There’s no rest for the property investor – well, not just yet!
In part 7 of our Queensland buyers agent Mackay case study, we talk about all of the things that need to occur immediately before and after you’ve signed on the dotted line to ensure the purchase goes smoothly and that you maximise the investment potential of the property.
If you haven’t yet read the first parts of the case study, check out:
Part 1 – Queensland Buyers Agent Case Study – Introducing Serg
Part 2 – Queensland Buyers Agent Case Study – Buying Criteria
Part 3 – Queensland Buyers Agent Case Study – Location Analysis – Mackay
Part 4 – Queensland Buyers Agent Case Study – Suburbs in Mackay
Part 5 – Queensland Buyers Agent Case Study – Mackay Purchase
Part 6 – Queensland Buyers Agent Case Study – Buying our Mackay Investment Property
When you are buying an investment property and have put in a lot of time and effort into researching, analysing, inspecting and negotiating it’s easy to want to breathe a sigh of relief and sit down for a rest once you’ve finally signed on the dotted line and made a purchase. This time, however, is crucial. There are things that need to be done and there is a time imperative to do them! In this part of our case study we look at all of the tasks that we need coordinate immediately prior to signing and afterwards in the time between signing the contract and settlement of the property.
We discussed this briefly in the last case study post, however, it’s an important one so I wanted to mention it again. Ensure that you have your contract reviewed by a professional before you sign it! Engaging a property solicitor or conveyancer on your team is a worthwhile investment and in this particular purchase there were a number of items in the contract that required discussion and amendment before Serg signed.
When you are buying in another state then my advice is definitely engage a solicitor or conveyancer with experience of property in that particular state, because things vary considerably between the states and you really want someone who knows how things work!
Building and Pest Inspection
Our contract was subject to a building and pest inspection and we arranged this immediately once the contract had been signed. Having a building inspection and pest inspection by someone who is local to the area is recommended as they will be most likely be more familiar with the most common issues found in the area. We engaged a building inspection company based in Mackay who conducted the inspection promptly and provided us with a written report and photos. We were able to discuss the issues found with the inspector and determine if any of these were ‘showstoppers’ for us. In this case there were a number of minor issues that we determined were not showstoppers, however, we did choose to feed back some of these issues to the vendor given that the property was brand new and the issues should have been rectified by the builder.
This is something that you have hopefully prepared for prior to purchasing. Have a finance pre-approval in place can be helpful, it’s not a guarantee mind you, but it is helpful and will streamline your application. The finance timeframe in a contract previously has often been 14 days, but I like to ask for 21 days as it is most often this timeframe that causes great stress! For Serg’s purchase we asked for 21 days for finance approval and managed this without issue. Finance is something that you really must be on top of, not just getting the approval but getting the actual application in and completed and the bank ready to settle. There will be paperwork going to-and-fro between you and your broker and the bank and my advice here is to always get your side of things done and turned around as soon as possible – treat it with great urgency. You do not want to be the one that is holding anything up!
For Serg’s purchase insurance was something that we were looking into even before the purchase. Being in Mackay, an area where storms, floods and cyclones are possible, we ensured that we obtained quotes on all properties that we were going to make an offer on before we made the offer. We needed to make sure that we could firstly, obtain insurance and secondly, obtain insurance at an annual premium that would be acceptable.
Once the property goes unconditional you must have an insurable risk and should take out a policy on the property. My advice here is to do this as soon as the property goes unconditional as you do not know what can crop up! In Serg’s case we had a perfect example of this! Between the property going unconditional and the settlement period a tropical cyclone warning was issued on the area and insurance companies put an embargo on the location, meaning that they were not issuing new policies during that time. Good news is that we were able to help Serg to get cover over the storm period, but just highlights how important it is to get your insurance in place as soon as you go unconditional!
My advice is to get lots of quotes when it comes to insurance, they can vary considerably, so it’s worth the time and effort. We obtained at least 5 quotes before deciding upon an insurer.
As soon as we were unconditional we also commenced our review of property management options in the area. We interviewed at least 5 managers and companies and documented in a spreadsheet for comparison all of our findings. After discussion with Serg, we appointed a property management company and had the property up on internet within a day of appointing the manager.
When it comes to property management, it can be difficult to know who is going to manage the property well, but going through this interview process can help you to understand more about the service each company offers and compare fees and services and to begin to develop rapport with your new manager.
Even once we have management in place, we work closely with the property manager to ensure that a tenant is found as soon as possible for the property. Although you obviously want to maximise the rental return on the property it is important to understand the local market and price the property accordingly. It doesn’t hurt to ‘test it out’ for the first few days or so at the higher end of what you are wanting to achieve, however, the benefits of the higher rent can be soon negated if there is no tenant forthcoming. So price the property within the market and get someone in!
Once the property has settled, or even beforehand, don’t forget a very important part of the process, which is to have a depreciation schedule prepared for the property. In Serg’s case, being a brand new property, depreciation was a major factor in purchasing and so we’d expect to see some good depreciation benefits. Even in an older property, however, a good quantity surveyor will most likely be able to prepare a report that will provide you with some benefits, particularly if there has been some updates made to the property at some point.
With less than a week to settlement now, we’ve almost got everything in place and it will be time for Serg to sit back and…well…do very little, hopefully!