Your partner in property

The Essential Guide to Buying Property

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CONTENTS

BUDGETING & FINANCES 2

RESEARCH AND INVESTIGATION 2

INVESTMENT STRATEGY – THE KEYS TO PROPERTY SELECTION 4

ASSESSING VALUE AND HOW MUCH TO PAY 5

MORE RESEARCH 6

PURCHASE STRATEGY 7

IDENTIFYING RISK 8

PROFESSIONAL ADVICE 9

FAQs 10

Property Duo was established in 2009, commencing as the strategic advice arm of WBP Property Group – one of Australia’s largest property valuation firms.

Property Duo disrupts the traditional real estate model, introducing transparency, independence and research-based insights to the existing property lifecycle. Unlike our competitors, we’re not transactional, we’re about building life-long relationships.

Offering a range of expert service, ranging from buyer’s and vendor’s advocacy to portfolio advice, negotiation services and more, Property Duo is your partner in property.

T: 1300 333 DUO (386) F: 1300 886 545 E: info@propertyduo.comLevel 14, Suite 2, 360 Collins Street, Melbourne, Victoria, 3000 | ABN 36 044 687 378

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Property is one of the most popular asset classes in Australia and is often the single biggest financial decision most people make in their lifetime.

The property search can turn up more questions than answers, but by being prepared and asking some simple questions buying property can be an exciting and enjoyable experience.

The following guide is an overview of the process of buying property in Australia and provides handy tips and tricks to help you research, find and buy assets, not liabilities.

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Firstly, seek independent financial advice and ensure you have lending pre-approval. With this in hand you know exactly how much you can spend, which will help narrow your property search, saving you countless hours.

Having pre-approval also makes the negotiation and settlement of a property much smoother.

Using a finance broker can help you obtain a better interest rate and other benefits not available to the general public.

The broker will do all the ground work for you in researching the best mortgage products to suit your needs, and best of all the service is free to you as the borrower.

When choosing a broker ensure they are qualified and accredited with the MFAA (Mortgage and Finance Association of Australia) or FBAA (Finance Broker Association of Australia).

Budgeting & finances

BUDGET TIP Knowing the areas and types of property that

fit your budget and objectives will assist you to filter your search and find the property that’s

best for you.

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Apps: There are many applications or ‘apps’

available for smartphone devices to help buyers research, find and inspect properties all from their phone handset or tablet, the most popular of which is probably realestate.com.au.

Built-in GPS allows users to conduct a refined search of the most recent listings and sales results based on location, price range, property type, property features such as number of bedrooms and bathrooms, land size and more. Apps of this kind are a convenient and efficient way to scroll through the hundreds of new listings advertised to the market each week.

Another useful app includes Property Guide, which gives users an estimated assessment of property values, unit measurement converters to calculate floor space and compasses that allow you to assess a property’s orientation and the amount of natural light it receives.

Maps: Progression in satellite mapping

technology means that users can research properties and suburbs from above, assessing what the local area has to offer without leaving their chair. Available on the latest smart phones, Google Maps uses built-in GPS technology to deliver location-specific results for local businesses and services such as schools, transportation, shopping and dining facilities, and sports and recreation.

Street View: This handy tool enables users to

take a virtual street-level tour of almost any capital city in the world, with 360-degree panoramic views of the streetscape. This can be particularly beneficial for cursory inspections of a property in assessing accessibility and the external condition and presentation of the property and the street. This can save valuable time by reducing the short-list and forgoing the need to physically inspect hundreds of potential properties.

Property data: Advances in digital

technology such as the internet and personal computer devices means that access to information is becoming increasingly simple.

RP Data and Real Estate Institute chapters in most states offer an abundance of free and paid information to assist property buyers with researching a property’s or suburb’s historical performance. This data is invaluable in assessing a property’s future performance and its potential for strong capital growth.

* * *

While technology makes it easier to conduct your property research, it should not replace a physical inspection if you are serious about buying a property.

Research & investigation

RESEARCH TIP Speak with local agents

about area demographics and local amenities, and

source independent info about the area’s

or property’s historical capital growth.

Information is power when it comes to buying property. For those looking to invest smarter, these handy tech tips will help you find the right information to make better informed property-related decisions.

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Investment strategy

When selecting a property consider these strategic tips.

Never speculate: When buying real estate don’t risk everything on a guess. Base your decision on facts. including comparable historical sales history. A long-term consistent performance history is the most reliable indicator of future outcome. Basing your decision on a location’s proposed future development, such as improvements to local infrastructure or amenities, can result in disappointment. Also, consider property types in limited supply rather than those in greater supply of similar available stock. Quality scarce dwellings. such as Victorian terraces. offer limited opportunity to buy, and benefit from significant demand and subsequently higher levels of capital growth.

Value land: Land size underpins the value of a property, and can account for 70 per cent or more of the total value of a property. Before buying, consider how the value of

the physical site compares to the value of the dwelling. If the value of the property is weighted towards the dwelling itself, such as is the case for high-rise apartments, it is less likely to benefit from significant levels of future capital growth. When assessing a property remember one simple thing; land appreciates and improvements (buildings) depreciate.

Avoid main roads: While access to transport infrastructure is important, avoid buying on main access roads and near train or tram lines. Properties in these areas suffer from traffic congestion, impeded access and significant noise disturbance – all factors that influence the property’s growth potential. Select properties located walking distance to a bus route or train line in quiet streets or cul-de-sacs.

Buying off the plan: Like any business, developers need to make a profit and a typical development is likely to have

a minimum profit margin of 25 per cent. This means that every unit or apartment in the complex must sell at 25 per cent or more above cost. Off the plan buyers also absorb the cost of expensive marketing campaigns and advertising, additional costs that can take years to recoup in growth terms.

Buy for capital growth: The majority of property wealth is achieved through capital growth. In the long run, a property with a high capital growth profile and moderate rental return will outperform those properties with seemingly high returns. It is also worth noting that rental guarantees are in fact no guarantee of long-term growth performance, so be wary.

Adhering to these simple steps will assist you in differentiating between an average property and a high performing asset that will bring you that step closer to achieving your long-term goals.

Searching for the right property can be time consuming, so it's important to have a strategy before you commence.

The keys to selecting the right property

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While there's tough rules in place to manage underquoting practises and improve transparency in the real estate industry, onus still lies with buyers and vendors to understand value and how it is reflected in the price of a property.

What is the property worth? The most effective way to determine the value of a property is to compare it with recent property sales. The sales must be recent and from the same area as the subject property.

They should also have similar attributes such as land and dwelling size, age, number of bedrooms and bathrooms and the condition and fit out of the kitchen and wet areas.

When purchasing property, a sworn valuation can also be beneficial, ensuring you avoid overpaying.

Assessing value

Once you’ve found the perfect property, the next step is to determine its worth and how much you should pay.

How much should I pay?

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VALUE TIP Don’t simply rely on the advice of the vendor’s real estate agent. Instead conduct your own investigation.

How much is my property worth?

Get your free property price estimate report. Visit propertyduo.com for details.

Before making an offer or tendering that first bid, ensure you’ve thoroughly reviewed the Contract of Sale, physically inspected the property and decided upon the Terms of Settlement.

Contract of saleIt’s imperative to have a qualified conveyancer or legal practitioner review the Section 32 and associated sale documents before you sign the contract of sale. A conveyancer will search the title to verify its status, obtain rate and planning certificates from relevant authorities, adjust rates notices to ensure you only pay the rate fees for the period from which you take possession of the property, confirm the size and measurements of the property, including any easements,

identify any structures that don’t have the correct council permits and documentation and determine the availability of utilities and related services.

A conveyancer may also alert you to anomalies between the contract and the property.

Settlement termsFlexible settlement terms such as unconditional sale and long or short settlement can be appealing to many sellers and provide buyers with a distinct advantage over less flexible competitors.

Also, take note of the chattels included in the contract. Don’t assume that certain features or ‘fixtures’ are included by default.

InspectionsIt’s also wise to arrange a building and pest inspection to ensure you’re aware of any existing or potential structural building defects.

A qualified and experienced building inspector can provide a report on the condition of finishes, fixtures, electrical wiring, plumbing, gas, asbestos and structural integrity of a property helping you to identify defects that may potentially cost you thousands of dollars in construction and repair costs.

More research

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RESEARCH TIP A building inspection report that identifies defects may also provide you with leverage from which to negotiate a better purchase price.

Investment strategy

Understand the rules of negotiation for both private sale and auction environments and you’ll have a better chance of securing the property.

Auctions are commonly used to maximise the sale price for the vendor in a competitive market. Compared to sale by Private Treaty, an auction is an open and transparent process, with benefits for both buyers and sellers.

So what steps can you take to increase your chances of placing the winning bid on your next property?

The key is to participate! Don’t wait for other bidders to start or for the property to pass in so that you can make a post-auction offer.

If you are serious, you need to bid. Placing the highest bid at auction means that if the property is passed in you will be offered the first right of refusal to negotiate the purchase price. This means that you could secure the

property for less than it would ordinarily sell under Private Treaty.

Many people will advise you to set a strict price limit and walk away if bidding exceeds your budget. But are you willing to miss out on your dream home for the sake of $1,000? Bidders commonly approach an auction with a neat, rounded price limit, but by making an odd bid (say $651,500) you might outbid your competitors without paying an extra $5,000 or $10,000. While it’s important to set your budget, bidding at auction should be flexible and situation-specific.

Remember, when it comes to bidding, you’re there to win, so bid fast and confidently – don’t give your competition time to think. Also remember, you’re bidding against other bidders not the auctioneer. Stand where the auctioneer and other bidders can see you, and direct your focus toward your competition. Bidding in this way will tell other bidders that you are intent on buying the

property, which may unnerve them to your advantage.

While you may only bid on a property once or twice in your life, you might be competing against seasoned professionals who buy properties on behalf of others every weekend. So if you choose not to engage an advocate, knowing the tips and tricks used by these professional bidders will help you hold your ground at auction, and hopefully submit a winning bid.

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Securing the property of your dreamsThe depth of information and research obtained will have a significant impact on your game plan and your ability to buy with confidence.

NEGOTIATION TIPWhen buying via private sale sub a time-limited

offer to ensure your offer is put to the vendor

immediately, avoiding agents’ delay tactics to

drive up price.

Some of the most easily recognised, and yet commonly ignored, red flags include:

Property title:The type of title of a property has a significant impact on its rate of capital growth.

Company Share and Stratum titles are often viewed unfavourably by lenders as they provide reduced loan security as a result of restrictions to ownership entitlements and control of the property. This can make it difficult to obtain finance, which in turn can impact saleability of the asset and capital growth.

It is wise to consult a conveyancer or property adviser to identify the title type before deciding to purchase.

Size restrictions:From time to time lenders establish policies that restrict lending on properties smaller

than 50sqm, because some smaller residential assets, such as student accommodation, are associated with greater lending risk.

While rates vary slightly between lenders, the size restriction often means buyers cannot access the capital required to finance certain purchases, resulting in diminished demand for the asset and implications for growth.

Before purchasing, buyers should check with their lender to see if they have any restrictions on floor-size. If unsure, contact the local council who can provide the dwelling’s size over the phone.

Owners Corporation rules:These are a valuable and necessary aspect of all multi-unit developments but buyers must ensure they review the rules, facilities and costs

associated with the Owners Corporation prior to signing a contract.

While gyms and swimming pools are beneficial for residents, Owners Corporation fees for these facilities can be expensive and dminish investment returns.

Buildings may also have rules governing noise disturbance, pets and building maintenance, which can impact lifestyle and return on investment.

Guarantees:Finally, don't be swayed by rental guarantees, stamp duty savings and marketing campaigns that distract you from a property’s poor growth potential. These offerings are generally time limited and non-transferable, which means they add no real value to the capital value of the property.

Identifying risk

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Although most people understand the basics of what affects property values, such as location and land size, many are unaware of the hidden dangers that can impact long-term investment returns.

Buyer’s Advocates and Property AdvisersA professional property advisor or buyer’s advocate can locate and negotiate the purchase of property on your behalf.

Armed with information provided by you about your lifestyle, needs, financial position and investment goals, an experienced and suitably qualified property advisor is an independent voice of reason in the selection and transaction process, helping you avoid the pitfalls associated with buying, selling, or investing in property.

An advisor will help you to determine whether an asking price is within fair market value, manage negotiations, including auction representation, as well as review contract terms and conditions on your behalf.

Property advisors also liaise with specialised contractors

including property managers, real estate agents, building inspectors, pest consultants and surveyors, utilising a network of contacts to obtain good value service for your money, while saving you the hassle of doing it yourself.

Property ValuersA certified property valuer can provide an independent assessment of the value of the subject property to assist you in determining how much you should pay.

The valuer’s skill lies in his or her ability to undertake detailed analysis of comparable sales information. That is, breaking the sales down to the added value of features and improvements i.e. balconies and motor vehicle accommodation per square metre and applying those rates to the subject property.

This type of analysis is rarely

undertaken by real estate sales firms who tend to apply rough rules of thumb.

Financial planners and accountantsWhether you’re buying a home or an investment property, a financial planner can assist you in maximising the effectiveness of your personal finances. A financial planner can tailor solutions to better manage your cash flow, investment and retirement planning, debt and risk management and taxation.

Similarly, an accountant can assist you in maximising the tax benefits of owning property and assist you with strategies for managing debt.

Finance brokersA finance broker is your intermediary with the lender and can assist you with determining your borrowing requirements and sourcing the best loan options.

Expert advice

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Finding and purchasing the right property isn’t easy, however, you needn’t do it alone. Establish a network of contacts to ensure you get the right advice from qualified and experienced specialists.

When buying or selling property is turning up more questions than answers, don’t risk a guess.

Disclaimer: The content of this guide is written expressly for education purposes and is based on the opinions of the authors. The authors and agents for the authors do not accept any liability for any error, omission, loss or damage of any kind sustained by any person or entity arising from the use of this information. It is recommended that you seek independent professional advice relevant to your specific circumstances before acting on this information.

Below are answers to some of the most commonly asked questions when it comes to buying property.

FAQs

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When is the right time to buy?Analysis of historical sales data shows it isn’t when you buy but what you buy that’s important.

How much should I pay?Compare the property to other recent sales in the same area with similar attributes to help you determine how much to pay.

Where should I buy?Location, is the quintessential factor when buying property. But, location is more than just the right suburb or even the right street – it is as specific as the lot number or position in a block of units.

Is property a good investment?Property is one of Australia’s most popular asset classes, due to its relatively stable performance and long-term growth. However, a sound investment portfolio typically comprises a mix of assets including shares, property and commodities.

Do I need a buyers agent or adviser?An increasing number of everyday Australians are seeking professional advice when buying and selling property. While it's not mandatory, professional advice can help you avoid the pitfalls associated with buying, selling, or investing in property.

Got more questions?Contact PropertyDuo today on 1300 333 386 to learn more about property.