Is the grass really greener on the other side? Maybe. Australia has seen a surge of investor activity in recent years, with investment loans reaching record highs. But as home prices rise, plenty of investors are looking beyond their own backyard and making interstate purchases.

Australian homes have delivered plenty of pluses for investors in recent years.

Vacancy rates are low and rents are rising across much of the country. Strong price growth has seen more than 93% of recent investor sales make a profit – the highest rate in a decade.

Not surprisingly, that’s seen a rush of investors keen to buy a rental place, which has pushed new investment loans to record highs.

But there’s a twist.

As many as one-in-five investors nationally are casting their gaze beyond their local neighbourhood and buying interstate, according to PropTrack’s latest Investor Report.

In some parts of the country – including the ACT, Tasmania and the top end – 40% or more of investors are buying interstate.

Is it a good idea? Here’s what to weigh up.

The ‘freedom’ of buying as an investor

When it comes to deciding where, and which type of property they’d like to buy, investors can enjoy plenty of freedom.

An investment property doesn’t need to be close to your work, family or friends. So in many ways, you’re free to buy where you choose.

And investing interstate can bring the advantage of diversity. You’re not exposed to the fortunes of just one property market.

Of course, it always makes sense to invest in an area with capital growth potential, healthy rents and plenty of tenant demand. But your local market may tick each of these boxes.

There is another factor that may see investors head interstate – and that’s affordability.

Investing interstate may be more affordable

Home values differ widely across Australia, and this can be a key driver behind the decision to invest interstate.

An investor who lives in Sydney, for example, where the median home price is over $1.295 million, may not be able to afford a locally-based rental property.

But their budget may extend to a more affordable market such as Hobart ($737,742), Melbourne ($828,249) or Adelaide ($937,021). Or the same investor may decide to buy in a regional area (national median $758,788).

The point is that buying interstate can simply be more affordable – and potentially healthy returns.

What to be aware of when investing interstate

Investing interstate can be a straightforward process though there are potential pitfalls to be aware of.

First, you may not have the same home-town knowledge of the area you’re buying in.

That makes plenty of research essential.

In addition, checking out homes listed for sale won’t be as easy as jumping in the car and popping out for a quick inspection.

The solution to both challenges can be using a buyer’s agent. This is a licensed professional, who can share their local market knowledge, track down properties that suit your goals and budget, and help with price negotiations.

A buyer’s agent will come at a cost though. You may be asked to pay a percentage of the property’s sale price or a flat fee. It’s an added upfront cost, though when you’re investing in an unfamiliar area, hiring a buyer’s agent could be money well spent.

Bear in mind, as an interstate investor, you’re likely going to need a property manager to handle the day-to-day renting of your property. This will also involve an additional cost, so be sure to do the sums to see how this could impact rent returns.

Applying for an investment loan for your interstate property

If you’re planning to invest interstate, the good news is that you aren’t restricted to lenders based in other states.

We can help you find an investment home loan that’s a great match for your needs no matter where the property is located.

It’s a good idea to talk to us at an early stage.

The process of applying for an investment loan works in much the same way as an owner-occupied loan. However, some lenders take potential rental income into account when deciding how much you can borrow. Others don’t.

The difference may seem minor but it can shape your buying budget.

Talk to us about your interstate investment

Call us about your plans to buy an interstate rental property.

We can explain your loan options, compare lenders, and explore different loan structures that can help you achieve your goals.

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