The current market conditions make investing in property extremely appealing. Low interest rates combined with an under-supply of property are attractive. This causes large numbers of people to enter the market with varying levels of experience and expertise. The activity is great for property values and the economy but sadly, some investors will end up as casualties. It has been seen before that markets like this will witness the inexperienced and uninformed rushing in and making a purchase without having first put in place the necessary checks and balances.

Any investor not wanting to end up a casualty should work through a checklist prior to moving forward. The following are some of the points from our pre purchase checklist that we work through with our clients,  provide them with added protection.

If you cannot answer YES to the following, we recommend you defer your purchase decision and seek knowledge instead! Don’t be in a hurry!

I Have The Borrowing Capacity

1. I understand the way my finance needs to be prepared including whether or not to refinance existing loans.
2. I know what LVR (loan to value ratio) I am choosing and what my strategy will be for handling a slightly lower bank valuation.
3. I am aware that valuations may be 5-7% below contract price.
4. I understand the costs and benefits of mortgage insurance.
5. I understand that banks don’t loan against furniture packages, if applicable.

I Have The Holding Capacity

1. I know what my holding costs will be.
2. I have received a cash flow analysis example.
3. I understand my cash flow management options and structures.

I Have The Mental Toughness Capacity

1. I have all the information I need to feel comfortable with my purchase.
2. I understand the strategy being used to create wealth.
3. I have seen a ‘Retire on Your Equity’ (ROYE) example.
4. I have read and understand all parts of the property report.
5. I understand what is included and excluded in the contract.

I Understand The Finance Requirements

1. If a deposit is required I can fund this from security, ie: cash or equity, as I am aware I am unable to borrow against the property until settlement.
2. If acceptable, I understand whether or not the use of a deposit bond would deliver a benefit to me.

I Understand How Leasing My Property Works

1. I understand what is involved in appointing a property manager.
2. I understand how I can manage a vacancy if it occurs at settlement or any other time.

I Understand The Tax Process

1. I know if I am able to complete a variation form with the ATO and reduce the amount of tax taken out of my pay rather than wait until the end of the financial year.
2. I know what the ownership split should be if purchasing in more than one name.
3. I understand what is meant by ‘Joint Tenants’ and ‘Tenants in Common’.

I Understand The Timeline Of The Contract Process

1. I have received and reviewed the mrd timeline and understand what my obligations are along the way.

I Understand Lending For Off The Plan Purchases

1. Banks will not give an unconditional approval on ‘off the plan’ purchases. They will only give a three month conditional approval subject to an on-completion valuation.
2. Conditional finance approval is an indication of how a lender would have viewed my loan application had settlement been within three months.
3. I understand that significant changes I make during the off the plan time; such as changing jobs or a major purchase, could result in me not qualifying for finance at the time it is required.
4. Valuations are generally better on a finished product due to the physical bricks and mortar as well as the progress the market has made during the time of construction.
5. I understand inspection of the building is not possible before the contract becomes unconditional.

I Understand The Advantage Of Using An mrd Referred Solicitor Or Conveyancer

(If Applicable), My Partner Understands All Of The Above And Is Equally Committed To Purchasing An Investment Property

While some of the above points are unique to mrd, they still represent understanding that all investors should have. It’s easy to ignore the nitty-gritty detail of a property purchase but that’s where mistakes are made.

Becoming a successful investor is not difficult and need not be risky. As the next wave of people flurry to jump in to the property market, please balance the desire to cash in on price growth with your level of knowledge and understanding.

Our complimentary and without obligation offer to mentor you to a place of understanding stands.

See also “Property Investor Crash Victims” >>>read article

To request we tailor a Personalised Retirement Options Plan with you (complimentary and without obligation) >>>click here

Did you miss the recent round of webinars? That OK, we have recorded one and you can view it at your leisure >>>download

Happy Investing,

Nick Lockhart
mrd Customer Care Program… because investing is personal

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