Patience and market research are the two most important things property investors need when it comes to buying interstate in the current market.
While many investors feel more comfortable buying in their own backyard, buyers’ agent Alex Dutt of Advisable says it’s worthwhile considering properties in other states to diversify your portfolio and buy at different price points.
While he understands some investors may feel nervous about buying interstate in a hot market, as they fear they could end up paying too much and securing the wrong type of property, it is still worth doing – provided you do it right.
He says a buyers’ agent can help investors knock out some of the competition by negotiating on off-market properties and advise what is a reasonable price for those which are on the market.
“Ideally, if you build a property portfolio,at some point you’re going to want investment diversity and not have all your eggs in one basket,” Dutt says.
Buying in another state can offer the opportunity to access properties at a cheaper price point that may not be available in your own area.
“Sometimes buying interstate offers access to markets where there are opportunities and growth drivers that we don’t have in our own backyard,” he says.
When it comes to picking the right area to buy, where prices haven’t skyrocketed, Dutt says focus on the value proposition of an area.
“Look at the long game, don’t be looking in the rear vision mirror, don’t look at what’s happened over the last 18 months,” he says.
Examine the individual opportunity and be prepared (if there are too many owner-occupiers circling it and pushing up the price) to move on and wait for other opportunities.
“Sometimes it can be better to walk away,” he says.
“With patience and persistence, you will find opportunities. You’ve just got to know where to look and you’ve just got to know how to be prepped, to make those opportunities come to you.”
Investors need to be ready to move quickly when the ideal deal does arrive. That’s why, when buying interstate, it’s important to seek professional advice about the target market.
While property prices have increased significantly in many locations in the past year, Dutt says many investors are achieving excellent rents which still makes investing worthwhile.
He says a good tool for investors to work out whether a property market is slowing is to examine “days on market” data.
When that number is particularly low it means properties are selling fast and demand is high; when the numbers start to increase it means a drop in demand, competition may not be as high, and vendors will have more realistic expectations.
“Days on market provides a real insight into what’s happening on the ground,” Dutt says.
When buying in a hot market, it’s essential investors determine what fair market value is and not be caught up in bidding wars with owner-occupiers.
Don’t just rely on online guessing tools, work out what the property has, what is in demand in that area from tenants and investigate sale prices achieved for comparable properties.
“As buyers’ agents that’s what we do,” he says. “We’ve got a very good feel for any market we’re buying in. We can readily say ‘it’s worth this much’ based on comparable sales, the location and other factors.
“If someone else is willing to pay too much you need to know when to stop. That is really important. That means you have to have patience. It could take multiple cracks at buying. It could take two, three, four or five goes at trying to buy a property that ticks all the boxes before you land the one at the right price.
“In my experience it’s better to miss out on a property and be patient, rather than paying too much.”