Logistics of long distance property investing

For some time I was toying with the idea of inter-state/inter-city investment but had shied away from it considering the formidable logistics it entailed, at least from my vantage point. However, I understand there are people in PC who are or have been such investors. I would appreciate if you could share your own experience. In particular, I have the following issues in mind:

1) Lack of / poor local knowledge – if you are not or cannot be on the ground you are at a disadvantage, merits of the internet notwithstanding. How you assess, for example, noisy neighbours, or odour from a business premises not far away?

2) The cards are stacked against you to strike a good deal when you buy – you can’t promptly inspect the property, assess the neighbourhood, develop a sense of the market and offer a fair price to secure the deal – you may end up overpaying or under-offering and missing on a deal;

3) Ditto when you sell;

4) The owner is vulnerable to agent and tenant exploitation . Just face it, agents love absentee landlords. You cannot physically go and inspect the property to triage a call for a repair, for example – if it’s of a minor nature you can fix it yourself if you are local; if it’s major you can organise your own tradie and get a better deal. All you need a fussy tenant and/or lousy agents and you would be bombarded with requests for repairs.

(I had, some years ago, attended to an ‘emergency’ call of an elderly relative’s tenant’s – the power went out on a Sat evening; they needed an electrician pronto. So I went in to inspect the place and found the main switch tripped; I flipped it back and the power was back; asked them how it went out and found out it was a faulty electric kettle. Needless to say an electrician call would have costed my relo a week’s rent.)

 

Yet people still do it. So what are the advantages of interstate property? If you were in perth in the last 10 years and didnt buy sydney because it was too hard? Or in sydney in 2000 and only bought in sydney to watch it flatten for 10 years?

A good buyers agent and property manager will handle most of the issues. With property ads and sales data online, a little research will give you an pretty accurate price to buy or sell.

If you have multiple properties you cant attend to them personally anyway. Land tax will eat up savings from sourcing your own tradies.

but if you can only think of negatives, dont do it then.

 

This is exactly why I have always purchased property in different states. Follow cycles

In the main did my own research, BA can have their own bias... good/bad???

 

Lived in Sydney at the time. Bought in Ballarat. Easy. Did my own research and bought reports from people I respected. Phoned a PM to take a look and see if they wanted on the books and what it would rent for. Got pest and building reports to take a look. Google earth bla bla. Knew the values in the area. Put in an offer. No problems. 10 years later its been great. The property I bought as I lived in and the same city being Canberra at the time and inspected it and others?. Nope. Ballarat is much better. I would never put all my assets in one area whether real estate or shares. Now I'm in China. Whatever. I don't have a home state or home country bias so I don't care. But I'm a girl - but not a big girl's blouse for sure

 

Yes, totally agree with all of this. Land tax is not the first thing that many new investors think about. I notice that many well educated and intelligent people are incredibly reluctant to invest outside their local area.

 

I own both interstate and international residential investment property.

All of the challenges cited, are fair to raise. All I can affirm/speak to is the importance of team-building in the locations you hold. It all comes down to having an excellent team who is trustworthy, attentive, and responsive. So, point #4 of the OP's first post, is most paramount to me personally.

I haven't always got this right and have paid for my mistakes along the way. But I've learned a lot and continue to grow and learn.

Also consider here the value of "economies of scale". I.e. once you find a location you like that may be interstate or even international; aim to grow in that area and potentually have multiple properties there. You get economies of scale in terms of building the one team there to manage both (or more) properties in that area. It makes for less emails and phone calls from fewer stakeholders. You can also deploy the tradies you know and trust in this area; on multiple properties.

 

A good buyers agent will solve all of those problems for you.

They also usually have trusted builders/agents/tradies/conveyancers etc they regularly work with and trust.
I recently did this interstate. Spent around $10k on a BA who did all the searching, inspections, property reports, all the running around for repairs/improvements as well as the handover for the sale, collecting keys, etc etc and not to mention we got the property about 10-20k under market value before it even went to market.
Well worth every penny IMO.

Seems like you are finding excuses to not do it

 

Have owned interstate for years. Also owned in the state I have in. Can honestly say the service from agents is about the same. But I am pretty hands off. That may mean I am paying more than I could if I arranged everything myself, but my time has a cost too. Its a cost of business, against the land tax savings and state by state cyclical gains.

 

I invest interstate, it's a great way to reduce land tax.

The trick is you have to be prepared to pay for advise from trusted sources.

I use a buyers agent within the states I don't reside in, it saves on my time and money visting the state (hotels, flights etc) when on the property hunt, plus a decent buyers agent (not a property spruiker) can be worth there weight in gold.

Come to think about it, I attend my property's in my home state in person, no more than the interstate ones because I have them all looked after by decent property mangers.

More of a mental thing than an actual issue for 90% for it.

This website is great for reaching out about good agents, mangers, tradies etc in an area, so that's a good tool to use to reduce your chances of having issues.

Lot's of people fail to factor in there time as being important too.

 

Just got to make sure you are using the right BA if u go down this road

you know that saying...... you dont know what you dont know

You really need to do research, as I said before BA will have their own bias.

I know some BA that I would in no way recommend as I have seen some disasters that investors have purchased in my State

After so much research I have found other ways to network, start with many real estate agents in area of interest. Look at leads on PC, then identify market conditions. Market conditions seems to be overlooked, yet imho most important factor to consider

 

I never needed a buyers agent. I enjoyed doing all the research myself and paying RE managing agents, building and pest inspectors, and engineers to look for me. If I had looked at myself I'm an idiot and would have looked at irrelevant things like drapes or carpet. I left the experts to it. I made the idiot mistake and looked at my own home and bought it without the investor lens on. But granted some may not have the time or want to learn how to research so a BA may be the way to go. For me no.

I parlayed this all into international investing now. May later be a BA or building inspector for others based on all the knowledge I have now ;-)

 

If time is so important and you dont like the thrill of the chase or the journey. why do a half arsed outsource and still have to put up with issues, maintenance, tenants, PMs, brokers ,banks accountant's, council's, rate's, levies, BC, Insurance land tax. Shot servicability, poor liquidity and poor cashflow. Just get it all done in an REIT, with the real experts, elite of buyers agents and managers who have cheap finance giving internal gearing, cashflow, improved serviceability, liquidity, long term indexed rent and ability to swap assets. Or buy property in the same state that doesnt have all those issues including Land tax, PPL, Primary Production Land, or CIP which doesnt have most of the issues of RIP.