“Why are you ok to buy a house that you won’t be able to go and see!?”
A friend was shocked when she heard that I (Junge Ma - InvestorKit Research Analyst) just signed a contract to buy a house in Townsville, 2000km away from Sydney, my residing city. This is a common doubt you’ll receive if you talk about buying properties in regional areas or interstates.
To be frank, if I was going to live in that house, I would prefer checking it myself. However, for an investment property, I’m not just ok with not going and checking it myself, I feel more comfortable that way. This blog explains why.
When people ask the question at the beginning of this blog, their main concerns are:
· In purchasing - You’re going to put a lot of money in that thing, so don’t you need to do the quality check yourself?
· In holding - What do you do if anything happens to the house while you are so far away?
My response would be “I’m happy to have the specialists do these for me”.
This is based on my experience of my current purchase. As an expat, our familiarity with Australia is very different to those born here. It’s a whole new journey for me, so I decided it’s better to get some help from my colleagues – the InvestorKit team. They sourced this Townsville house for me, and the below steps happened in the last few days:
Friday 1st April - A local contact of our team went to the open home on behalf of the Investorkit and sent back multiple videos showing all areas of the property with comments on the condition of the property.
Saturday 2nd April - After queuing for a few weeks, I became the first in line in my budget range, so I was presented with this house. Knowing that the house is in good condition, well in my budget and has passed all InvestorKit’s due diligence criteria and having confidence in Townsville market (A market I researched and also onboarded), I am happy to proceed to make an offer.
Sunday 3rd April - Our team negotiated with the vendor’s agent based on their estimate on the house’s market value (using comparable sales) and got a deal for me at $4k below the asking price.
Monday 4th April - After signing the contract, the InvestorKit team booked a professional building and pest inspection on the house for me. As this process has been going on, my broker from (Hills Finance, based in Sydney) has been looking after formal finance approval.
And in a few weeks, a local property management team will be managing the lease on behalf of me after settlement and the remaining steps are complete (pre settlement checks).
There are 6 specialists involved so far: solicitor, buyer’s agent, local representative, building and pest inspector, property manager and broker. They have made and will make my investment journey smooth in four ways: saving time and effort, saving money, maximise my chance of success, and efficient property management.
The specialists save me time and effort.
If I was to do everything myself, I would need to spend lots of time on the early phases:
· Learning how to buy a property in Australia across various locations – What’s the process in each state? What do I need to watch out for? Which conveyancer do I use? How to negotiate with the vendor? How can I build a portfolio? ...
· Market research – With my budget, which region do I buy in? Which suburb is the best? How is the rental return rate in this area (yield)? Is it easy to find a tenant?...
· Property search – I would be swiping the Realestate.com App all the time looking at properties and collecting their info: location, number of bedroom/bathroom/car space, inspection time, appointment needed or not, price guide, etc. A never ending process until I am successful.
· Due diligence – I like this property based on the photos, but has it been impacted by floods or is it in a bushfire prone zones? Is it close to any noisy road? Is the neighbourhood safe?...
· Inspection – I would be rushing from one property to another for open homes on every weekend (even some weekdays). With no guarantee that I would like it or be successful. It is this that leads to the emotion building up too.
All the above activities would have kept me restless for months before finally nailing a property. However, with the specialists working behind the scenes, it took me just a few days in total before signing the contract:
· I still need to learn how to buy a house in Australia across multiple areas and how to build a portfolio, However I’ve got guidance from Arjun and the team and I can learn as I go along.
· I have market reports ready with each region’s economic performance and house market trends, based on the most up-to-date data.
· I have the team search for properties and do the due diligence for me, whilst I can focus on my own work and life.
· I have the team and their local connections attend the open homes, so I can spend my weekends catching up with friends, pressure free.
The specialists save me money.
Some might doubt it: How can you save money while spending so much on the specialists’ service fees?
I pay the service fee to avoid spending more in the future. Below are some examples.
· Data: If I was to do the market research and due diligence myself, I would need access to property data, eg. RP Data. That would cost me around $200 per month for a subscription. Note, that this is the tip of the iceberg for research. InvestorKit spends $125k+ on their research division each year.
· Travel costs: If I was to travel to Townsville to inspect the house, I would need to pay for the transport and accommodation, around $1000 for a weekend. And that is only for one house in one city. What if I wanted to check on multiple properties in multiple cities? Easily thousands of dollars gone.
· Negotiations: This is where I believe the specialists save me the most. One of my vital weaknesses as a buyer is becoming emotionally attached easily. I would love to offer a higher-than-market-value price to beat any potential competitors just to get something I really like. In this purchase, I would offer higher than the asking price to be “safe” if I saw the house myself and fell in love with it. However, the specialist (buyer’s agent) negotiated purely based on the market value and got a deal even lower than the asking price. That is another thousands of dollars saved. As they specialise in comparable sales analysis, they also reduce opportunity cost through finding the sweet spot in price rather than low balling every deal too.
The specialists maximise my chances of success.
If I was to purchase a property myself, it’s highly likely that I would be focus on one region because of the time and monetary costs on research and inspections. However, with the specialists, my options are much wider – InvestorKit team have done all the research work and I don’t have to worry about long-distance travel for inspections. The more markets I’m open to, the sooner I can get an ideal property. As I’m open to all the markets in my budget, my chances of success have immediately multiplied.
While holding the property, the specialists will make the property management more efficient.
Around 75% rental properties in NSW and 82% in Queensland are professionally managed for a reason: the property managers are more efficient than landlords in managing rental properties.
Most investors would agree that having a property manager handle their property not just makes the landlord’s life easier but gives the tenants better experience as well.
For landlords, the property manager helps select higher quality tenants, makes sure of on-time rental payment, and has more experience in handling conflicts and solving problems.
For tenants, the property manager is more accessible when there’s any issue, and they offer better and fairer solutions than the inexperienced landlords.
As an investor, I would definitely use a property manager even if I buy in the building I’m living in. So what’s the difference between holding a property in the same building and in another city?
Some may argue that if the property is close by, you can go and check on it in case of an emergency – OK, assuming that I went and saw what happened, what could I do other than waiting for the maintenance (which my PM is taking care of) and preparing for any possible insurance claim (for which PM will help provide docs and evidence), which would be the same if I didn’t go?
Hiring specialists is the reason why I was comfortable buying a house 2000km away without seeing it myself. The specialists have already made my purchase journey as a first-time investor smooth and, I believe, will make my landlord journey smooth and relaxing as well. At the end of the day I have been able have access to the whole country from an investment perspective, and I get the support around me to make it all feel like its my backyard.
If you are already busy with work as I am and would like to spend the precious spare time on enjoying life rather than digging data or rushing from one house to another, don’t forget there are a bunch of specialists doing this as their full-time job! Just like the InvestorKit team. InvestorKit is a buyers’ agency devoted to analysing local economic and house market data, matching you with the best suitable house and nailing it for you at the most reasonable price. Would you like your investment journey to be worry-free like it was for me ? Just let us know here and let’s start with a 45-min FREE no-obligation consultation!