Investing Interstate

Hi Cathy,
welcome to the wonderful world of property investing. My advice is to read every Margaret Lomas, Monique Wakelin, Noel Whittaker book you can find for the ‘nuts and bolts’. Most of the others out there will be about more advanced investing – wraps, lease to buys, developing etc; unless you are totally fearless and ready to try anything from day one.
For your first property it is probably wise to buy in your own area as you will probably know the market? and start small for experience. Otherwise, the Internet is probably the only way to go at this point for you guys. Once you start making enquiries the agents will become helpful to a point, but they are always acting for themselves first, the vendor second and you third (or maybe 4th after themselves). It is a good idea to have every piece of criteria you are looking for ready to give the agent when you contact them so you don’t waste your time and theirs. For example; “I want only 2 bed houses, only brick, must have an attached garage, under $200k ” etc.
As far as eastern states; it’s a very big area, so you need to set yourself some parameters first; eg:
1.are you after capital growth, or cashflow? you probably won’t get the two together in many areas (if any) right now.
2. what is your budget? how much can you borrow? have you talked to your bank yet? Find banks that are investor friendly (St.George for one).
3. do you want to go for cities or regional areas or smaller country towns? the rent returns vary a lot between the three.
4. do the numbers. As a basic guide; over-estimate expenses and under-estimate income-
a)purchase price + 5-6% is about what your all up purchase costs will be anywhere you buy. If it’s less, then good.
b)allow 20% of the rent per year for all outgoings such as insurance, rate, repairs, body corp etc. If it’s less, then good.
c)allow at least 1/2 a percent over the interest rate of your loan to factor in other surprises.
d)when an agent quotes you an expected rent return; subtract 20% to be safe. they often tell investors best-case scenario to make you feel good.
5. never buy without a ‘subject to’ clause for a building inspection, bank valuation, pest inspection and lawyer to look at the contract. (part of the 6% purchase cost). and of course; these are independant which you arrange – don’t let the agent do it.
6. try to buy a property that you can ‘add value’ to to increase it’s rent return or capital value. eg; a house with no garage – you add a good carport, or turn 2 beds into 3, maybe a large block which you can later sub-divide and build on (more experienced investing I think).
Last but not least; it is my fortunate experience to find that a well priced, well located existing property in a good sized town/city will never fail. If possible, buy one built after 1987 (building depreciation).
As a suggestion for your first area to research; try the city of Frankston, Victoria. I live near it and have an investment property there. It is 45 mins from Melbourne, on the bay, good schools and Universities, shops, hospitals etc. It is still undervalued, has excellent infrastructure and transport and is at the end of the new Eastern freeway extension being constructed now. It has experienced steady growth even through the last 3 years decline in Melbourne, and there is plenty left to come. There is also a $1 billion marina planned for the near future. Naturally, there are good and bad areas there, but I don’t want to do all your work for you!
Good luck,
Marc