Ashleigh Goodchild says investors can mitigate the risks of buying property in a different state.
Ashleigh is a long term local West Australian property entrepreneur, investor advocate and property management specialist.
With national buyers agents and interstate investors exploring areas such as Western Australia, Ashleigh joined Bushy Martin on the Get Invested podcast to highlight the potential risks with interstate property investing and how to mitigate them.
Interstate property investing risk: Buying property that’s tenanted
Ashleigh revealed that buying a property that’s already tenanted is one of the biggest risks interstate investors face due to unforeseen existing challenges from the tenants.
“I am always curious as to why an investor who has a really good tenant in a property would be selling. There’s generally two reasons – one is that they financially have to due to one of the three D’s – death, divorce and debt. But then there’s a good chance that they’re selling the property because it’s becoming a bit of a headache, and a big risk that owners are taking are properties that are tenanted, and what happens with those is that access into them is really difficult. So a sales agents may say to an investor listen it’s tenanted, the tenants paying this much rent, but we can’t get access in, and then with this FOMO, people are still buying the property without seeing that. And gosh, the number of tenants that owners are inheriting from a property that are a problem is being very hard to manage,” she said.
“Another risk as well is that the paperwork that has been put in place for that tenant is sometimes missing. We’re getting properties handed over with no bond, no lease agreement, the wrong lease agreement, and just really crappy situations, and investors don’t get to check that prior to putting their offer in, because if they ask too many questions they’re not going to get the property because there’s so many other offers, and so you’ve got to keep your offer really simple. So that is definitely a big risk and I’m definitely seeing a lot of problems coming because of that.”
Interstate property investing risk: Old listing photos
Interstate investors unable to visit the property need to ensure the listing photos are up to date and an accurate reflection of the property.
“I think the other thing with buying site unseen is that we don’t have a rule in Western Australia about how old the photos have to be. So what can happen is, if you’re looking at a property and in the description it says that it’s tenanted at $450 per week and you notice that the photos the agent has used are unfurnished photos, I would be 100% asking them for up-to-date photos or an up-to-date walkthrough of that property, because if they’re using photos from five years ago you’ll want to see the property right now,” Ashleigh said.
“I had a client get stung with this. She was pressured to put an offer in because there were other offers, there were tenants in the property, and she went to go do the pre-settlement because we weren’t able to get in prior, we could only get in just before settlement to check the plumbing and electrical. I have never felt so bad in my whole life calling this owner and saying I am so sorry that this property does not look like the photos. We got a few things from settlement, but my words to him were don’t worry about making the right decision, make the decision right. And I said you’ve made the decision, now we’ve just got to make it right for you, and we have been in a process of getting it all cleaned up, which a good property manager is going to do for you, but it’s unnecessary stress that you have to go through.
“So I think that investors can have a really good look online at a property and look at those photos, but we just don’t naturally seem to think when were these photos taken, if they were taken last week or 10 years ago. So it’s very important to be mindful of that.”
Interstate property investing risk: Hiring the wrong property manager
Ashleigh and Bushy urged interstate investors to secure a local independent property manager to ensure they’re making informed decisions.
“I think it’s really important to have independent professionals, so not the property managers that are attached to the sales office because they’re going to be under some pressure to tell you what you want to hear, rather than what the truth is. But each of those key players – the mortgage broker, the investment strategist, the buyer’s agent, the building inspector, the property manager – if they’re all independent of each other, the likelihood is they’re not all going to agree with each other, so there’s going to be some robust discussions, but it’s going to allow the investor to make informed decisions based on all that in relation to what’s important to them,” Bushy said.
“It’s important to have a local property manager who has intimate knowledge of that location and who eats and breathes the local market because they know how one street differs from the rest and how one area changes from the other and how that property compares to others and the demographics of the area in terms of what the actual tenant profiles are.
“An independent property manager who’s completely unrelated to the property transaction will also tell you the ins and outs, because if it’s a dud property it’s going to end up the property manager’s headache as well, and the last thing a property manager wants is to end up with a dud property. Dud properties generally come with trouble landlords and trouble tenants, so it becomes a world of pain for everyone. So just taking the initiative to get someone who really understands how the local market works, has their boots on the ground, and can do a full video walkthrough of that property and a pre-settlement inspection to make sure that it’s a full working order exercise is massive from the get-go.”
Listen to the full interview here.
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