Buying property in other locations when metro is too expensive
When CBD prices surge its tempting to look at alternative locations to get into the property market, and I totally agree with looking at your options – go in with eyes open, a real plan or strategy, and make educated decisions.
I’ve seen a number of first home buyers who have been advised (not by me) to purchase properties in other locations with a view to growing their deposit. What I say about this is know what you’re getting out of it. You need to know your exit strategy, the reason you're doing it - are you expecting growth & cash it out or saving the extra rent to further your deposit?
Also consider the costs in doing so – you’ll pay stamp duty and legal & loan fees to buy the property and agents fees, legals and sundries to get out. That’s a lot to make up from the growth or rent bonus you received.
And remember nothing is guaranteed, you could effectively lock yourself out of the local market while you’re holding the other place & you may not get the return you hope. Although we hope you do!
Be particularly wary of those country towns where prices are so cheap your deposit goes further, it looks like it makes sense. It can be hard to borrow in these locations- you might need more deposit, but even if you need extra 5 or 10% it's of a smaller amount – and it can be hard to sell in a short time frame if you need to.
Rather, if you can find a location which has a balanced and diverse economy & where they are building new infrastructure – this could be a more sound investment to suit your goals. If new infrastructure is being built then likely the big boys with the big money to spend on research have done the work for you and found this to be a growing location.
It may not even be another location you consider, it could be a different property type – a town house vs the traditional house and land in the metro region you desire.