I am based in Sydney and currently we (wife and I) are considering purchasing an investment property in a different state.
It is largely because properties in Sydney are too expensive.
Is it too ambitious? Is the risk too high for what it's worth?
I would appreciate if anyone here can share their personal experience in this.
Regards
I say that it is "riskier" because it's unlikely that I would actually see the property in flesh before purchasing it.
Also the ongoing management would entirely come down to the REA that manages it. They may be complacent knowing that I am in a different state?
I say that it is "riskier" because it's unlikely that I would actually see the property in flesh before purchasing it.
You can always choose to go and see it. Even if not, you should get an inspector to check it out before purchasing anyway.
If you're not an engineer or someone who knows about construction, seeing it is not really that useful because you wouldn't be able to notice anything important that the seller's actively trying to hide. It's about as useful as checking out BHP HQ and touring their mines before you buy BHP shares.
Remember - you are not purchasing a house to live in. You are purchasing a house to rent + make money. Whether it looks nice to you, whether you like the feel of it…etc. are all irrelevant. You need to make a decision based on rental yields and projected growth rates in that area.
Also the ongoing management would entirely come down to the REA that manages it. They may be complacent knowing that I am in a different state?
Well if you don't like the one you have then you can always hire a new one.
To be honest, though, if this is the sort of thing that bugs you, then you shouldn't invest in property. An investment property is not a house you're living in, so minor things should not bother you. I've seen many residential property investors treat their investments like their own personal home and end up becoming extremely stressed out and worried about minor things that literally cost nothing to fix.
There was someone I knew who got into a massive fight with their managing agent and tenant because the tenant wore shoes on carpet and it turned into a nightmare for him. He would have cleaned the carpet when the lease was up anyway. When I asked him why it bugged him, it was a combination of "I didn't like it" and "my house, my rules" - if you're this sort of person and you can't detach yourself away from an investment property, then you should look at investing in REITs or even shares.
Source for what I'm saying - I'm an economist, I've worked as a real estate analyst (commercial property though), and I've taught courses on commercial real estate investment (syndicates). Different to residential, but similar ideas.
You are also in some ways contradicting your first comment and post.
Some people.
Like everything as a good analyst you can know there are different circumstances.
As a seasoned real estate person you understand many of the beginning traps. As the OP is a beginner buying investment properties away from home relies on good advice. Likewise future management and the ability to watch the management of your property.
The further away from where you currently reside means the higher the cost of management.
Like you said with the issues of changing of zoning laws, local markets etc, these can change. That will also be compounded if you aren’t in the area to notice these things.
If I was making my first purchase I would by more locally. Establish your expertise and understand the real estate investment game like you as an analyst has developed. Buying far afield involves more people to trust and manage and less observation of your investment. All added costs.
Look at what Meho2026 below says, it’s not simple, even the way you buy and manage properties in different states means different things than in NSW. Of course if they are into All details probably fine. But given they are asking here I would suggest they are fairly green. Plus not that flush with funds as they say, that’s why they are looking outside NSW
As a seasoned real estate person you understand many of the beginning traps. As the OP is a beginner buying investment properties away from home relies on good advice.
That's why my first statement says that OP should consider getting professional advice before proceeding with any investments.
Likewise future management and the ability to watch the management of your property.
If you need to watch the management of your property, you're either (1) too involved, or (2) stuck with an incompetent agent and should look for a new one. You are investing, you are not making property your career.
The further away from where you currently reside means the higher the cost of management.
The cost of management is similar across different areas.
Like you said with the issues of changing of zoning laws, local markets etc, these can change. That will also be compounded if you aren’t in the area to notice these things.
If you're an investor, then you make it your business to know. Do you think I really care about all the different industries I have stocks in? I couldn't personally care less, but it's my job to know as an investor. If you don't want to care, then that's fine, you can put your money in a fund and someone will care for you at a cost.
If I was making my first purchase I would by more locally. Establish your expertise and understand the real estate investment game like you as an analyst has developed. Buying far afield involves more people to trust and manage and less observation of your investment. All added costs.
Nope, if you're buying in the same local area as where you already have a primary place of residence or another investment, then that's just a bad idea. Sorry, but this is bad financial advice. Half the country is on fire right now. If you have multiple properties in the same neighbourhood and a fire tears through, you'll be in a whole load of trouble.
I know people from Perth who lived there and bought multiple properties there. When the property market crashed after the mining boom, they all lost millions of dollars, stuck with underwater loans. Some went bankrupt and can never get a loan again…etc. Don't put all of your eggs in the same basket.
But given they are asking here I would suggest they are fairly green. Plus not that flush with funds as they say, that’s why they are looking outside NSW
I can't give any personalised advice for OP, but if you're investing, you always diversify and you never put yourself in a situation where one single crash can wipe out your entire existence. If you're not familiar with this idea, then you either haven't invested enough or haven't cared to learn.
Yep I absolutely agree with everything. I definitely won't have any emotional attachment so trivial things won't worry me. For me it would just be for pure investment purpose.
Really appreciate your response!
Buy in Perth, I hear they are eventually going to go up.
I’ve invested interstate. It’s not a big deal at all,
I do a lot of research and watch the market for a while.
I analyse the sales and rental markets basically until I pretty much know what something will sell or rent for.
Selecting a suburb is where you have to be smart. I avoid rural and look at city suburbs or high population density areas.
Look for areas with multiple sources of employment.
Hospitals and universities close by are good cos there’s thousands of people on your doorstep wanting to rent.
Public transport links are very important.
Close to parks and schools if your target tenants are families
I look at the local councils future plans for the area.
You want capital growth so look at 10 year plans for infrastructure planning, local government incentives for business growth.
There’s lots of books out there that can give you checklists in selecting growth potential
Look at the population stats, is the population increasing, what are the demographics.
Obviously look for areas with low rental vacancies and reasonable rental returns. Often these are in areas that there is no way in hell I’d ever live.
Check all the figures stack up. Calculate all costs versus rental income.
Calculations need to include water rates, council rates, property management fees, strata or insurance. It’s still possible to find positive cashflow investments
I always physically go and inspect properties.
I take a checklist when I do an inspection. I look like an idiot but you’ve got a limited time to check everything is in working order and look for signs of trouble.
I document all that straight away and take photos.
If you see lots of properties in a day, it can get confusing and your brain muddles the details especially when you are unfamiliar with the area.
Some properties look like great deals online and are the opposite in person and vice versa. I would never buy a place sight unseen.
Get referrals for conveyancing solicitors in advance. I never use a conveyancer cos if something goes wrong a solicitor can sort things a conveyancer can’t.
I contact a few of the local REA talk to them about specific properties and tell them what I am looking for.
I book flights, car hire, fleabag motel and compile a viewing list.
I have a list of property and suburb specific questions I ask REA, sometimes I’ve asked before sometimes I already know the answer just to gauge how much bullshit is in the response.
REA are salespeople and they will sell a suburb, just double check what they are telling you is true.
I always stick with the opinion that all REA are liars but I pretend I believe everything they say to establish a relationship.
Most REA are actually really receptive and are motivated to help you because they see you are a serious buyer.
If you tell them what you want relatively specifically they will often show you or tell you about properties not yet advertised.
Establishing those relationships is probably the most important thing when looking but always remember they are all liars.
A lot of that applies to buying in general but is important to consider when you are buying in an area you’re not familiar with.
Once you have found a place you want to buy everything is straightforward but you need to find out beforehand the state specific laws. Making an offer in a property isn’t the same in every state and sometimes the process seems very odd if you are familiar with the NSW ways You can sign all the documents electronically
I tend to look at properties that have recently new kitchens and bathrooms to minimise any hassles trying to organise renovations in the beginning. Also these are the type of places easier to rent.
I prefer properties that are already tenanted but I have bought vacant if it’s a good deal and I can cover the vacancy period financially
Getting a good property manager is the next part, get recommendations.
At least twice a year look at the rental market, you need to know what’s going on so that you are getting market rent and if you’re not why not.
What areas have you been considering?
Or if you don't have time or skills for research… Find the nearest newest macca's opening up and buy in that suburb.
That's for taking your time to respond!
They're some really great tips that I'll definitely take on board.
I'm looking at properties in Perth/Brisbane cities with properties around the 250k mark. Some have pretty good rental income with existing tenants which would be positively geared.
Just looking at it on paper it almost sounds too good to be true?
I'm looking around the South-west area of Brisbane specifically.
OK, I bought in Moorooka not that long ago. Send me a PM if you want.
why Moorooka?
What do you think of Coomera in QLD?
There's less incentive now that you can't claim travel time to your rental property on tax!! ;)
Have you recently received a cold call offering you properties in Queensland, by any chance? It's not a scam as such, but you will pay far more than you need to.
Yes I have, principles are the same as buying locally, ie do your research etc etc. This can be harder and more time consuming if is is an area / market you are not familiar with
You are a lot more reliant on the agent for management, so critical to get a good one. You can't just get in your car and drive over to verify if what the tenant is complaining about is valid or not
Overall though, it has been good for me
Real estate shows about 40 properties in Sydney around your price range.
Same as local really, except it will be hard to figure out if the local tradies any good or having to rely on your property manager's recommendation. Good PM is a must (and please buy landlord insurance).
Did you buy in QLD ??
Can you not
Typo - where did you buy in QLD?
Based on your questions, I think you should either see an advisor or learn more about investing on your own before putting your money anywhere apart from an ETF or managed fund.
1) Personal experiences are irrelevant - some people make money, some people lose money, some people make even more money, some people become billionaires…etc. - these are all anecdotes which won't help you and will only make you more likely to make the wrong decision. People are more likely to share success stories and hide failures.
2) Why is purchasing in another state any riskier than purchasing in Sydney?
3) If you are investing, you should be purchasing in different states for diversification. I've seen so many people buy multiple investment properties literally in the same suburb. This is the worst decision you can make from a financial standpoint. All it takes is for some external crash, or change in zoning laws, opening up of new land close by, some freak natural disaster…etc. to wipe out your entire fortune.