Buying real estate rarely goes smoothly, and buying property interstate has even more potential challenges. However, it's entirely manageable if any potential trouble areas are anticipated and addressed. Many people own a property in a different state, and you can too.  According to Local Property Team's CEO Brennan Hill: "Demand from people that currently live outside the Gold Coast is strong with approximately one in three enquiries coming from this group. Most of us would be aware that these buyers are people coming from areas such as Sydney, Melbourne and Adelaide, however some might be surprised to know that buyers are moving from rural areas across QLD and Australia as well".

Reasons for Buying Property Interstate

There are several reasons why you might consider owning a property interstate. Maybe local real estate prices in your area are simply too high to qualify for a loan on a second home or as an investment property. Perhaps another area of the country is experiencing a real estate boom like Queensland has been throughout the COVID crisis. Maybe you want to own a vacation home. Brennan Hill has identified a trend in the Gold Coast real estate property market whereby a large proportion of non-local buyers don't necessarily want to move into the area straight away, but rather they want to buy now for investment then move to the area in 2 to 5 years time. Local Property Team recently sold 2 Greg Norman Crescent to a lady from Melbourne who wants to move in about 3 years or so. In the interim the property was advertised for rent at $1050 per week and had 22 tenants inspect it. Buying property is a great way to diversity your property portfolio provided you avoid hidden mistakes while making sure that you do not miss out on golden opportunities.

Potential Challenges when Buying an Interstate Property:

Lack of knowledge about the area and the local economic situation

It is commonly known what areas of town are doing well and which areas are struggling. However, you should not assume what determines property prices in your target area because there isn’t just one Australian real estate market. Successful real estate investors usually know more about areas of town to invest than realtors do. First home buyers won’t have this type of day-to-day knowledge and will have to rely on others for their advice and opinions.

You’ll benefit from looking at growth drivers like affordability, infrastructure investment, other urban growth investments, population grown, employment opportunities and tourism forecasts. You will need to do your due diligence by researching historical prices, rental yields, future development plans for the area and more. Ensure you're getting your advice from a solid source and supplement your own focused research with expert advice.  

You don't know the laws, regulations, property taxes, and other details

Real estate laws and practices vary from state to state and even from city to city. You’re going to have to find a way to gain this knowledge. For example, buying in Sydney is more fast-paced with almost auction-like conditions. In some parts of Brisbane and Perth vendors tend to be a little bit more flexible; this gives you greater power to negotiate for a subject to finance contract or subject to building and pest inspection contract. 

You need an interstate team

It is vital that you assemble a team of experts to help you purchase a great property in a hyper-competitive Australian real estate market. You're likely to need a real estate agent, a property manager, an expert mortgage broker, handyman and more. Your team will have a huge impact on the level of success you experience. Build your team before you buy anything. 

Everything is going to cost more

For a non-occupant owner, interest rates, down payment, and insurance are all higher. This is because banks simply don't have as much faith in a property owner that doesn't live in the property. 

Things You Must Do When buying property interstate

Hire an EXCELLENT PROPERTY MANAGER 

If you’re going to rent out your property, keep in mind an investment rental property is only as good as its management. Ask your property manager for their unbiased opinion on a property’s condition, attractiveness to tenants, vacancy rate, the cost of maintenance, management fees and more. Choose an experienced property manager who isn’t managing too many properties (150+) to receive personalised service and the attention that you need when buying interstate. It is your property manager who handles decisions about vacancies, evictions, and handling other problems that require attention. For example, 2 Greg Norman Crescent was rented by Local Property Team for $1050 per week and had 22 tenants inspect. This shows how important it is to find someone that you can trust with your property even when you aren't there. 

See the property before you buy it

While very experienced investors often don't see the property firsthand, it’s still a good idea for you to see it before you buy. As it’s not be possible for you to view every property that interests you, you may want to hire a buyer’s agent who can then provide you with expert knowledge, insights on the area as well as access to off-the-market/unlisted properties.  If there is something off about the property a good agent will tell you upfront. Until you have a team you can trust, you don't really know what you're getting yourself into.

Visit the area in person

There is absolutely no substitute for visiting the real estate property and walking through the area yourself. This is helpful because online listings can be misleading. Find out what (if any) developments are on recent council records. Schedule an open house and see as many prospective properties as you can. If this is your course of action, investigate if you can claim the costs of travelling as property investment expenses come tax time.

Join the local real estate investors club

Even if you’re buying a vacation home, landowners and real estate investors are the people that know the area, trends, and relevant people. One good friend in the local club is invaluable.

SECURE A Real estate agent

A buyer’s agent is an invaluable asset when buying property interstate. Although their fees may range from a few thousand dollars to $15,000 for most homes and more for premium properties, they can help you avoid pitfalls when buying property interstate and make the process easier to manage. A key tip to buyers in South East QLD is to avoid tow-tier property marketing, which is when there is one price for locals and another price for interstate and overseas buyers. To avoid this, do your research, and avoid two-tier properties altogether. It is important to leverage a buyer’s agents’ knowledge when buying interstate. If something feels wrong walk away and readjust your goals to reach your main plan. You may also be eligible for purchase cash backs for property buyers? This money can help offset some of the costs of purchasing a property.

SECURE A Mortgage broker

Getting pre-approval for a home loan is the very first step to take when buying property interstate. The approval criteria for investment loans are complicated and necessary to prove that you can afford the loan. You need to know about lending policy, loan to value ratios and negative gearing benefits to maximize your borrowing power. Property types and titles also vary from state to state which ultimately determines your chances of approval. If you require further information you can also order a free upfront evaluation on the property which tends to spot problems with the property if they exist.

CHOOSE Interstate Conveyers

It is very important to make yourself aware of conveyancing differences when buying property interstate. For example, NSW solicitors and conveyancers can perform property transactions, while in QLD only a registered solicitor can handle property transfers. In QLD most contracts are subject to a finance and/or building and pest report, while in NSW there are currently no standard building inspection or finance clauses except for certain disclosure obligations from the vendor. Other legal requirements that differ from state to state are stamp duty, contract of sale, property tax, etc. A sound recommendation is to hire a very experienced conveyancer in the state that you’re buying in. 

Owning property interstate can be a wonderful investment from a financial and a lifestyle standpoint. As with anything else, if you understand the potential challenges beforehand and invest, research and plan for them, your likelihood of success will be much greater. After you’ve considered the risks and weighed the benefits, do the math. Find out exactly how your funds and cash flow will look like. Carefully consider your cash flow to ensure you have enough liquidity to cover shortfalls and mortgage repayments. Be sure to get your team of experts in place and research property and legal requirements to the best of your ability. Remember planning and persistence will stand you in good stead no matter where you are on your real estate property journey.