Order of Purchasing a Property

Hey,

Im a young investor. You may not realise it but I believe age is the BEST leverage of all!
My theory is: The younger you start investing the more time you have for your assets to grow and grow……..

Just let me know if you can convice the banks on that one!

There is no blueprint but here is a good place to start:

Read, Read, Read. There are a number of authors available in regards to domestic property investment with very different strategies available. I would recommend reading a few of these and making up your own mind based on your situation and what you feel comfortable with. Be flexible with this

Set Goals. Set some realistic goals for yourself in regards to property accrual, eg: buy first prop, then buy another within another 2 years and 1 every year after and so on. Whatever floats your boat and is in line with your strategy, negative gear/positive gear/buying for depreciation etc etc.

See what you can borrow. Im guessing finance will be an issue, I always recommend brokers as you get an entire 'suite' of loan products in one simple visit and if your broker is any good and you can communicate, they will help you select the best one for you. Why go to a bank which may only have 5-10 loan products when you can go to a broker with 700? Seeing a broker initially will enlighten you as to your borrowing capability and they can direct you in regards to your obligations(repayments etc) to meet the loan agreements.

If you qualify for a loan: Visit an accountant whom specialises in property investment, they will guide you on the best ways to maximise tax deductions and what to target when purchasing, also they can give you an idea of what costs are 'claimable' at the end of the financial year or when sale occurs(heaven forbid).

Get to know your target area. By now you should have an idea about how much you can spend, whether you want to buy a negative/postive geared property and a general idea about what you want. Time to get the newspaper, jump onto realestate websites and Find a target area(if not local) that you feel suits your investment goals/requirements. Get to know the background of the area, Aus beaureu of statistics is helpful also ringing property management offices about what is in demand in the area will help you find a good target property that will be rented as much as possible.
 
Once, you have found your area. find your house. You should have generated a fairly lengthy list of criteria to aim for with this purchase and while you will never find a property that suits all of your criteria, you may come close and you will need to decide for yourself what concessions are worth making for the greater good. When purchasing my last property, I set a blueprint of what my broker can finance me for, what property my accountant will be able to do the most with and what property the rental managers are 'hot for' in the area. This helps me make my decisions. Armed with all this you can hit your local real estate agents.

Inspect, analyse numbers. But over analysis will probably just scare you! It scares me! Some of the numbers you will need to crunch are the management fees, local rates, water rates(residential landlords usually pay these as well) and insurance, these are all ongoing costs involved with the ongoing ownership of an Investment property.

Once you have inspected a few, found the property that best suits what you are looking for, time to put in offers. I have no real tips here. It is important however to get it as cheap as possible. Even request an extended settlement period in your contract so that you can gain access(before you have to start finance repayments) to do the place up a little before getting tenants in. I have done this successfully once before.

At this time, you know you are serious about buying start looking at conveyancing options, whether they be a franchised 'no frills' company or a solicitor. Remember most of the time, you get what you pay for. A cheap conveyancing option may not be cheaper in the long run!! A conveyancer will run title and other searches for you and will generally oversea the obligations of your future contract.

When signing a contract to buy, ensure that it is subject to pest and building inspections, finance(if applicable) and any other conditions that may benefit you. Important: Once you sign a contract you are liable for any damages etc that occur on the property, Get insurance!!! If any accidents happen during the contract period you are very liable.

Now appoint your conveyancer…… He will start working for you straight away. Usually you name your conveyancer in the contract to buy the property but if you have done your research you already know who you are going to use and if this changes the contract can be modified to reflect this.

So you have a signed contract, you have organised insurance to cover you. Time to get moving quickly and get a building and pest inspection, if the property is older – the report will resemble a mechanical report for an older car. There will more than likely be problems with the property although most may be very minor. You can utilise some of the information in the reports to further negotiate the contract price, for example if safety switches need installing, you might be able to knock off $300 from the contract price to enable you to do that and so on. Once you receive the reports read them carefully!

Concurrent with the previous you should also be working towards finding a good property manager. Hint: Become a renter, Look in the paper for the most attractive ads, go to open houses. Find the one that the renter is going to choose and go with them!!

In addition to this, you should have another appointment with your broker to organise finance. He will be very happy to see you again, and you should 'nut out' the best deal possible for you. This needs to be done asap after contract signing(if finance wasnt pre-approved) so that there isnt any finance delays towards the settlement of the contract on time(delays could cost you money).

So now, you have a contract for a property. Insurance cover, Building and pest reports. A property manger ready to take the reigns of your big investment and a mortgage broker working diligently to get your finance on time and an accountant who is looking forward to seeing you next financial year, All of this getting overseen by your conveyancer.

Its all about building a good team. At this time your broker is getting you the best deal, your property manager is advertising your property(before settlement) as a rental and your conveyancer is doing all the relevant searches to protect your interests.

Now, You wait for settlement and enjoy the 'bumps' along the way.

This is just my opinion and I am not a professional, all due diligence should be taken on an individual basis. This should be used as a very basic guide only as situations vary from person to person and state to state.

Id love to hear other peoples opinions/thoughts? Have I left something out?

Regards and best of luck

Mick