Introduction When buying a property, you sign a contract of sale to purchase a property, and you usually also sign a contract with a lender to repay a loan for several years. Investing in a property is often a large financial commitment, which requires much preparation and due diligence to ensure that you are getting value for money. So it’s important to get it right! Key Issues A few key issues to be aware of before you purchase property: Know who your friends are The REA showing you property is representing the vendor (seller) and should therefore be seeking the best outcome for the vendor; representing their best interests at all times. Even if you think you’re becoming the best of buddies with the agent, they are still better friends with the vendors Do your due diligence. This has been covered extensively in my previous article What is Due Dilligence, but, to reiterate briefly: Once you’ve selected an area, ensure you know it as thoroughly as possible. Ring up several agents for long chats, engage in question time with property managers and subscribe to the local paper for current local information as well as advertised listings. Use the net extensively, including council websites as well as RE search engines. Drive around (if possible), talk to other investors who have “been there done that”, become as familiar with the area as you can. Go to open homes, make appointments with several agents and pinpoint the local amenities/transport systems etc. Purchase reports from companies that sell comparable sales data, keep tabs on what’s for sale, for how long, and price reductions (if any). Ask agents the pertinent questions ... and remember to keep accurate checklists and records. It’s amazing how easily we become confused after inspecting 30 properties or so! Engage your solicitor Try to avoid signing a contract for the sale of a property until you get your solicitor/conveyancer to have a look over the terms and conditions. Time and time again, property buyers sign their life away to a property with problems when an experienced legal eye scanning the contract could have saved them a lot of grief. Your cooling off period can also be utilized for this purpose, but remember that you may be up for penalty costs, depending on which state or territory you are buying in. Building and pest inspections Investors can be hesitant in spending $500 or so on getting a property inspected for structural faults and other problems, in case they don’t buy the property. Here’s a tip: Better to lose $500 and know the problems you’re facing than spend $500,000 and bitterly regret your hasty property purchase for the next 30 years. Never be afraid to negotiate. What’s the worst that can happen with your offer? The REA comes back with a “No!” Don’t worry about offending vendors with low offers, if your research has demonstrated that your price estimation is fair and you can back it up with facts. Try to stick to written offers and put deadlines on them, so that decisions can be made quickly. Remember that negotiating is a game, and it may take time to agree on price, terms and conditions. It’s all about a win-win and creating value for both parties. Also set your walk-away price and stick to it. For investors, if the numbers don’t stack up, simply move on. Buyer’s advocate If you don’t have the time or confidence to look for property, or you’re not comfortable negotiating, or feel you lack the resources to research effectively, then you may consider using a buyer’s agent/advocate. Appointing such a licensed person can remove the emotion of buying from the scenario and may secure you a lower price. They have access to much of the same information as REA’s and are more likely to be familiar with the current listings and market condtions. Try to select one who has local knowledge, and who is a property investor themselves.
