Investing in your own backyard

[Peta]

Dear brains trust,

I wanted to ask all of you out there who are well practised investors...

1) Do I need to be concerned that the properties I am looking at investing in are a significant distance from my principle place of residence?

2) Would it be easier to invest closer to home for the first IP and then branch out from there?

3) What experiences have you guys had?

I guess I am looking further afield due to the house and land prices in Sydney being out of my price range and my desire to get into the investment arena.

Thanks in advance,

Peta

 

[anrke]

Dear brains trust,

I wanted to ask all of you out there who are well practised investors...

1) Do I need to be concerned that the properties I am looking at investing in are a significant distance from my principle place of residence?

2) Would it be easier to invest closer to home for the first IP and then branch out from there?

3) What experiences have you guys had?

I guess I am looking further afield due to the house and land prices in Sydney being out of my price range and my desire to get into the investment arena.

Thanks in advance,

Peta

Hi Peta,
Firstly - I'm not an investor (...yet), in fact I am signing to buy my first home today. So, I have no experience in your question.

However, I would imagine that at least for your first one or two IP's, there are several pro's to buying close to home.
Firstly, you're not going to know any market better than the one you live in. You immediately know which suburbs are In, which are Out. You'll know more about planned infrastructure, estates, complexes, highways etc.

Secondly, I think until you build up a good relationship with an agent it will be easier for you to keep tabs on your investment - ensure it's being looked after/maintained to your liking.

 

[VYBerlinaV8]

I have bought IPs within half an hour drive of my PPOR for two reasons:
1) I know the market here well, and can spot a good deal
2) There are good deals to be had in my local area.

I have no issue with buying IPs that are in different cities or countries, provided you know the markets and do the research. I haven't bought an IP in a different city yet, but so far that's just a matter of convenience.

Bottom line, if you find a good elsewhere, go for it!

 

[Alanna]

I think that the location of your investments depends very much upon your strategy for investment. If, for example, you are wanting to do some work on the property which you wish to do yourself, then obviously closer to you will be easier. Also, if you are looking for cash flow neutral or positive, then you will need to look in specific areas.
If though, you are looking at quite a new, low maintenance IP, then further afield may suit. It doesn't matter where you invest, but when you narrow down where you wish to look, you need to become an expert in that area and know all that you possibly can about the suburb/town.
Good luck
Alanna

 

[Peta]

Thanks for your replies.

I know it very much depends on my strategy for IP's. I am not sure if I am biting off more than I can chew with buying an IP in Armidale when I live in Sydney (a whole day on the train, or 6 hours by car so a 3 day turnaround if I dont want to drive off the road due to fatigue!).

The deal seems great. A lot of house for the money and a good area, close to town and a good size suitable for student renters or families. The figures add up too! Just a shame its so far away - I need to decide if that really matters.

Cheers,
Peta

 

[MichaelW]

The deal seems great. A lot of house for the money and a good area, close to town and a good size suitable for student renters or families. The figures add up too! Just a shame its so far away - I need to decide if that really matters.

Sounds like a passive buy and hold strategy. In that case, if the figures really do add up, then it should work for you. I can't promise capital gain though, I presume your research has factored that in and you're comfortable in selecting that suburb.

Just suggesting, that if its not a reno or development then being close is less important. But it is hard to be an expert when you are physically removed from the area and don't have your finger on the pulse of what's driving the local economy and house price appreciation.

Cheers,
Michael.

 

[skater]

I have bought quite a few interstate & regional IP's. Some have worked out great, others not so.

Some of the problems I have encountered are: Useless property managers & nowhere else to turn to in a regional where you already have the best of a bad bunch. In this instance there was a good manager when we bought, but he retired. Excessive maintenance costs due to the small supply of tradies in town. Excessive management fees. Property in very good order when bought, but 3 years later requiring major $$$ spent as it is now in bad repair (can someone please enlighten me as to how this can possibly happen).

In hindsight, most of the issues I have had have been entirely because of bad managers & by not being nearby, you rely on them to do a good job. If the PM is useless & sweeps things under the rug it's not until the you know what hits the fan that you find out & you are then in deep trouble.

On the plus side, I have 2 that are a distance from me that have been wonderful, great CG, great cashflow, great tenants (one even painted it for me), plus a great manager. There is another that I own interstate & one in a regional that have been no trouble either. I had 2 in Tassie, one was a dog (property managers again), so I sold it, & another that was great which we also sold, but not until we had trippled the purchase price.

None of this has dampened my enthusiasm to buying out of area properties, but in future I will be much more careful in making sure that there is more than one agency that has a good manager, & get a guide on how much tradies charge for maintenance when assessing if I am willing to purchase in the area.

 

[Alanna]

Definitely tradies are a serious problem to be considered, and to some degree, this is governed some of our location decisions. What can and can't be fixed is very important if you want to keep tenants happy.