What I learnt out of buying 7 properties

I want to add to the advice of avoiding pools. I avoid them with any purchase - house, apartment, townhouses. In regards to the latter two, I would be more forgiving when it comes to a townhouse. Fixing pool issues in a regular pool is much, much cheaper in a townhouse compared to an apartment. If there are leakage issues with an indoor apartment pool then the costs can be astronomical.

 

Why is it cheaper please - any specific reason? I have no townhouses in my portfolio yet so would have no idea. Thank you in advance!

 

Hi David,

Haha, I know right? I screenshoted your posts and sent to my father. We burst out laughing looking back at our journey and how similar it was for both of us.

Do you mind if I ask as to whether you have considered or used any legal buffet including corporate structure or trusts? Thank you!

Cheers

 

A regular outdoor pool sits on top of soil and is surrounded by (generally) easy to access land. You can get heavy tools into the area without much fuss. The most you'll need to do is tear down a fence or two.

An indoor pool is inherently difficult to get access to, and sits on top of a surface that is even more difficult to maintain (e.g. another level, plus concrete etc). Any leaks or damage here is a frightening prospect.

 

@David Shih , loved your post mate. It is so simple and powerful. I still need to start my investment journey, so was reading lot of books related to real estate investment. But these books only contains theory and not much practical knowledge. Things are so easy to understand with all real life examples you gave. You must right a book one day .

 

Not sure what legal buffet is...hold on let me check with my solicitor to see if he offers any buffet

With my current purchases, no, as I was trying to maximize my purchases and minimize any ongoing cost. But now I have a business and Trust structure setup, moving forward new purchases will be under my family trust instead. That way if I want to gift the house to my kids later on I've got the option to do so too

Are you concerned with your titles and legal setup?

That's interesting to know, thanks for sharing! Do you mind sharing the approx. difference in the pool cost for indoor vs outdoor?

Thanks Prashant appreciate your kind words
Maybe when I get to lesson 50 or so they can be compiled into one single e-book

Cheers,
David

 

Haha, it was meant to have read BUFFER! Apologies for fat finger. I have done some research about titles registered under an individual vs those under a trust. It turned out that a trust would not be financially viable due to several significant tax implications. What's your stand?

Cheers,

 

This is treading into tax/legal areas so I'm probably not the best person to give advice here...all depends individual circumstances and whether the benefit of advantages outweighs the disadvantages of buying in a Trust.

Michael Yardney has wrote an article about this so prob worth checking it out:
https://propertyupdate.com.au/should-you-use-a-trust-to-buy-a-property/

My suggestion is definitely seek qualified professional to get specific advice on this.

Cheers,
David

 

Good on you David, all the best!

 

12. Twelve Lesson – How to negotiate purchase price with Real Estate Agents?

Negotiating with Agent isn’t easy – but trust me it’s definitely worth spend time learning as it could potentially save you thousands or more.

There are couple of tips & tricks which I’ve developed over time with different experiences I’ve gained. But overall I think it’s important to remember – REA (Real Estate Agents) are also people, so try connect with them because the more you can connect the easier the negotiation process.

Understanding what the REA wants

We all know that REA (Real Estate Agents) have quite a reputation in this industry. Most people hate them for a reason, but I guess as investors we also need to look at them from another angle.

Putting aside their REA status they are people after all. They also have emotions so all we need to do is connect with them like we would with anybody else you first met.

Of course, it might be difficult to do this during the open inspection – especially when there are groups and groups of people coming to inspect the place! In times like this, then all I can say is ask intelligent questions and ask for a copy of the contract to show that you are truly interested in purchasing the property. If you are able to convey this message across then it’ll leave an impression with the agent – to let he/she know that you are not just a tyre kicker.

Why are we doing this? Two main reasons:
1. They want to be able to help the vendor sell the property at the best price
2. They want to be able to help the vendor sell the property in the shortest time frame possible. Ideally even before the property hits the market, that way they don’t even need to do an open inspection!

So based on this understanding, they need to be able to filter out the warm/hot leads – buyers who are not time wasters and shows good interest in purchasing the property. On top of that, if you are able to ask intelligent questions to further show that you have already done your homework before hand, then you’ll definitely be in a lead from majority of other inspectors who strolls in, have a wonder around and then leave without much engagement.

Some examples of intelligent (and probing) questions include:
– Why is the owner selling?
– How long has the property been on the market? (Assuming the property is not on the market for the first week)
– How much does the property rent? (do your homework before hand so you know how much it should rent and validate this with the Agent)
- How is the rental demand for this area? What type of demographics would this property attract?

Avoid asking questions which can be found from the ad or online – you should have done these as part of your homework before you attend the inspection.

Develop the optimal offer price

Once you’ve inspected a property the first thing you’ll do is to assess whether the property is worth the advertised price or not. You can do this by following 11th lesson - how to develop optimal offer price and cashflow forecast:

1. Research all recurring expenses, such as council and water rates, strata fees, insurance, etc. You can usually get these from Sales Agents, Property Managers or sometimes from the Sales Listing.
2. Call several property managers to confirm the achievable rent of the target property. This will feed into your Lower Rent and Upper Rent.
3. Input all the data collected into the cashflow calculator
4. Add in the asking price (and confirm loan amount) to get the yield on purchase
5. Tweak the purchase price until you hit the optimal yield you want to achieve. This will be your optimal offer price for the agent
6. Assess the estimated weekly, monthly and yearly cashflow position (before tax) for the proposed property and perform risk assessment at a higher rate if required
7. Submit your optimal purchase price to the sales agent and if the offer is rejected, don’t be dishearten – simply move on to the next opportunity! Otherwise congratulations – the property is now under contract you. Time to move onto organizing Finance and Building & Pest (if applicable)!

We also know that REA are representing the vendor/sellers so their best interest lies with the seller. But hey, they also want to make the deal work because if they can’t sell the place then they don’t make a living. They want to sell the price at the highest price possible and as investors we want to purchase the at the lower price possible.

So the question is, how to make it a win-win situation for you as the buyer and the REA?The key lies on whether you are able to extract the important information from the REA. This is where the importance of asking intelligent & probing questions comes in.

For example when you ask why is the owner selling, REA could tell you the owner has bought somewhere else and is therefore looking at offloading their current home. What this means is there could potentially be a deadline in which the owner must sell the current property in order to fund the new one – so the vendor may be open for some discounts via negotiation. Similarly if the property has been sitting on the market for some time then it’ll also be open to negotiations – so look out for REA’s response on these probing questions as these will also have an impact on your offer price.

Once you are able to determine the offer price and assuming you’ve done all the due diligence checks you’ll then be able to start the negotiation process.

Negotiation is all about leading and meet in the middle

To make a deal work, we want to lead the REA to our optimal offer price. The strategy will be to offer below the your optimal price and then make it look like a “compromise” to land at your optimal price.

Let’s run through an example. Say today you want to purchase the property at $330,000 and the property is currently advertised for $350,000. The first offer is always the tricky one – you will need to low ball but at same time don’t put through ridiculously low offer. At this stage, you want the vendor to counter offer around $340K and ideally you can meet in the middle for $330K, therefore I would start by offering at $320K .

REA might be very upset with this initial price. This is where you as an investor can let them know you’re investing so it’s numbers that counts and not emotions. While you do like the place a lot this is the price that you can see the deal will work and you look forward to hearing back from the vendor.

There can be 3 outcomes after this initial offer:
1. Vendor rejects the offer and insist on $350K
2. Vendor counter offer – above $340K
3. Vendor counter offer – below $340K

If vendor comes back with outcome 1 then there won’t be much opportunity to negotiate further. Time to move on.

Outcome 3 is the ideal scenario but usually unlikely, as you’ll have more opportunity to get close to $330K, or even a slight opportunity to negotiate below $330K!

Outcome 2 is probably the most common scenario – vendor will come back with counter offer but it’ll be above $340K. Let’s say $345K. Now, if we take the middle price between $320K and $345K we come to $332.5K. This is where you show:
1. The willingness to meet in the middle at $332.5K, and attach a 24 to 48 hours expiry so you can put the pressure on vendor
2. You have no intention to play games so this will be the absolute final offer. Take it or leave it.

Again, there can be 3 outcomes after the second round offer:
1. Vendor rejects the offer and insist at $345K.
2. Vendor counter offer – above $332.5K.
3. Vendor accepts the offer.

Outcome 1 – shows the vendor is not willing to really meet in the middle. I would suggest time to move on.

Outcome 2 – you can decide whether to continue negotiating again and use the process above to rinse and repeat and get to as close to $332.5K as possible, or just bite the bullet if it’s not too much different.

Outcome 3 – well done on leading the vendor to your optimal price!

 

Thanks @David Shih . Excellent Knowledge sharing and advise. Do you agree that Logan council has very high Council Rates. Do you know the reason? Based on socio-economic condition of Logan residents, do you still intend to keep those IPs that you have?

 

Hi Rajiv,

Yes Logan council does have high council rates and they charge extra for investors. Not sure what the reason is but to me it's just part of cost in building a portfolio. As long as the cost is factored in during initial calculation it's not much of an ongoing problem due to rental yield being relatively high.

I do intend to keep my Logan IPs until the time I can exit with some profit. As long as they're leased to tenants and rent is being paid on time then not much of an issue. The trouble only comes when the tenant is in constant arrears like 1 week behind. Rest...a lot of the risk is mitigated by having building & landlord insurance in place

Cheers,
David

 

13. Thirteen Lesson – The importance of having a Trusted Team around you

Property investing is not a single person game so I want to stress the importance of having a good team around any property investor to be able to accomplish a successful property investment journey.

I have been asked a write something on what consist of a good property investment team, and where would you be able to find these people? Let’s have a look below and tackle each role one by one.

During any property investment journey the following good property investment team members are critical to your success:
1. Mortgage Broker (MB)
2. Conveyancer/Solicitor
3. B&P Inspectors
4. Buyers Agent (BA)
5. Property Managers (PM)
6. Accountant



1. Mortgage Broker (MB)

The Role: to provide credit advice on how much an investor can borrow, and ensure the fund is available during settlement of property.

Most of the property investors actually underestimate the importance of having a good mortgage broker in the team. A good mortgage broker can help you in the following way:
– Assess your situation and advise on your borrowing capacity
– Review and select the most suitable loan product for the IP purchase
– Structure the loan correctly to ensure at later stage funding will still be available so a property investor can continue to purchase more IPs
– And, takes majority of the headache out of you having to deal with banks for any funding issues during settlement

A good broker is a critical team member to any investor’s successful property journey – it can be a difference between obtaining funding from banks for 3 properties vs 6 properties if the loan is not structured correctly. Ideally, a good broker should also be an investor so he or she will understand what investors are after and how to best guide them.

Note a common misconception is that brokers are just good for interest rates. A good mortgage broker doesn’t just talk about rates – interest rate is just a small component in the overall scheme of equation but he/she should be focusing on what the property investor is trying to achieve. i.e. the goal

Above all – they usually don’t charge clients a single cent! Brokers are remunerated by the banks for each of the loan they write. And there are huge effort required to ensure clients are looked after…so don’t think their job is easy as it seems because it’s not.

I can also relate that most people would prefer to go to banks directly. But if you are really serious about property investing, then a good broker will be absolute paramount member of the team.

Where can you find good Mortgage Broker? Speak to other investors and usually a good broker will not be shy of referrals!



2. Conveyancer/Solicitor

The Role: to provide legal advice on the sales contract, oversees the contract exchange and ensure settlement of property takes place in a smooth fashion.

A good conveyancer/solicitor will be able to assist in the following way:
– Provide legal advice on the contract process
– Represent buyer in a contract process, once signed contract has been exchanged (which then becomes a legally binding document)
– Represent on buyers behalf to seek extensions on any of the finance or B&P clause
– Represent on buyers behalf any negotiation required, or fulfillment or execution of special conditions
– Perform agreed free/paid searches on behalf of buyers such as title, council, development plan etc
– Attend on the day of settlement to complete settlement process on behalf of buyer and transfer of stamps/title, and advise buyer when settlement has been completed

A conveyancer/solicitor is required to handle all the legal aspects of a property purchase. When you need a contract reviewed, a conveyancer/solicitor will be your best friend. They will be able to provide general legal advice, and in particular advice on the impact of a special conditions or hidden clause within a contract which most investors will not be aware of. So my recommendation – don’t proceed to make any offer until you have a contract checked out by a conveyancer/solicitor!

Your conveyancer/solicitor will represent you as the buyer in a property purchase transaction. The seller (vendor) will also have a conveyancer/solicitor who represent them. So once the contract has been signed and exchanged, then all the formal communications will be handled by both side of conveyancer/solicitors. They will ensure any further requests/negotiations from the buyer/vendor are being discussed, as well as any special conditions are met so that the contract can proceed in an agreed fashion (or terminate, as required) onto the next stage.

Also Joe Blob may be your best conveyancer/solicitor buddy next door, however when you purchase in a different state you will not be able to use him. Each state has different law/legislation, so when you purchase interstate you will need to find a conveyancer/solicitor who can provide legal advice in that state. Usually a local solicitor that resides in that state will be able to provide such advice/service.

Where to find a good conveyancer/solicitor? Again this is where investor network comes in handy. The best way is to seek referral from investor who has purchased previously in the state you are currently looking to purchase. They would then be able to refer (or not refer) the conveyancer/solicitor details which they have used. Alternatively have a look on Property Chat – Legal Issue sub-forum for recommendations:
Legal Issues



3. Building &Pest Inspector (B&P Inspector)

The Role: to provide professional advice on building and pest for a target property.

A good B&P Inspector will be able to assist in the following way:
– Conduct building & pest inspection of the target property, and advise on any building defects (existing or potential) and also any pest issues (both existing or potential)
– Provide a formal building & pest report of the target property (sometimes it will be two different people carrying out each task – one for building and the other for pest inspection)
– The B&P Inspector should be able to walk you through and discuss the inspection result on the day if you are able to meet him/her onsite on the day
– An outstanding Building Inspector (who usually holds an active Builder license) will be able to provide a rough estimate on the cost associated with fixing any major/key defects
– An outstanding Pest Inspector will be able to advise on whether the property has had termite damage previously, and to some extent also able to trace back where these termites may have been residing – for example, a rotten tree branch sitting in the corner of a garden.

B&P Inspector are a vital team member during purchasing as a small cost upfront could save you up to thousands of dollars down the track! May it be building defect, active termite infestation…these are expert skills where you and I who are not trained in this area will not be able to identify.

Some really good Building Inspector will also be able to provide guidance on the repair cost for defects listed – but it’s not a common act and definitely not within their due responsibilities to do so. If you can find a Building Inspector who is happy to provide estimate for you – treat him/her like a gem in the team! This means you’ll be able to work out estimated repair cost required and establish the optimal offer price – refer to my previous post on “how to determine best offer price“.

So in this context B&P Inspector are there to help an investor to minimize the risk of unexpected future outlay. Note however, Pre-purchase B&P Inspection usually don’t go into the detail of Asbestos. Some B&P Inspectors will mention presence of Asbestos however will put a caveat on the completeness of Asbestos reporting being “out of scope” from the pre-purchase inspection report.

Again B&P Inspectors are best chosen via words of mouth. Referral sources are the best as someone has tested and done it before and if they are happy to recommend service then the B&P inspector must have been doing something right.




4. Buyers Agent (BA)

The Role: to recommend which property to purchase.

BA is a vital team member in your team as they do the hard yard of asset/property selection and recommendation. A good BA will be able to assist in the following way:
– Discuss with investor to understand budget, time frame and ultimate investment goal
– Conduct research for suitable candidate properties within the suburbs that fits the price range
– Review options and present recommendation to the investor
– Act on behalf of the buyer in the negotiation and contract process, till settlement completes
– Provide some investment education to the client throughout the process

To those investors who do not have time, energy or whatever reason – BA is key vital player to the team. They are the messiah to investors who would like to invest but have no idea on where and how to start. They have a unique position in the team, where their expertise, negotiation skills, as well as their connections with local agents in making a good investment deal happen.

Like conveyancors/solicitors BA is also state based. A BA qualified to recommend properties in QLD may not necessary have the license to be able to recommend properties in VIC, so it’s important to check/confirm with BA upfront on what area they can and can’t recommend.

On top of that it’s also important to understand BAs’ niche area within a state. Take Sydney for example – a BA can, in principle recommend ANY properties across Sydney and NSW region. However it’s impossible to know all NSW suburbs thoroughly, so each of BAs will have a different niche area where they are very familiar with the area and know the suburb inside out. It is therefore paramount that during initial engagement to confirm the BA you are working with do know the target suburbs inside out. Usually the deal they present will be a good indication of whether they are a claimed suburb expert or not.

BA fees are not cheap – this can range from couple thousand dollars to a percentage of the purchase price. However as Phil Tarrant from SPI repeatedly claim, BAs do this everyday so they are geared with all the ammunition in finding a better deal than you and I can discover. And if a BA can negotiate and present a deal which potentially saves you thousands of dollars, then it simply means BA’s fee are covered.

Like brokers, a good BA understands that for a good, long lasting client relationship it is vital for he/she to understand what the client is ultimately trying to achieve via investing. The recommended property will then fit into the long term investing landscape and be able to assist the client in achieving the ultimate investment goal. In this context a good BA will always be outcome driven – because they can deliver beyond client’s expectation, hence can win over client’s trust and referral.




5. Property Manager (PM)


I find this interesting – all valid points on what to look out for in a PM!

The Role: once property is settled, to look for tenants and manage day-to-day issues of an Investment Property on behalf of Investor

Property Manager ranges in their capabilities and character. Some will essentially “do their job to manage” whilst some others will go way out of their comfort zone just to add value. A good PM team will be able to assist in the following way:
– Have in-depth understanding of building expertise and handyman skills
– Be able to have difficult conversations with tenant/landlord as required
– Excellent communication skills – concise and precise to the point
– Do more than just collect rent. Be pro-active and provide guidance to landlord (and tenant as required) to ensure best mutual outcome for both

Handyman skills are a good to have for PM but not a must have. My personal experience is if they do have the handyman skill and are willing to do pre-purchase inspection for you then it’ll be easy to arrive at an estimated repair cost required prior to getting a tenant into the place. This has been very handy for my QLD purchases as I would be able to arrive quickly at the optimal offer price based on the pre-purchase feedback once PM has carried out. So if contract has been reviewed and green light has been given, then I can commence negotiation straight away and beat other competitors.

Having the handyman skills also means that PM can fix things quickly during routine inspection. Sometimes a quick fix could save a trip from handyman and I’ve seen it happen before and that would be value-add!

Due to the nature of the role PM selection is absolutely critical. They will be looking after the property for you, and I’ve heard lots of horror stories where management was not done properly and owner had to step in and take over management themselves….a classic example where tenant issue goes out of control. PM is someone that you need to be able to entrust to manage your property day-to-day and solve problems on your behalf. Their role is more than just collecting rent, perform routine inspections and escalating issues….if this is all they are doing, then it’s probably time to switch to someone else.

Communication skills is also one of the most important element in choosing any PM. Is his/her communication style easy to understand? Is it concise and to the point? How would they handle difficult conversation? These are all the things that an investor need to consider and be comfortable with before taking up a PM service. But fundamentally, there needs to be a trust relationship established between PM and the investor so it comes down to how quickly the PM can establish rapport and whether they can consistently deliver the outcome to anyone’s expectation.

PM fees can also vary greatly and my suggestion is always don’t go for the cheapest. Choose PMs based on a proven record of delivering results. The best way to choose a PM is to seek recommendation from fellow investors and also where possible, do interviews with the PM directly so you can understand who you will be dealing with moving forward. Sometimes there are personality clash and no matter how good a PM is you will not be able to work with them. Be open, be honest and let them know your expectation so that they know what ticks your boxes and can deliver to your standard.




6. Accountants

The Role: to provide support and advice regarding tax and asset protection.

I have to admit I haven’t used Accountant as much as I should be so this is probably my weakest role out of them all. In my opinion a solid Accountant will be able to assist in the following ways:
– Provide advice on IP tax minimization and deductions – what you can claim and what you cannot during tax time, and what can be claimed upfront or need to be depreciated. How long to keep receipts etc. Below are some common deductions:
1. Interest incurred on an investment loan
2. Insurance incurred for the IP
3. Property Management fees/charges for the IP
4. Council, Water rates, Strata fees incurred for the IP
(Also note that new laws have recently came out to disallow claiming of travel expenses in relation to your IP)
– Provide advice on Asset protection via structures such as Trusts, Companies and SMSF (Self-Managed Super Funds)
– Provide advice on Capital Gain/Loss at the point of selling an IP
– Ensure year end compliance reporting with ATO (Tax Returns)

I’m sure there are more – but as I haven’t used Accountant much myself I can’t comment too much. But on top of my head if I have any questions in relation to what I can and cannot claim, the amount of depreciation that I can claim for an IP (you may also require to obtain a depreciation schedule from a Quantity Surveyor) and if I want to discuss about setting up Asset protection then Accountants are the ones to go to.

However as the portfolio grows it may not be a bad idea to outsource IP tax returns to your trusted accountant. They are the trusted member of the team to handle any tax related questions during selling (also to avoid making any potential mistakes in your tax return!)

(A special thanks goes to Minh Pham as an Accountant for providing insights and assistance so I’m able to complete this section!)

As you can see, each team member plays a vital role and in their assigned area to ensure the success of an investor’s property journey. Make sure you seek licensed professional and engage their services to make an informed decision each and every step of the way.

 

The way I look at it is to just do whatever you can yourself. That paint edging...ummm a bit of masking tape at Bunnings would lead to a better job! Same goes with tiling, just do it yourself, I’ve seen legit tradies do some seriously poor jobs. Tiling isn’t super expensive when you do it yourself, and it helps that large format 30x60 and 60x60 tiles are in fashion, making the job easier.

 

What's the best way of getting an agent to send me properties before they hit the market? To answer my own question I would say establish that I am serious about it and be specific about what I want. Should I also give a budget range so they don't give me properties I won't afford?

 

Great thread David some very valuable advice here.

@househuntn - build relationships with agents - go to open homes (fly up when purchasing interstate), have clarity on what exactly you are after. Agents like clarity, and it exudes confidence - they are more likely to do a deal with someone who is clear about what they wish vs someone who is wishy washy.

 

14. Fourteenth Lesson - A guide for NSW/VIC/QLD Buyer: Process from making an offer to settlement

Hey all!! Today we’ll go back to some basics and cover the complete purchase process from offer all the way to settlement, which I think will be beneficial to everyone.

What I found is that high level purchase process (as far as NSW, VIC and QLD is concerned) is actually not too different. But we’ll go into details and that should give everyone a clear indication on the subtle differences.

Note this is written purely from my own experience as a buyer having purchased properties across NSW/VIC/QLD. By all means this is not professional advice and you should definitely be guided by the professionals you engage with for each of their expertise area.

1. Pre-Offer Stage:

During this stage:

NSW
1. Contract Review – engage a solicitor/conveyancor to review the contract

2. B&P Check – if you are concerned about Building & Pest issues – do a Building & Pest inspection before putting through an offer.

Contract of Sales for NSW doesn’t usually come with any B&P clause which you can terminate. You can certainly discuss with solicitor to request putting a special condition in for B&P clause.

3. Finance – in NSW there is no Finance clause which you can terminate on so seller would assume you have your finance sorted with banks or Mortgage Broker before proceeding with an offer.

Like B&P, you can discuss with solicitor to include a finance clause under special condition before putting in an offer. Note usually the more special conditions you’ve put in the less attractive your offer is to the vendor.

4. Any other special conditions which you would like to be included should go through a solicitor to ensure they can be discussed, agreed and will be included in the Contract of Sale before offer is submitted.

VIC
Mostly the same with NSW with exception of:
1. Contract Review – Section 32 is where the special condition lies so ensure this is checked by the solicitor/conveyancor before putting through an offer.

2. B&P clause – Like NSW, VIC contract doesn’t come with default B&P clause so suggest all buyer to put this in as a special condition. Typically the vendor can accept 7 -14 days of B&P clause.

3. Finance clause – Again the VIC contract doesn’t come with default B&P clause so suggest all buyer to specify Finance clause upfront unless you have the OK from your Mortgage Broker to waive Finance clause (which could make your offer more appealing to the vendor). Typical finance clause is 14 days.

QLD
Mostly the same with NSW with exception of:
1. Contract Review – special condition is located in a section within the the contract called “special conditions” so by far the easiest to identify. Also ensure this is checked by the solicitor/conveyancor before putting through an offer.

2. B&P clause – QLD contract comes with a section that allows buyer to write the number of days for B&P clause by default so to protect the buyer. Typically B&P clause is 14 days in QLD, but can range between 7 to 21 days depending on potential B&P issues of the house.

3. Finance clause – QLD contract comes with a section that allows buyer to write the number of days for finance clause by default, again in protection of the buyer. Typical finance clause is 14 days in QLD but no surprise when it goes to 21 days depending on the bank institution. It’s worth checking with Mortgage Broker on how many days the Finance clause should be in order to maximize buyer protection.

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2. Offer accepted and contract exchanged stage:

During this stage:

NSW:
1. Offer is accepted by the vendor, contract signed by both parties and contract is exchanged. At this stage the property will be taken off-market i.e. no more offers will be accepted.

2. A small deposit (as specified in the Contract of Sales) is made by the purchaser to the agent’s nominated Trust Account.

3. Cooling off commences – in NSW this is 5 business days from the date contract is exchanged.

4. If there are any other special condition such as B&P or Finance clause, it will also commence from the date is exchanged and purchaser would need to kick off the process to get the clause satisfied i.e. engage a building inspector for a pre-purchase building inspection report, or seek an official confirmation from Mortgage Broker that bank has approved for the required Finance in writing.

VIC:
Mostly the same with NSW with the exception of cooling off being 3 business days. If the B&P and Finance clause exist then they will also come into effect once contract is exchanged.

QLD:
Similar to NSW – cooling off is 5 business days and the B&P/Finance clause will commence once contract is exchanged.

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3. Contract goes unconditional till settlement stage:

This stage is common across NSW/VIC/QLD.

During this stage:

1. Once all the criteria has been fulfilled and the special condition clauses satisfied by the vendor/purchaser, then contract goes unconditional. At this point buyer will be required to pay remainder of the agreed deposit (usually 10% of the purchase price) to the specified Trust Account. The buyer will also no longer be able to pull out of the contract.

2. Both vendor and buyers’ solicitors start preparing for settlement. From buyer’s solicitor perspective, they may conduct various mandatory and optional searches on the property as requested by the purchaser. Also they will organize for a transfer of title process where buyer will be required to complete and sign relevant documentations in preparation for the settlement.

3. From Finance perspective, Mortgage Broker/Banks will issue Loan Documents for the buyer where buyer will be required to complete, sign the necessary loan application and various documents required and return to the bank for processing. Depending on the bank the application time may vary but do allow plenty of time for this process in order not to delay settlement.

Also as part of the bank’s policy they may require purchaser to provide a Certificate of Currency for insurance in order to cover any legal liability on injury or accidents of any person occurred at the property. You should take Bank’s direction on this – if they need it they will ask for it, if not then don’t need to organise till after settlement.

4. This is the stage where plenty of activities going on behind the scenes which buyers may not be aware of. Your team works hard for you to prepare all the necessary documents for settlement. But as a buyer you also need to take guidance from your solicitor & broker at this stage on what is still required and what is outstanding in marching towards the final settlement date.

Once all the paperwork from legal and finance are signed, submitted and completed, your solicitor will be able to book in the settlement date and time.

About 5 to 7 days before the actual settlement date your solicitor will work out the Statement of adjustment – how the exact funds will be disbursed, who they will be disbursed to (vendors, agents, other parties as required) and how much is still required to be paid by the buyer. This will be approved by the vendor and then your solicitor will notify you in preparation to have remainder funds ready for transfer to their Trust Account so settlement can proceed as planned on the settlement day.

You may also want to liaise with your Property Manager or Solicitor to organize pick up of keys from the sales agent once settlement has been completed.

5. On the settlement day:
– Your solicitor will represent you as the buyer in the settlement process – you do not need to be present
– Each parties will have a representative at the agreed settlement location, review and be completely satisfied that all documentation are completed and executed properly
– If a document was caught not completed or properly executed at this stage it may cause settlements to be held up or delayed
– Once all parties are satisfied with both documentation and funding transfer have been completed/exchanged, the incoming lender will take the title documents, transfer, discharge and mortgage to the land titles office for registration
– Keys getting picked up by Property Manager or Solicitor from the sales agent office.

As you can see the whole process is no easy feat – lots of moving parts and that’s why if one party doesn’t communicate or haven’t executed what they are required to be done, then settlement may not occur as planned. Hence the reason why delay in settlements are quite common…

And that’s why hopefully this guide now provides some clarity around the process at each stage so every buyer can minimize the chance of a stressful settlement!

 

Hi David, you a nice bloke......,.,

But lets blow a effing hole in this team BS speak everyone seems to do ?

There is no effing team, you have people you pay to perform a function, they have no stake often in the rest of the transaction.....


So I wish people wouls stop with this rubbish talk..... no team, no friends.....it is a business transaction ...

 

You don't need to be best mates with someone to be in a team with them.

It is a business transaction, and in any project involving input from a group of people, you do want to be managing an effectively functioning team. The Property Professionals that are engaged don't (well, shouldn't) work completely independently of your input and there should be effective two way communication to get the best results.