There are a number of clear benefits of becoming a border less investor.
- Investing in a city other than your own can be a smart way to
diversify and spread your risk across multiple markets.
- It also allows you to take advantage of growth cycles that may be
stronger than your local area.
- And investing interstate may lower your land tax bill as
each state has its own land tax threshold.
Over the years, I’ve come across a large number of investors who
strictly buy in their own state (or worse still, their own city or back yard)
because it’s in their comfort zone.
It just makes sense to them and they can easily visit the property and
see it with their own two eyes.
They make this huge investment decision based on their proximity to the
property, rather than on evidence, facts, or research.
They get it wrong because they think searching for properties (in their
backyard) is researching – they are very different things, so they tend to buy
under performing properties.
What investors really need to do is look for the right property, in the
right location, at the right price, and interstate investing hugely opens up
those opportunities – it just makes sense to take advantage of good investment
opportunities that you’re able to identify locally.
Of course, investing interstate doesn’t come without risk.
You see, Australia is made up of many different real estate markets,
each with its own cycle and which don’t always move in sync, so you have to
have a good idea of what’s happening in the market you’re considering.
You just have to look at the significant variance of growth in the
different property markets in 2021 to see what I mean.
In the last quarter alone,Domain House Price Report for the
March 2021 quarter reveals that house prices in some cities have surged by 8-9%
so far this year, while others have enjoyed a much more lackluster sub-2%
And it’s the same story for units – prices in some cities have jumped as
much as 3.9% while in other areas prices have actually declined.
And the divergence between markets doesn’t stop there either – even
within each city, some suburbs or even streets will even see a disparity
between market values.
By that I mean, one suburb can be experiencing growth, while a nearby
suburb may not.
There are so many reasons for this, including the individual
characteristics of the neighborhood.
An oversupply of apartments, for instance, can make one suburb perform
poorly, while a few suburbs over, closer to the city and with fewer apartments,
the market is growing.
Interstate suburbs also carry extra risk in that they need more research
because you can’t assume that what determines property prices in your area will
apply to other areas elsewhere.
You’ll need to do your due diligence and additional research if you’re
going to invest interstate in areas you don’t know as well as your own
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Thursday, 14 October 2021