Investing "out of town"

[Reub]

Hi there,

A quick question. Has anybody got any specific tips or pitfalls concerning making IP purchases many miles from your place of residence? Whilst I understand that it is a dangerous practice to buy 'site unseen' and you must research the local market to feel comfortable, are there many differences that people have experienced in buying 'over distance'?

Cheers,

Reub

 

[tamara]

Hi

In my experience buying from afar has the same challenges as if you were in town but only compounded. You still have to decide where and when to purchase and if what you are being told is accurate. You just have to do your research.

I know that I will not be able to site my next purchase but I have a friend who is an investor in property who will view the property/ies for me.

You need to think outside the square a little more and ask the right questions.

tamara

 

[kryptonite]

Hi Reub

I am very confident you will find your answer in a book I am reading at the moment. "How To Create An Income For Life" by Margaret Lomas. quote......try to forget about WHERE you are buying, and focus on WHAT you are buying.Buying positive cash flow property is all about being smart in what you do.

 

[geoffw]

You will find a few opinions on Margaret Lomas if you do a search.

 

[gailh]

Hi

I live in Melbourne and last year I purchased a property sight unseen on the sunshine coast. Some tips:

1. Get the exact address and look it up on a map to see the context. Is it near busy roads etc. You can see maps to most Aus cities in travel shops or in Borders bookstores.

2. Make sure you are very familiar with the prices and yields in the area.

3. Ring up a different agent selling a competing property and, feigning interest in the property they have, tell them the address of the property that you are thinking of buying - if anyone has anything bad to say about the location or the property, it will be a competing agent.

4. Ask the agent to email you digital photos of every room by email.

5. Get building/pest inspections (ensure relevant clause is put in contract) and ring up the inspector and discuss the property with them. Don't be too afraid by the report though, they are usually not overly enthusiastic about the quality of buildings.

6. As a last resort, ask for a clause in the contract that the contract is subject to a satisfactory inspection by you. Then jump on a plane and go for it. If you are spending more than $100,000 on an item, $500 for an airfare is $$$ well spent.

Good luck

Gail

 

[Ross Sneddon]

Hi

I purchased a property a little over two years ago, sight unseen also.

I was short for time, had the money for the 20% plus costs and I believe in investing NOW, whatever the time, just find the right place in the right area.

BUT, I did the research. I was confident in the the builder by reputation, the property by referral, and I had done a lot of research on the area and was confident that it would grow in value, (Capital Gain), and the rent was achievable but not excessive. Mean average for the area only.

Now I don't necessarily recommend that you do this or that all properties should be handled in this manner. It was merely circumstances.

I suggest that you consider areas outside your home area, interstate and maybe later on internationally. NZ shows some good potential if yield is important, not quite so much for capital gain.

The important point is to decide on your criteria, write them down, and look around for the investment which fills the bill. Do the research, Caveat Emptor.

My property. It has now increased in value by 17.24% in two years, (Bank Val) produced a yield of 6.99% which has now been increased by a further $10 per week to the area mean average of $190 per week, and has had one week vacancy only, no damage and minimal maintenance. Was it worth it? You betcha.

Regards

Ross

 

[johno]

Hi Reub,

I am a new investor, I just purchase an ip in Rockhampton. My strategy is to buy CF+ ip's. Before I bought in Rocky i did my research, I spoke to 5 different real estate agents, I read as much as possible on Rocky, I live in Sydney.
AS it was my first ip I didn't not want to buy sight unseen, so I decided to fly to Rocky and look at properties there. I used my frequent flyer points.
While in Rocky I spoke to as many locals that I could, taxi driver, hotel receptionists. In the end I bought a block of units which will be cf+.

Good luck to you.

Johno

 

[NIF]

Hi Johno

I was wondering if you know anything about Gladstone for IPs ?

Did you consider it when you researched Rockhampton ?

Thanks / Neil

 

[johno]

out of town

Hi Niff,

Yes I did. I found out that Gladstone was not as good, in terms of rental returns, as Rocky. I believe that Gladstone property prices have increase considerably over the last year or so, while Rocky property prices are starting to increase.

Another good area for rental returns is Bundaberg. I am looking at buying another ip there. Rental vacancies are down to 2%.

Regards,

Johno

 

[ruk]

I have several ip's where i live and all have gained value.

in 1994 i bought in another city, and it still hasn't reached my original purchase price.

i think it's best to stick to the area you know the best, if it was worth investing there in the first place, it should continue to be.

 

[see_change]

we bought two properties in logan subject to inspection. One we had a contract on , we let go after it turned out that the long list of questions I had asked the agent had been answered.. ah .. um .. inaccurately .

We had been up and spent some time looking in the area and getting familiar with the style of housing , and things to watch out for.

One reason we picked brisbane ( from sydney) is that because it is a major centre , the cost of flights is cheap and they are available at short notice.

Bought one in Hobart also subject to inspection. Cost of flight syd to hobart is signif more , and harder to organise at short notice.

see change

 

[the_captain]

Travel Expenses

Hi All,

I too have looked out of town and found some great properties. Haven't purchased as yet, but will be looking to do so this year.

I was wondering if any of you know about the tax-deductability of expenses incurred whilst on your property sourcing trips.

Can you claim anything?

 

[see_change]

My understanding is that you can add the cost of travel to find properties to the base cost of the property , rather than claiming it as an immediate expense.

Of course once you have one property in an area, you can claim the costs of checking that out ( have a valid reason ) ..... while you look at other properties. With each trip we take we have an file ( envelope) where we keep all receipts and an itinery to validate the claims.

I have a friend who has several properties in Airley beach which he has to check out on a regular basis.

See change

Disclaimer .. I'm not an accountant , so check with yours etc...

 

[beech]

hi SEE_CHANGE interested to know how your friend has faired in Airley beach?
What does he think of the future up there?

thanks Darren

 

[beech]

hi Johno,what sort of yields are to be had in Rockhampton?

Darren

 

[johno]

out of town

Hi Darren,

I am getting a 10% rental yield.

 

[see_change]

He's been buying up there for a couple of years , so got in before current interest.

I've never been there but I know several people who's opinions I respect who believe that airley has a big future.

see change

 

[ally]

Hi Johnno

I have also been looking at units in Rockhampton, and I see you are one step ahead of me, and have already bought! Have you read API, last Oct/Nov issue, citing capital growth for Rockhampton was only 4.32% for units and an abysmal -1.16 for houses? Did this affect your decision to purchase in any way?

I guess it is better to speculate and get in before the mob, because once there is a major capital gain you have basically missed the boat.

Or are you more concerned with positive cashflow, rather than capital growth?

BTW what did you make of the town?

Regards
Ally

 

[Ross Sneddon]

Hi

On the matter of claiming travel, accommodation and any expenses incurred PRIOR to purchase of a property, may I suggest that you have a chat with your accountant.

My understanding is that the IP is considered as a business and legitimate expenses incurred in the running of the business are claimable as a tax deduction, but expenses incurred before the business is purchased and before the business is operational may not be claimed.

An example is the cost of Stamp Duty and Legal advice sought prior to purchase. These costs are considered to have been incurred before purchase.

I don't believe that you can get around the Stamp Duty angle but if your solicitor worked for you before and after purchase and rendered two accounts, one for advice given prior to purchase and one afterwards, then the second is claimable.

Talk to your accountant.

Regards

Ross

 

[johno]

Hi Ally,

I am more concerned with positive cashflow, rather than capital growth?

I spent 3 days in Rockhampton. During that time I inpected over 45 properties, from units, townhouses, duplexes to houses.

Although the capital growth in Rocky is quite low at the moment. I believe that it will increase over the next few years. There is quite a bit of construction going on there.

There is a magnesium smelter being built just outside Rocky, which will employ around 1000 people.

The locals are saying that property prices are beginning to increase.

I think it is a good area to invest in.

Regards,

Johno