3 tips to navigate the risks and rewards of interstate investing
Looking beyond your local market, including interstate, can open up new opportunities when the timing is right. Often referred to as “borderless investing”, this approach allows you to tap into growth in different regions.
However, investing in a different state comes with its own considerations. Understanding how it works, where the opportunities may be, and what to watch out for can help you make more informed decisions.
Here are three reasons borrowers are interested in interstate investing.
One way some investors attempt to manage risk with their investments is to diversify. By spreading your investments across different locations, you’re not relying on just one market. If one area slows down, another might still be performing well. It may be a helpful way to balance your portfolio over time, reduce the impact of local downturns, and tap into a wider range of growth opportunities.
That said, diversification doesn’t remove risk entirely. Property markets can shift due to factors like economic conditions, housing supply and demand, and changes in interest rates.
Investing interstate can give you access to markets that may be more affordable or experiencing stronger growth at different points in the cycle. Because conditions can vary across states, looking beyond your local area may help uncover opportunities you might not find closer to home.
For example, some markets have recently outperformed others. Perth, Brisbane and Adelaide have seen solid growth over a recent rolling quarter, with housing values rising 6.8%, 4.8% and 4.3% respectively, while Sydney and Melbourne recorded slight declines of -0.1% and -0.4%.
This highlights how opportunities may emerge within different parts of the country at different times. That said, markets can shift, and past performance isn’t always an indicator of what’s ahead.
Another reason some property investors consider buying interstate is the potential difference in land tax thresholds and rates across states or territories.
Land tax is an annual levy based on the value of your investment property (excluding your principal place of residence). This tax is managed independently by each state or territory (not applicable in the Northern Territory).
Keep in mind that Australian stamp duty rates and thresholds may also differ by state or territory.
Land tax laws are complex and change frequently. As tax outcomes depend on individual circumstances, it may be worth speaking with a qualified tax professional before making decisions based on tax considerations.
Before buying interstate, it’s important to do your homework. You need to understand the broader real estate market, the city/town, and even the suburb.
What are the rental yields like? Vacancy rates?
How is the capital growth tracking? What infrastructure plans are in place? What’s the expected population growth and how will it affect supply and demand for housing?
Having access to this kind of insight can help you make more informed investment decisions, rather than relying on market sentiment or short-term trends. If you’d like a clearer picture of where opportunities may lie, get in touch for a personalised property report.
It’s important to consider the big picture before buying interstate. What are your goals?
It may also be worth thinking about whether the property is likely to be negatively geared, where losses may be offset against your income. Or perhaps your property is positively geared, where rental income exceeds expenses.
Taking the time to define your strategy upfront can help guide your decisions, keep your investment on track, and ensure the property you choose aligns with your long-term goals.
If you’re buying interstate, you’ll need a team of professionals on your side.
A reputable buyer’s agent can offer local market insight, find you the right property, and negotiate or bid on your behalf. You may also need a conveyancer or solicitor to help with the legal transfers, as well as a building and pest inspector to assess the property’s condition.
Lastly, it may also help to speak with an experienced finance broker when considering your borrowing options.
Navigating interstate investing and finding the right loan can feel complex, but having the right support can make a difference. A broker can help you understand your options, compare lenders, and explore loan structures that may align with your goals.
We work with a wide range of lenders and can help you get a clearer picture of what may be available based on your individual circumstances. If you’d like to explore your options, feel free to reach out – we’re here to chat and help you figure out what might work best for you.
Disclaimer: The information provided is general in nature and does not constitute financial, tax or credit advice. It does not take into account your personal objectives, financial situation or needs. You should consider seeking independent professional advice before making any investment decisions.
