Problems with purchasing interstate?

I have never contemplated the idea of purchasing an IP interstate. I now realise that quite a few of the members on this site have so, and seem comfortable with it.

I remember once reading in a Real Estate Investment book that it is always a good idea to purchase your IP's within close proximity to where you reside so you are able to drive past on occassion and see it. I guess it brings comfort knowing it is still standing and in the condition in which you rented it out. lol
Could members that have properties interstate please share with me the pros and cons of owning IP's which are located interstate or overseas (Tas, NZ).

I reside in Melbourne and have recently been looking at areas in Tasmania.
Does anyone have any IP's in Tasmania and what do others think about investing there.

Regards
John
 
I guess it brings comfort knowing it is still standing and in the condition in which you rented it out.
Yes and you know the good and bad parts of 'near where you live' so you don't buy in bad areas etc

Could members that have properties interstate please share with me the pros and cons of owning IP's which are located interstate or overseas (Tas, NZ).
John, after you get a few under your belt, so to speak, you realise that it is all pretty much a numbers game. Houses are the same everywhere, tenants are the same, PMs are the same - they can all be good or bad. You invest interstate:
1. To diversify:
(a) Not all cities / towns will be in a slump together. Perth was growing when Sydney was falling for example.
(b) Political risk. NSW govt. introduced a vendor exit tax (now gone) and fiddled with land tax thresholds etc
2. To avoid land tax in each state / territory

I have friends who did well out of Tassy. I stick to the mainland - just personal preference. Buy one in every city then you've got your bases covered. :D
 
Maintenance on Interstate IP

Yep it makes sense Propertunity. I guess like anything in life, the more one does it, the more confident and less fearful one becomes.

I was also looking at it from the perspective of having to maintain a property that was lets say interstate. That is what i fear most.
For example if i had a property in Tasmania and lets say the hot water unit broke down. If the property was nearby i could shop around and get a good deal on a new unit and maybe use a plumber friend to instal it.
But if it was in Tasmania, i would doubt very much that the RE Agent would give two hoots about sourcing me a good deal on the new water unit or plumber and it could leave me with an expensive bill which could disrupt the positive gearing on that property. So how would you get around that.

Regards
John
 
Hi John

I live in Sydney, moved to Australia 10 years ago and had visited Melbourne possibly thrice before we bought there 'sight unseen' about 2 years ago. And would you believe it, the hot water system broke down on the weekend after we settled on a Wed ! The building inspection report said that the hot water system was in reasonable condition.

PM called us 9 am Saturday morning ...was mid of July ...tenants had moved in on Thursday, family with kids ..so PM said they would call a plumber who might be available to put in a new system that day.

I called a few plumbers directly and obviously was quoted 'weekend' price. Finally went with someone suggested by the PM and yes, it might have a couple of hundred dollars more than what I'd have paid if it was a weekday or if I could shop around in Sydney.

Yes, we were upset when it happened.

But let me tell you, in the long term ...it does not matter. It's all a cost of doing business ..I chose to invest interstate to manage my land tax issues and also because property cycles vary in different states.

Would I buy in Tassy ? Went there on family holiday in January and we drove around for 10 days and I quite liked what I saw - esp Hobart.

Goodluck with your purchase. Sydney too is looking pretty good at the moment ...check out other posts on the Sydney market !

Amelia
 
i would doubt very much that the RE Agent would give two hoots about sourcing me a good deal on the new water unit or plumber and it could leave me with an expensive bill which could disrupt the positive gearing on that property. So how would you get around that.

Don't sweat the small stuff John. $200 too much - OK so don't make a habit out of it. Do you think Donald Trump only buys in areas where he can get quotes for cheap HWS's? (I know an exaggeration, but it is a mind-set I'm asking you to think about changing)

Alan
 
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I'm with Alan (as usual ;)) and Amelia on this one. If you're confident that you've chosen a good investment, this stuff is really trivia.

Look at it this way. I bought a house in 2004 for $121K. I only owned it about 18 months, during which I spent about $2K on repairs, I think, which is probably reasonably high, as I had to do some roof repairs.

Then I sold it after 18 months for $172K. Do I really care if I could have gotten the repairs down to $1K, or it had blown out to $3K? Nope. And this was a cheap property, where repairs as a percentage of the asset price are relatively high! On a more usual $400K home, the repair amounts become even more trivial as a percentage.

I'm not saying you should be a sucker and allow yourself to be ripped off. But you do need to accept that you will have to pay for repairs, and that there is a range of reasonable prices for repairs, and as long as you're somewhere in that range, you shouldn't sweat it too much.

If your property is performing as an investment, it won't be significant. If your property isn't performing as an investment, perhaps the time spent chasing repair quotes and doing repairs yourself would be better spent on improving your investment selection skills. :)

Success at investing from a distance also relies finding a property manager that you can trust. If I only had a couple of hours in a city that I wanted to invest in, and had a choice between viewing properties or interviewing PMs, I'd interview PMs. I'd rather buy a property that I hadn't personally inspected and know that I have a good PM to manage it for me, than be familiar and happy with the particular property and then find that it's difficult to get a trustworthy PM in that area.
 
I too echo every ones sentiment here. Repairs are simply a cost of doing business that are tax deductible.

I have a portfolio spread across Australia and do so mainly for diversification across different markets.

My investment philosophy is to buy, hold, set & forget. Investing is all about leveraging other peoples time and other peoples money.

I leverage other peoples time by employing property managers to look after the day to day operations of each property within my portfolio in order to free up my time to leverage other peoples money to acquire more assets and building my portfolio further.

Once set up everything runs on auto pilot.

Lifestyle = Income x Time. You have to have both. By applying the above it provides income and time to spend it however you wish.

The last thing I want to do is become a slave to a portfolio I have built - that kind of defeats the purpose for building my portfolio in the first instance.

Hope this helps.
 
Yes maintenance costs are trivial!!

Thank you all for sharing your experiences.
I agree!! It is about finding a bargain as that is where the profits are made over the long term. There will always be costs associated when holding an IP.

Thanks once again
John
 
Hi JCM,

I agree with all sentiments here and believe in diversifying your portfolio.

When one state is booming, another may not be. When you spread your eggs around, you can almost guarantee you are at least making money somewhere.:)

I have bought without a physical inspection three times. Once in NZ.

However, as far as NZ is concerned I would do a quick trip to the towns you choose to buy in. If you are not familiar with NZ, you need to be.

As far as maintenance is concerned, I prefer them too far away to visit constantly. We have an IP about 700m away and I continually hear from my husband about how the tenants have let the garden go...etc.:rolleyes:

Regards JO
 
Tas ip's offer great returns simply becuase the purchase price is lower than the mainland.

There are currently NRAS properties available in Tas make the yields even better, $280,000 gets you a brand new home with $407 pw with 10 year guarantee.
 
To avoid land tax in each state / territory....

I have this dilemma right at this very moment. Another 'standard' house purchase in Melbourne, and my land tax will go from 2.5k pa to $5k pa. :(

Do you decide to do the due diligence and possibly even a trip or two to the 'other' city to be a in a position to make an informed judgement on an IP? Will that city outpeform Melbourne (or your home city)? Let alone, whereabouts in the city

I have seriously been thinking Adelaide but I know I like to see the area, the property, touch and feel the IP before I would feel vindicated to buy.

As for maintenance etc, the PM will handle that. as they do in your home city. For me, its the actual decision of which property, where and how much that would be the hardest for the interstate purchase.
 
Do you decide to do the due diligence and possibly even a trip or two to the 'other' city to be a in a position to make an informed judgement on an IP?
Good question. Personally, I do visit the 'other' city. But at the end of the day investing is just numbers and you don't have to visit to do that. You can do it on your PC at home and hire a good BA in the other city to do the on the ground DD and negotiations for you.

Will that city outpeform Melbourne (or your home city)? Let alone, whereabouts in the city
BL, I'd just outsource it. Tell a BA what you want and have them come back with options. Do your desktop DD on the options, pick one, and let the BA do their job. They do it everyday.

I have seriously been thinking Adelaide but I know I like to see the area, the property, touch and feel the IP before I would feel vindicated to buy.
Too much emotion coming thru here ;). Don't discount Sydney either. Buy one in Adelaide as well for sure.
If you must "see" it use goole streetview & google earth - it is much cheaper than a flight, hire car, meals & accom. etc. x 2 or 3.
 
buzz, get on a plane and fly over. You can do it for a day trip if you're really short on time, or else make a weekend of it. Do all the research that you can do from interstate before you go, so that you can really focus your time "on the ground" on those things that can only be done on the ground. Airfares are so cheap these days that there's really no reason - other than time, and hardly anybody is THAT busy! - to not go and visit the area.

Stuff to do before you go:
* demographic research - population, jobs, economic growth etc
* which areas of town you're interested in focusing on - ask on forums to get a feel for the character of various neighbourhoods, and narrow down to 2 or 3 that match what you're looking for
* average prices in those area, nature of houses, type of tenants, vacancy rates, rental levels, etc

Stuff to do on the ground:
* find a good PM
* drive around the neighbourhoods and get a feel for them
* visit the nearest shopping centres - see whether they're vibrant and busy, or have lots of vacant shops and hardly any shoppers - if the latter, ask why - it may be that the area is fine but there's a big new shopping centre that everybody's visiting right now

Stuff that can be done after:
* finding specific properties (if not achieved whilst on the ground; the other items are a higher priority for me, and looking at property is lower)

Hope this helps!
 
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