3 tips to navigate the risks and rewards of interstate investing

When it comes to buying an investment property, you don’t necessarily need to limit yourself to your own backyard.

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.

❖ Diversify your property portfolio

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.

❖ Seize opportunities

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.

❖ Benefit from tax perks

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.

Key considerations to help balance the risks and rewards

Before investing interstate, it’s important to take a step back and assess both the potential upsides and the risks involved.

With that in mind, here are some key considerations before getting started.

1. Do your research

Before buying interstate, it’s important to do your homework. This means understanding the broader market, the city or town, and the specific suburb.

What are the rental yields and vacancy rates like?How is capital growth tracking? What infrastructure is planned? What is the expected population growth, and how might it affect housing supply and demand?

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.

2. Choose your strategy

Before buying interstate, it’s important to consider your overall goals.

• Do you plan to buy and hold, and ideally benefit from capital growth?

• Maybe you want to buy and flip, and hope to turn a profit in the short term by adding value through renovations?

• Perhaps you’re a rentvestor intending to rent where you want to live, while owning an investment property in a more affordable or high-growth area.

  
  

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.

3. Get a reliable local team

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, help identify suitable properties, 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.

How we can help

Navigating interstate investing and finding a loan that suits you 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 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.