a property ownership held in one state versus another may be treated differently. This may also mean different tax outcomes upon selling or transacting.
What should I do?
Before buying a property, we recommend seeking professional property advice. At Crest Property Investments we specialise in sourcing brand new and off the plan properties for buyers. We also do not charge fees to buyers! If you’d like to learn more, please feel free to contact us. We welcome the opportunity to help you make the best property decision.
While we have taken care to ensure the information above is true and correct at the time of publication, changes in circumstances and legislation after the displayed date may impact the accuracy of this article. If you want to learn more please contact us. We welcome the opportunity to assist you.
September 2022
