Anyone who’s a regular watcher of our videos will know that we’re proponents of borderless
investing because not all of the states move in the same cycle.
So whilst we think that time in the markets is a very good thing, we also think that an
extension of that is actually timing the market to make sure that you’re in the state that’s
got the best chance of being in the upswing stage of the cycle.
So in the next 24-36 months, you can get the benefit of the growth and further compound
your portfolio for better results.
So I was recently interstate, looking at another market to help other clients buy investment
properties.
And it’s not until you get there that you see what’s around and you can understand
the differences between the styles of properties in the suburbs.
But equally when it comes down to the dollars and the cents because, not all states have
the same stamp duty regime for example.
So if I was to spend $600 000 across the states, in New South Wales the stamp duty would be
roughly $23,000 but in Victoria, its $32,500 – so that almost $10 000 more.
Or if I go over to Western Australia, it’s still roughly $23,000.
So depending on which state you're in will depend on how much stamp duty you pay.
Equally, land tax is different across the states.
So if I go to Victoria there’s a threshold before it kicks in whereas if I go to Cairns
or the ACT, there’s no threshold, it kicks in straight away.
That’s a consideration the investor would need to do on their calculations to make sure
that they can actually afford these properties.
So today I just wanted to remind our viewers that it’s not just a case of getting on
the internet and looking at real estate with the view to buying interstate because we always
propose that you need to go and check it out yourself, so that’s a given.
But there are other considerations as well.
Cooling off period for example.
In Adelaide, 2 days no penalty, in Melbourne 3 days and there is a penalty.
You’ve got to have a strategy around how you’re going to use various rules in each
and every one of these states.
Another part of it too, is the different contractual processes.
In New South Wales and ACT you’ve got the exchange system, whereas in Western Australia
and Queensland you’ve got offer and acceptance and you can do your due diligence after that.
In Victoria it’s very auction centric in the built up areas so you’re going to need
to do all of your due diligence in the lead up to the property and quite often you’re
going to spend some money in advance of the property without any guarantee of actually
getting it.
There’s lots of considerations that people need to have and more recently there’s a
verification of identity.
And you need to understand that because if you’re buying in – let’s say- New South
Wales and you decide to buy in Western Australia or you decide to buy in South Australia, you
need to be able to prove your identity.
And given you’re not able to walk into the solicitor and verify your identity straight
away; you need to have process in place.
There are ID companies who can verify your ID on behalf of the solicitor so that you
can get the transaction done.
And equally if you’re living internationally and buying into Australia, there are a whole
lot of ramifications.
So the point is very simple, the overarching context is that I encourage all investors
to consider being a borderless investor because they can get outperformed results but the
point is that you need to understand the dollars and the cents of the decision to buy borderless,
so that you’re not going blind.
And more importantly, you’re not getting any nasty surprises once you’ve signed the
contract and afterwards you find out that stamp duty is so much more expensive or that
you’re cooling off period doesn’t even exist.
These are the things that you need and it’s why I think that buying an investment property
really is the domain of seeking professional advice.
Because someone who’s actually done it before and been there before and knows the path that
you need to go down so that you can have a successful and smooth transaction is very
important, so I still encourage everyone to consider being borderless but know that there’s
a bit of research that needs to be done.