Long Distance Real Estate Investing

Hello PC

I am an 18 year old planning on purchasing my first investment property. I have read a few books, listened to podcasts and scrolled through the forums here at property chat. I would just like to say that I appreciate the work a lot of you put into this forum it is really helpful so thank you.

A few books have said an individual should not limit their self to local markets and look countrywide for opportunities as purchasing real estate in local markets is not necessary if it means finding a better deal elsewhere. Of course the yields would have to cover more expenses because 100% of the work would be outsourced.

So I've recently begun looking at blocks of units countrywide where the rental yields are much higher than my local area and I have seen opportunities that would be positively geared at a more affordable cost than where I am located. The DSR, vacancy rates, affluence and safety scores etc are closely comparable to favourable markets in my local area as well.

So my question is, how many of you back this concept or disagree and do you have experience in long distance real estate investing, what’s your opinion, is it risky for first timers, what are your tips and what to look for?

I look forward to your feedback.

TIA

 

Do you think that higher yielding regional properties will grow as fast as the cities? At your age, you want growth. Your income will probably grow so if its a tradeoff between growth and income you should focus on growth.

Otoh, it doesnt mean you buy in sydney at 2% yield and think its a good idea.

Long distance can mean buying in another state capital.

 

Not sure what is long distance to you.
To me, long distance is buying in VIC, being in NSW.

For some, it can be buying US, staying in Australia.

It works if you habe a good team in place to manage the property and you leave growth prospect in the property as that will keep you safe longer term and let you buy more in future.

Regards

 

I see your point it makes total sense.

I was just thinking for my first property to aim primarily for cash flow so when I finish my apprenticeship (currently in 2nd year) I wont be restricted from going travelling due to having out of pocket expenses such as mortgage repayments and maintenance costs.

 

I have looked at purchasing in Australia, not overseas e.g. the US at this stage.

Your points are helpful and I will search for a compromise with areas that show decent capital growth if it is at the expense of having some out of pocket expenses.

What is your ideal of a good capital growth rate?

 

Honestly, speculation doesn't works. I habe tried to add value while buying. Hence taking leverage of 8% to 15% and then targeting 4.5%+ yields.
Though the options are decreasing every single day that passes by.

Regards

 

Thats your call. Lifestyle is important too. But if you are after cashflow and wont get much capital growth, why not just buy shares? The advantage of property is the gearing. That magnifies gains (and losses).

The other thing to consider is how much your borrowing capacity is used up by the first property.

During the last Sydney cycle (say 2008 to 2017) it was about 7% a year, slower at first and higher at the end. Even 5% would be great growth compounded for a few decades.

 

First up, congrats on starting so young and wanting to build a better future for yourself mate.


Re buying outside your location, I haven't seen most of my IPs around the country so investing outside my local area is a non issue for me, however I think I have a decent handle on doing DD so it reduces my risk. You want to be fairly sure you know how to do thorough DD before you take a punt and buy on the other side of the country.

If you were my son, I'd be advising you not to rush in to buy CF positive properties in woop woop unless you have a strong indication that the area will see decent CG and or you are able to add value to the property.

I can tell you now,imo the #1 thing that will make the biggest difference to your investing success and give you the most investment options is to focus on your trade and put yourself in a position to earn as much money from it as possible as soon as possible. If you can focus on your income/business ability with your trade, it will make investing in RE and your chances of success so much more realistic when you are ready.

Just remember, every purchase you make has to count. If you buy cheapies, you take on debt, which reduces your future money available and serviceability which then limits how fast you can move on. So you do not want to be wasting your deposit and serviceability on duds returning you $15 a week with no growth in sight.

At the end of the day it all comes back to what are your goals, how much you are willing to sacrifice and how focused you want to be. I also started when I was 18 and I have no regrets. But there are many sacrifices to make. Most young folks (and many older ones for that matter) just aren't willing to make the sacrifices. Only you know what's right for you.

 

Our long distance investments were interstate - so we would just jump on a plane and spend 2-3 days looking at all options and back on a plane by end of that time after signing a contract on the best possible option.

How far away are you talking? What are the long term prospects for the area? Population growth and local economy (jobs) would be top of mind for me as that'll drive growth and define yields/vacancy rates.

 

I live in Perth and my first IP was in Melbourne. No real issues from my point of view. I would recommend it.

That said, if you buy in Perth you may struggle to find a good property manager. The general standard of pms in Perth is poor.

 

a good property manager is the main thing. I have had property which I lived 1 km from where the PM organised the renovation. I have other property which I live 800 km from and have seen twice in the past decade.