Is it preferable to buy an investment property local to my current address?

Lucy EldredDecember 17, 2020

If you've had your eye on a potential investment property around the corner from where you currently live, you wouldn't be the first. There are many pros and cons to buying a property locally. For those dipping their toes into investing, it's usually their local property market that has them excited.

The certainty that comes with knowing your own area and being able to drive past your investment property can be second to none in many people's eyes. The tangibility that comes with investing in property in the first place – that you'll be buying something you can see and understand – is part of the reason it might feel safer to purchase nearby.

However, there are some crucial questions you need to ask yourself before closing your eyes to the rest of Australia.

Are you living somewhere that is expected to do well for investors? Is there somewhere better? And can you afford it?

It's unlikely that the one suburb you live in is the best investment location out of every suburb across the country.

If you own the home that you are living in, then it might actually make sense to diversify and consider a property further afield, or even interstate.

Similarly, if you haven't yet purchased in the area, it might be worth looking for other opportunities first, rather than holding yourself to one specific location. You need to make sure the area works for you, to achieve your financial goals.

Often, the reason you live somewhere is very different to the reason you invest somewhere.

There are some specific benefits to purchasing a property that is local or just a few suburbs away. You have the option to repair and renovate yourself, without having to travel long distances, and you can always do the protective drive-past if you're getting concerned about the investment. It also makes self-managing the property easier if that's a consideration. If a substantial renovation, that you will be hands on with, is part of your strategy, then it's worthwhile considering the better options closer to home.

Buying locally can also save you time if you have the required knowledge about the area's property market in advance. Many first time investors keep a regular eye on their suburb's auctions and sales.

However, having strong local knowledge and connections can go both ways.

It can be a useful set of skills to have as you seek out local experts, and if you have knowledge as to potential changes coming up for the area, the good and the bad streets, where the noisy neighbours are and so on, it can cut short your research time. But it also means you may be very biased about an area you like. You must be able to leave your emotions and assumptions at the door and look at an area with fresh eyes, as an investor not as a resident. You may find that what you think is true about the area is not the case when you take a step back.

Look at the possible return and investment figures, the rental yields and what you are getting for your investment. You may find that purchasing in a regional area, or in another state, may be more lucrative. With the internet now at your fingertips, doing some preliminary research is easier than ever.

While it may seem daunting to look at another location, this may just suggest that you haven't sufficient your research or that you may want to consider engaging a buyer's agent or other professional.

And remember, even if you decide to purchase in a location not local to you, do not shirk on your physical inspections and necessary research – it's likely to be worth the costs and due diligence.

You must also be astute about the differences from state to state. There are different real estate and planning laws across the country that you need to make yourself familiar with.

For help getting started in property investment, speak with a RAMS home loan specialist and pick up your free RAMS Investor Pack.

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Disclaimer: Information in this material in general and does not take into account your objectives, financial situation or needs and you should consider whether it is appropriate for you. You should also obtain independent professional advice relevant to your financial circumstances.

The taxation positions described are general statements and should only be used as a guide. It does not constitute tax advice and is based on current tax laws and their interpretation.

RAMS Financial Group Pty Limited does not endorse or assume any responsibility for the advice, content or services provided by Property Observer or any other third party referred to in this material.

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