5 Things You Must Do Before Signing A Contract On An Investment Property

5 Things You Must Do Before Signing A Contract On An Investment Property

Are you looking to buy an investment property or just about to make an offer on one? Once you have narrowed down the list and chosen the property you need to make an offer and sign a contract. Before you do that, our 5 tips will help ensure that your investment is a success by minimising your expenses and maximising your cash flow from the first day you own it.

1. Obtain an independent rental appraisal

The appraisal supplied to you by the selling agent may not have the most accurate information. Has the estimated weekly rent figure been provided by a sales agent or a property manager? Property managers work day in, day out leasing properties and are likely to give a more accurate figure.

Overly optimistic rent appraisals could mean that your property could sit on the market vacant for a considerable period of time, costing you money. You should obtain a separate independent appraisal to ensure you are buying a sound investment. Alternatively, you could ask for the quoted rental figure to be added to the Special Conditions of the Contract if the selling agent is going to be your managing agent which would keep their appraised figure realistic.

2. Ensure you receive a written report on the surrounding area

If you are not a local of the area you are buying in or haven’t lived there before then get your agent to help you learn about the area. A good agent will advise you on the details of the surrounding properties. A great agent will provide you with a full comprehensive report on the local surrounding areas, school catchment areas, median rental yields and market values in your chosen suburb.

3. Compliance can be costly so be aware of what you are buying

During contract negotiations, purchasers can overlook the need for the property to meet certain standards when tenanted. In Queensland, contracts disclose whether or not the property contains compliant safety switches, has compliant smoke alarms and also whether there is a pool safety certificate.

If the property is currently a rental property the agent should be able to provide you with a copy of the compliance certificates. If the property is owner occupied yes the property may have smoke alarms and safety switches but when were they last checked? Smoke alarms have expiry dates and batteries need to be changed annually.

A property can be sold without compliant smoke alarms, safety switches or a pool safety certificate, however, the purchaser will need to ensure compliance before a tenant moves into the property. Cord blind legislation is another compliance area to be aware of however this has not been added to Queensland contracts yet.  If you discover that the contract states that the property is compliant in one of these areas but it isn’t, either the real estate agent or the sellers should pay to have this rectified.

4. “Clean” is a very subjective word

Clean to one person can be dirty to another. When a tenant moves into a property the property should be to a “bond clean” standard. This means that carpets should be professionally cleaned, sprayed for fleas if there were inside pets and the yard should also be sprayed for fleas. Other items that can sometimes be missed by the sellers are curtains washed, blinds and window tracks should all be clean and air conditioning filters washed.

Ensuring the owner attends to these items before settlement occurs can all be written into your contract and can form part of negotiations to make sure your property meets these requirements at handover. This can save you hundreds of dollars in preparation for the new tenants.

5. Ensure you have access to property before settlement

Your new investment property needs to be working for you from the moment cheques are exchanged at settlement. As part of the negotiation process, we recommend that you ask for access to the property from when the Contract becomes unconditional. Access can be for the purpose of showing prospective tenants through the property or obtaining quotes for any work that may need to be done.

Knowledge is power when it comes to buying property so ask questions and don’t be afraid to walk away from the purchase if it doesn’t meet your criteria.

If you need help at all with the purchase of an investment property give us a call on 07 4642 0007. We can also recommend to you some great building and pest inspectors to ensure your new purchase is a safe one that doesn’t have any hidden problems.

Investors – Have Your Say!

Blog Blackbird and Finch - Investors Have your say

Blog Blackbird and Finch - Investors Have your sayInvestors – Have Your Say!

In an excerpt from the Housing Tax Integrity website; “From 1 July 2017, all travel expenditure relating to residential investment properties, including inspecting and maintaining residential investment properties will no longer be deductible.

This change will not prevent investors from engaging third parties such as real estate agents to provide property management services for investment properties. These expenses will remain deductible.”

The other proposed changes will limit plant and equipment depreciation deductions for investors in residential investment properties to assets not previously used. This will include items such as dishwashers and ceiling fans.

Plant and equipment used or installed in residential investment properties as of 9 May 2017 will continue to give rise to deductions for depreciation until either the investor no longer owns the asset, or the asset reaches the end of its effective life.

The Government has asked for public consultation on the exposure draft legislation which will end on Thursday, 10 August 2017.

I urge all investors to have their say on these changes. While the changes may not affect you now, they will affect your future property purchases. The full proposal changes and how to have your say can be found HERE.

To submit your suggestions/ideas please email housingtaxdeductions@Treasury.gov.au

5 Questions to Consider When Selecting a Managing Agent

Needle in a haystack

5 Questions to Consider When Selecting a Managing Agent

If you are a first-time investor or find yourself in the position where you need to rent out your home, selecting an agency to manage your property can be a huge leap of faith. Handing over the keys to a stranger to manage and take care of raises many questions relating to trust, experience and competency. After all, it is one of your most expensive assets.

Recommendations from family and friends are always a good place to start as there are generally many agencies to choose from. If you have narrowed down the list of agencies to interview, we can suggest 5 questions relating to experience that you may not have considered.

Why are we concentrating on experience? Some say that experience is over-rated, but real estate sales and property management are high staff turnover industries. There are many varied reasons for this, but the average life span of a Property Manager is only 9 months. Property managers, like sales agents, do tend to move onto what they believe are greener pastures with a new agency and generally after their third or fourth agency they will leave the industry altogether.

Question 1 – Is my potential Property Manager an owner of the business?

There is an stark difference between being an employee of the business, paid a wage to perform the duties of a Project Manager, and an owner of a business, who will ensure that your satisfaction is paramount. Your fees are their livelihood and their reputation depends on referrals and reviews from clients just like you. As the owner of the business the buck stops with them. Owners of the business aren’t going anywhere and will generally be there for the life of the business.

Question 2 – Has my potential Property Manager ever owned a property or an investment property?

Over the years, I have come across Property Managers that haven’t even moved out of Mum and Dad’s home let alone had the responsibility of paying a mortgage. I even had another that had the tenants on a “payment plan” because they were behind in their rent (to me rent is a payment plan).

Investors are not a charity, they are a business and they expect to see money in their bank account once or twice a month to assist with covering the mortgage repayments on their investment property. Without understanding the responsibilities of property ownership, it can be difficult for a Property Manager to “walk in the shoes” of an investor.

Question 3 – Will the person appraising my property be my Property Manager, or will it be handed off to someone else?

Often, real estate agencies have a Business Development Manager that appraises properties and their focus is to bring investors, like you, into the agency to grow the rent roll. Business Development Managers, or BDM’s, are generally experienced ex-Property Manager with excellent communication skills and salesmanship. They can promise the world but aren’t the ones that must deliver. Once your have signed an authority they hand you over to your allocated Property Manager, if they run a portfolio office, or a team of Property Managers, if they are task based.

Questions 4 – Does my potential Property Manager have more than 10 years’ experience in real estate?

The career path in real estate generally starts at the Receptionist, the face of the business when you walk into the office. Often, they are new to the real estate industry, recently left school and green. Performing well in their role, they progress to become a Property Manager filling a void that perhaps has been left by another Property Manager departing.

This is where they tend to sink or swim. Agencies that throw them into the deep end as a Property Manager rather than an assistant Property Manager are suddenly dealing with finding new tenants, managing clients, tenants and tradespeople, disputes, maintenance, arrears and the exiting of tenants. As a highly-regulated industry with over 300 pieces of legislation: communication, organisation and time management skills and knowledge of legislation is the key to effectively and efficiently managing your property. Without extensive experience things are likely to be missed or shortcuts made.

Question 5 – How many Property Managers do you have and what is their average age?

The average age of the Property Managers in an agency can give you an indication of their level of experience not only in real estate but also their general life experience. If you can’t meet face-to-face and only talk on the phone it can be difficult to gauge their age. Just like in a job interview, asking someone’s age is a no-no, however this question will overcome any awkwardness.

So how are we different?

Both Rebecca and myself have been in the real estate industry for over 10 years and we have experienced every aspect of residential real estate – we have not only rented but owned an investment property, bought and sold residential property and built a home. We are both owners of the business and we are the ones that not only appraise your property, but we are the Property Managers for Blackbird and Finch.

Your property is not our training ground and nor should it be. Our average age is 40 and we have seen it all in real estate here in Toowoomba, the good, the bad and the downright hilarious. There is never a dull moment in property management and we love every minute of it.

To get in contact with Rebecca or Simone call our office on 07 4642 0007.