The borderless investor

THE BORDERLESSinvestor

Property commentator, Michael Yardney*, wrote of the ‘borderless investor’ earlier this year. This is the person who invests in property that is located anywhere in Australia, which may be intra-state or inter-state.

He was quite in favour of the notion, suggesting that investing in a location other than your own may be a wise way to spread risk across multiple markets and take advantage of growth cycles that may be stronger than occurring in your local area. Investing interstate may also serve you well through lowering your land tax bill as each state has its own land tax threshold.

Investors may narrow their opportunity by narrowing their geographical focus. Sometimes investors convince themselves they can get better results if they invest in a place they are familiar with. But living in an area for your entire life, or even many years, doesn’t mean you have to restrict yourself to investing there.

Yardney made the point back in April that this was especially relevant to investors living outside the largest capitals where capital growth is likely to be higher over the long term – namely Sydney, Melbourne and Brisbane. Though, he did suggest that even if you do live in one of these, it may still be worth looking interstate if rising property prices continued to make it hard for investors to get into the market.

When you are investing in property, anywhere at all, there are important factors to consider, with key ones being: your budget, its location and selecting the right property in that location.

Diversification of location may help reduce your risk as a property investor.

Any property investment should be part of a long-term strategy because property investment is a process, not a one-off event. Any property investment, no matter where it is located, needs to strategically fit in with long-term goals.

Consider being the investor who is prepared to move out of their comfort zone and buy outside their own suburb, city or state. This investor accepts that they may not be able to easily visit the property and see it with their own eyes. This investor is basing their investment decision not on their proximity to the property, but on evidence, facts and research.

Remember that Australia is made up of many different real estate markets. Each has its own cycle, and they won’t always be moving in sync. Even within a city, one suburb can be experiencing growth, while a nearby suburb may not.

What research truly involves is investigating the right property, in the right location, at the right price.

Interstate investing may open up those opportunities immensely, whereas just looking locally may only turn up underperforming properties to purchase.

As an interstate investor, or someone investing in any market other than the one they are familiar with, you may need to be more focussed on your due diligence and do additional research to gain the best understanding about what is happening in the market you are considering. This includes taking in historical prices, rental yields, development plans, employment opportunities, population growth, infrastructure development, and so on.

Accept that you may not be able to visit the property yourself, in person.

Form relationships with agents who have the on-the-ground perspective, with comprehensive local market knowledge and experience.

Now is the time to take advantage of the opportunities that current property markets are offering.

*Michael Yardney wrties regular columns for Yahoo Finance, Smart Company, Your Investment Property Magazine, New Zealand Property Investor Magazine and Your Mortgage.