Pros and Cons of Investing Interstate
If you are considering buying a property in another state, it is worth considering the advantages and disadvantages. Here are some pros and cons of an interstate investment.
The Advantages of Interstate Investment
Risk Distribution: When you buy property interstate you are spreading your real estate risk. Every state has its own unique position in the property cycle which means that their markets strengthen and soften at different times. For example, house prices in Sydney might be on the increase but in Brisbane or Perth they are decreasing. This is particularly worth paying attention to if you want to invest for rental purposes.
Tax Breaks: You are never going to get around paying your property taxes, however, you can get tax exemptions. For instance, if you own three properties in NSW, your tax is based on the cumulative value of those properties. However, if your purchases are spread between Victoria, Queensland and New South Wales, the properties are taxed individually at a lower rate. You should also bear in mind that each state has its own legislation.
The Disadvantages of Interstate Investment
Distance: One of the major disadvantages of investing in property interstate is that it is more difficult to manage a property when you don’t live locally. Local knowledge is valuable when you are purchasing a property so things can become a bit more confusing when you are dealing with a market that you are not familiar with.
Hidden Costs: To ensure that you don’t get trapped into an investment that isn’t going to be financially viable, you will need to hire a solicitor or conveyancer who can help you understand the legal requirements in the state where you plan to invest.
Research: It takes a lot of research to make good decisions when expanding your portfolio outside of your state.