Make and offer and negotiate. Once you have selected the most suitable property it’s time to make an offer and not be afraid to negotiate. To do this you will either need to enlist the help of an experienced buyer’s agent or you will have done your due diligence and researched the market. Before submitting an offer you must first know what comparable properties on that street and in that suburb have been selling for. You need to know this to effectively negotiate the lowest price possible and the best terms and conditions for the contract of sale.
On acceptance of the offer, the contract of sale is drawn up and forwarded to your solicitor for review if required. Your solicitor will examine the special conditions, inclusions and settlement term consulting with you and liaising with the vendors’ solicitor requesting changes on your behalf if required.
Once you have signed the land and building contracts you must provide a copy to your bank. This will enable the bank to provide an “unconditional finance approval” and prepare mortgage documents for you to sign. You will also need to arrange building insurance and provide the bank with a certificate showing the property is insured from the settlement date.
Your solicitor will attend settlement and arrange payment to allow transfer of title into your name. The bank will provide cheques (up to the agreed limit) for the balance owing (less the deposit paid). Various adjustments need to be made for stamp duty, solicitor fees, etc.
The next step is to find a great property manager and to start the process of tenanting your new investment. Often the fees involved feel like a waste of money but engaging an experienced and professional property manager is good risk management. You are protecting your investment from unforeseen risks and property management fees are tax deductible against rental income. If you want the best tenants for your investment property then you need the best property manager. Shop around, fees are often negotiable. But remember, saving a few dollars now doesn’t always pay off in the long term. Ask around for advice or recommendations, many friends or work colleagues would know a trust worthy and professional property manager they can recommend. Before you sign on the dotted line, be sure to meet the property manager who will be taking care of your property, after all they are the one who will be dealing with your property and answering any concerns you have in the future. They are representing your best interests and you need to know that you are going to have a good working relationship with them. Often when signing up as a new landlord you will deal with a director of property management, while it is good to know who they are, you won’t be dealing with them when it comes to tenants, payments, inspections or maintenance issues.
Landlord insurance provides protection from tenants leaving without paying rent, damaging your property, public liability, legal expenses and more. This insurance provides you with peace of mind knowing your property is protected. Your property manager will often recommend an insurer but there is no harm in researching your own options. Insurance premiums are also tax deductible
Maintain your investment. If you have a good working relationship with your property manager you are more likely to listen to their advice on any upkeep or maintenance required. Tenants are not likely to renew their lease if there is a constant string of problems with the property. Keeping up the property will keep your tenants happy and is a great way to ensure a constant stream of rental income. Often there are fees involved with securing a new tenant for your property and there can be a week or two lull in rental payments between outgoing and incoming tenants. If you are happy with the current tenants it is in your best interest to maintain the property. At times you may feel the costs of maintenance are too high, but before you say no, balance it against the costs involved with securing a new tenant.
Monitor your investment. It is good practise to get a new bank valuation on your investment property approximately every 12 months. If the property has grown in value you may be able to use the additional equity to purchase another investment property. This is called leveraging. Leveraging the equity from your investment property enables you to grow your property portfolio much faster.
By ensuring the cash flow associated to your investment property is healthy you avoid having to off load your investment property before it has truly worked for you. Holding onto your investment property for the medium to long term gives you the best opportunity for long term growth. Property investment is all about generating equity from an appreciating asset. So where possible keep the investment you have and seek financial advice before rashly selling in the hope it will improve your short term position at the expense of your long term interests.
By following the steps outlined you will mitigate risk and enjoy watching your asset grow.