What you need to know to be a long distance landlord
It’s always tempting to invest in your local area – after all, it can be very handy to have a rental property a short drive or even a brief stroll away from home. However, one of the golden rules of investing is to diversify your assets, and investing interstate can deliver valuable gains for your property portfolio.
That’s because Australia’s property market is far from uniform. Market conditions vary across regions and states, and when property values are rising in one market, other areas may be experiencing flat or even falling prices.
There are also vast differences in affordability and rental yields. Figures from CoreLogic, for example, show that over the last ten years Melbourne achieved the highest average annual property price growth (7.2% p.a.) of all Australian cities. Yet Melbourne’s gross rental yields are currently the lowest across our state capitals – about 2.9%. By contrast, investors in, say, Darwin are enjoying the nation’s highest capital city yields of around 5.3%.
By investing interstate, you may have a better opportunity to enjoy a combination of strong capital growth plus healthy yields across your total property portfolio.
That said, investing interstate does call for a bit of extra homework. Let’s take a look at the key issues.
You’re not familiar with the market
If you’re a Sydneysider a rental property priced at $400,000 in Hobart may appear to offer good value. But the current median value in Tasmania’s capital is $332,500 – so you need to understand what extras the property brings to the table to be priced above the median. The only way to know this is through research and in particular, identifying factors that will generate future capital growth.
It’s not always possible to view properties
You live in Melbourne. You’ve found what appears to be an ideal rental property in Perth. You could spend a few hundred dollars visiting the area in person or risk buying the property sight unseen. A better option can be to use a buyer’s agent, who can view the property and the location, and report back to you. It will mean paying agent’s commission but it can be money well spent.
Stamp duty costs differ between states
Stamp duty is charged according to where the property is located – not where you are based. Use Aussie’s stamp duty calculator to know how much you could be up for in duty.
Partner with a local property manager
From a practical perspective you’ll need to find a local property manager with boots on the ground to screen tenants, inspect the property, organise repairs as needed and keep you abreast of local market rents. The commission charged may differ from agents in your own neighbourhood so enquire about this at an early stage to ensure net rental yields are worthwhile.
Talk to a mortgage broker
When it comes to arranging an investment property loan, your local Aussie Mortgage Broker can help. We can help you choose the investment loan that’s right for your needs – even from the comfort of your own home. It’s one aspect of investing interstate where you won’t to need to travel at all.
For more information on property investment, download Aussie’s free Property Investing EBook.
Did you buy an investment property interstate? What tip would you give keen investors?