Buying a property outside the state you live in for investment purposes is becoming a popular strategy, particularly for young people who have all but given up hope of getting onto the property ladder in Melbourne or Sydney.
Before you dive in, there are risks and benefits to be aware of.
3 Big risks:
• Vacancies: Be careful you’re not buying in an area where unemployment or underemployment impacts your ability to command maximum rent, or even find a tenant at all – just look at some of the former mining towns where the cash has dried up.
• Tourism towns: Be wary of holiday towns or spots with a high rate of short-term lets – it’s hard to hang on to good, longer-term tenants if there’s a party going on every night next door.
• Property management: You’ll struggle to manage the property yourself from afar, so be prepared to shell out for a property manager. Research their costs before you buy, as they might be more expensive than if you invested closer to home.
3 Big rewards:
• Time in the market: By investing in a more affordable location, you could get onto the property ladder much sooner than if you waited to buy in your hometown, which means more opportunity for building equity and using negative gearing to your advantage.
• Growth: If the property grows in value, you could use your equity to expand your portfolio or purchase your own home sooner – a popular strategy known as rentvesting.
• Tax benefits: You could maximise your profits and minimise your tax with some clever accounting and leveraging of interstate land tax rules, meaning more money stays in your pocket than it would if you only invested in your home state.
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For the full story, which deep dives into many of the risks of property investing and how to mitigate them, read the complete feature article in the March 2019 edition of Your Investment Property magazine.
On sale at news agencies and Coles supermarkets February 14th to March 14th 2019, or download the magazine now.
