Should you buy to renovate interstate?
As property prices continue to rise in major cities, now could be a good time to buy – and potentially renovate – interstate. But where do you start? We look at the ins and outs to help you consider if it could be the right move for you.
This year may continue to be a challenging environment for first home buyers and property investors. Median house prices Australia-wide — despite experiencing their lowest growth since the boom in 2012-13 — have increased in all capital cities, apart from Perth and Darwin.
What’s more, by the end of 2016, there were 760 suburbs nationally that had a median home value of at least $1 million.
This has created a market in which high property prices — particularly in Sydney and Melbourne — conflict with a slow median wage increase, making property ownership a challenge for many first home buyers and property investors alike.
With all this in mind, now could be the right time to consider whether buying interstate could be the answer to your home ownership aspirations. Additionally, you could consider the potentially cheaper option of finding a ‘fixer-upper’ which could be molded to reflect your tastes.
Whether you’re considering purchasing a property to live in or as an investment, there are four ‘golden rules’ to keep in mind when buying and potentially renovating interstate.
1. Do your research
When looking for an investment property, particularly somewhere that isn’t close to home, one might be lured by the ebb and flow of online chatter that predicts the rise of property values. But before you jump in on ‘the next big thing’, do your own homework. Dinner party conversations are all very well, but keep in mind that trends come and go. Wisdom, however, never goes out of style.
Keep your eyes on reliable websites, such as RP Data and Australian social trends to spot an interstate purchase that could offer maximum capital gains.
In 2016, almost one in four NSW investors followed a trend to buy a property in Queensland, leaving them exposed to a potential risk of an oversupply of rentals properties, which can then drive prices and returns on investment down.
2. Be on the hunt for growth areas
An important point when considering an interstate purchase should be what the area has — or will have — on offer.
The best way to spot a growth area is to look for signs of gentrification. That doesn’t mean hipsters with lattes on every corner, but rising school populations, community facilities and infrastructure are all good signs – particularly if property prices have grown steadily and the area has a predominantly younger demographic.
Keep an eye out for potential infrastructure projects which could spur connectivity and drive up the area’s appeal – new or improving transport links, sporting facilities, hospitals, schools and shopping centres.
Lastly, it is wise to consider whether the supply of property within an area, along with surrounding areas, can meet the demand. It can be an indicator as to whether your investment property will experience price growth. If there are still thousands of empty or unsold lots, you may be facing a long wait if you’re looking for capital growth.
3. Know the rules
Just as you need to comply with by-laws and regulations when purchasing and renovating a property locally, your interstate property purchase will be subject to regulations that are specific to each region, state and area.
There are a number of different property titles in Australia, for example, and your interstate property could be subject to a Torrens Title, Group or Strata Title, Company Title, or Leasehold. It’s important to verify titles and other regulations and requirements by checking the state or territory’s specific property laws. Make sure you’re also familiar with cooling-off periods, stamp duty and building codes, which can also vary from state to state
4. Outsource a good PM
Once you’ve done the ground work, it’s time to think about renovations and calling in the tradies. Problem is, how are you going to manage a renovation when your fixer-upper isn’t on your doorstep?
One suggestion could be to hand over the renovation to a project manager. This doesn’t mean you’re not involved in the process — from budgeting to choosing the kitchen cabinets — but it does mean you will have a local expert overseeing the task who understands the area and its building codes and requirements.
To find the right one, experts propose researching project managers within your area of purchase before you settle. By doing so, you will have a clear outline of the quality of work they have overseen or produced – you’ll even have the opportunity to discuss their reputation with previous clients to ensure they are fit for the task.
What’s important is that you’re placing your property in the right hands, someone that is quick and responsive, and has an eye for spotting small flaws — such as a dripping tap — that could later save you hundreds.
Armed with the right information, a property purchase interstate could be worth considering. Whether your next move is across the border or across the road, your Proactive Accountants & Bookkeepers is always here to help.