With more than 10 million homes in Australia, what are the chances you’re going to find the ideal investment property in your suburb or even city?
It’s unlikely.
However, because we’re often emotional beings with a fondness for the familiar, some prospective investors spend weeks, months and even years scouring their own neighbourhoods for the perfect investment property (which they may never find).
Some may also discount their potential returns for a place with the ‘charm’ factor, which needn’t be a consideration unless you plan to eventually live there.
Instead, like investing in shares, property investment should be a rational decision based on the numbers alone.
It therefore makes sense to look beyond your immediate vicinity to find a place that will secure rental income and capital gain, without significant costs.
The familiarity trap
Emotion is an important factor in many of life’s pursuits, but when it comes to investment it can cause us to make the wrong choices.
We may hold onto shares for too long because they were gifted to us or buy companies because they are household names (even if they offer dim prospects).
One of the key benefits of borderless property investment is that emotion is muted, sometimes because we haven’t even stepped foot inside the place we intend to buy.
It makes sense for an owner-occupier to inspect a place they wish to purchase – sometimes multiple times – but for an investor, this isn’t always necessary if you can get a trusted expert to do the due diligence for you.
In fact, it can be a distraction and can persuade us to focus on the wrong metrics, like how we would feel living in the same property, which is irrelevant for investors with no plans to occupy the home.
Why go borderless?
Borderless investors can instead assess properties based on the historic return profile of the suburb in which they’re based, current and projected levels of demand, and amenities like schools and public transport.
One of the attractions of going borderless is the potential to capitalise on the growth cycle by selecting markets that haven’t reached the same level of maturity as your home suburb or city.
For example, some investors choose regional cities that are beginning to attract employers or more developed cities that have higher population projections than their own in the expectation they will secure a greater return.
There is also an opportunity to enter less mature markets at a lower cost.
Finding the right help
After deciding to broaden the search scope to other cities and states, a key question may be: where to start?
Some investors turn to buyer’s agents for knowledge on property markets they are less familiar with and to handle the inspections and negotiations.
Others prefer to do the research themselves – either online or by visiting prospective towns and cities – and outsource part of the process to a buyer’s agent or property manager.
It’s important to note that borderless investment won’t be for everyone. Some investors prefer to be close by because they wish to manage the property themselves.
Having said that, for some it offers the prospect of lower entry costs and potentially quicker growth than local markets may offer.
It’s not surprising, therefore, that borderless property investment is a popular choice for many Australians.
