How does interstate IP work…for the faint of heart?

I imagine that most first-time investors buy in their own "back yard"… the (pshychological) reasons for this are understandable - low risk and high comfort, lots of caution… but an increased possibility of accepting mediocre yields or growth compared to properties in other locations with better performance indicators.

I have not yet bought my first IP, but hope to shortly. In my head I have accepted the fact that the best performing properties are probably not in my back yard. I know that Buyers Agents exist, and that they have been used successfully by others to select "non-local" IP's with better performance … and also that this might be a route to accelerating investment success, but...

I just cant get my head round it!… buying and running a property, for example in Melbourne, when living in Perth? It just seems improbable! I'm sure others feel (and fear) this too?

I'm really interested to know how the practicalities of inter-state IP's work? Presumably property managers do everything, and therefore this relies heavily on finding a very good, pro-active property manager? Is it possible to phone up your PM and say "I just bought a place… go fetch the keys and rent it out… sort anything that needs sorting..." and expect all to go smoothly. Just sounds so fraught.

Does this approach limit the investor to properties which have lower maintenance (newer units for e.g.)?

Ultimately, I'd love peoples thoughts on the scenario of a first time investor (like myself) with around $350-$400K to spend, buying an interstate property using a Buyers Agent. Is this a "seasoned investor only" strategy? Does it justify the extra expense at this buying point?

Cheers, Sam :)
 
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I can certainly understand the attractions of interstate purchases for those who have several IPs, or those living in remote or unattractive areas.

But it never ceases to amuse me that Brisbane peoply buy in Sydney, Perth people are buying in Melbourne, Sydney people are buying in Adelaide, Adelaide people are buying in Darwin.......

Clearly there are good buys in all states.
Marg
 
People buy all over the place and I think it's mostly due to timing. For example when Sydney was in the think of a boom Brisbane hadn't yet started their boom. So if you want to be buying often it is beneficial to buy before a boom (sounds easy doesn't it).;)

So when prices are sky high in one state, buy in one that hasn't had a boom for a while or one that you expect to jump next.

I've just bought out of Sydney but not interstate yet. Maybe next one.
 
Hi Sam

Lots of reasons to buy out of your comfort zone including superior growth prospects, affordability, better yields, land tax bills (and don't underestimate the "creeping" factor of this insidious tax!!) and simple diversity.

"Managing the PM's" can take a little getting used to, but you do need to keep on top of them and try to at least periodically visit your IP, even if only once every few yrs, or get a trusted friend/colleague/advocate to do it for you.
 
Hi Samwise
I have been purchasing interstate trying to capture growth and access equity as my home State at the time was either flat/decreasing in value.

To date I have found this an excellent strategy and will continue doing so.

I started in 2007 when Melb (inner city) was experiencing a boom (20-25%) and then jumped back into Melb early this year purchasing in (middle ring) once again experiencing growth of around 25-30%. I purchased 4 IPs and am now tapping into equity.

Am now looking at Brisbane and Sydney market.

I used a Buyers Agent with my first purchase, they were excellent, providing comprehensive report and attended auction on my behalf. Downside cost -$10,000.

I did not use BA for the other 4 IPs and just researched specific areas on net, this was not difficult once I identified pockets that fitted my criteria.

The benefits far outweigh the risks and it has enabled to me move ahead at a faster rate.

One mistake I made when settling one of my IPs I did not arrange a property handover and the vendor kindly left me with about 5 trailer loads of rubbish. The PM who I arranged to do this handed his notice, I was not aware and was left high and dry. This cost me around $600, managed to get the RE agent to pay 50%.

I also recently viewed all IPs I purchased and I am happy with all purchases.

I have PMs managing my properties and everything is going well. Communication is fine I dont really see much difference from IPs I have in my State.

Cheers, MTR
 
Thats great info and experience, thanks very much.

Funnily enough, a colleague that i bumped into in town today just bought 8 houses interstate :eek:

So it really is possible to buy an interstate property and let the PM take care of everything then...

Can Buyers Agent fees be offset against tax?

More experiences welcomed

Sam
 
Thats great info and experience, thanks very much.

Funnily enough, a colleague that i bumped into in town today just bought 8 houses interstate :eek:

So it really is possible to buy an interstate property and let the PM take care of everything then...

Can Buyers Agent fees be offset against tax?

More experiences welcomed

Sam

BA fee's would be a capital expense and added to cost base of purchase
 
So it really is possible to buy an interstate property and let the PM take care of everything then...
Sam, we do this for clients all the time. If you have a read of the last client testimonial that recently went up on our website, you can read word-for-word what a Brisbane-based client of ours thought of the whole experience he had.
http://propertunity.com.au/page/client_testimonials.html

Can Buyers Agent fees be offset against tax?
Property Buyers Agent fees are Not Immediately tax deductible. Please have a read of the ATO ID attached which only came out in Feb 2009.
 

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Thanks Prop... thats some glowing references there ;)

What would BA fees be like for, say, a $400K property - i'm guessing $5-8K ballpark?

Would be good to see some sample transaction figures with/without BA from peoples past experience (actual vs expected)... you'd want that fee to mostly pay for itself (i.e. BA able to negotiate a price $5K lower than you, or $5K better performance over first X years).

Shame youre in NSW not Melbourne Prop!...
 
Thanks Prop... thats some glowing references there ;)
Well we do our best....

What would BA fees be like for, say, a $400K property - i'm guessing $5-8K ballpark?
Yep, pretty much ballpark

... you'd want that fee to mostly pay for itself (i.e. BA able to negotiate a price $5K lower than you, or $5K better performance over first X years).
Yes, I'd agree, otherwise if you have the skills and the spare time and can do it cheaper, then like with everything, do it yourself. We got one the other day for a client for a min. $25K under other comparables. I'll pop that one on our website next week. Worst case scenario is usually that we can save clients our fees off the purchase price.

Shame youre in NSW not Melbourne Prop!...
Shame you're not buying in Sydney or Newcastle :p (my personal biased suspicions are that they might do better than Melbourne - we'll see - time will tell) ;) But Melbourne is still good :)

All the best Samwise
 
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