Property Buying Checklist

Hi all,

I have been working on a checklist for property purchases and I thought I would share progress in the interests of open source collaboration...there a probably some good ones already floating around but I found it helpful to make my own. It somehow made sense to break it up into 3 stages. Stage 1 is planning or pre purchase. Stage 2 is the actual buying process. Stage 3 is the ownership phase. I believe systemising all 3 stages a bit should increase our professionalism as investors, and our enjoyment of the process as things will be easier. (for me systems = less stress) The total list is currently between 80-100 steps depending on how you break some of the steps up. I don't mind how many steps it ends up being, just that each one is achievable and make sense. Some of the notes are probably not required but I put them in as they occurred to me. I am happy for people to add/subtract, comment as you wish.

So anyway here are some draft notes for stage 1. I would appreciate any ideas as I am sure there are things missed.

STAGE 1 - PLANNING

  1. Decide to take action.
  2. Set long, medium and short-term goals for wealth creation and property investment.
  3. Review your finances to confirm your current level of affordability, and that you have enough funds to cover any transaction costs.
  4. Decide on approximate price range and property type and locations
  5. Decide on structure for purchasing (own name vs trust vs pty ltd etc)
  6. Decide on how to obtain finance ? whether through a Mortgage Broker or Bank directly.
  7. Make an appointment with your chosen Bank Manager or Broker so you have a clear indication of how much you can borrow and what type of home loan is right for you. Remember the smaller your deposit the more cash you can keep as reserve, however this means you borrow more (as a percentage) and you will need to pay Lenders Mortgage Insurance (LMI) for loans over 80%. If it means you can afford more properties this may be a cost worth paying as your capital growth exposure over time can be larger.
  8. Apply for Pre Approval
  9. Receive Pre Approval
  10. Check whether any First Home Buyer or other stamp duty concessions apply in your state or territory.
  11. Estimate your approximate expenses e.g., legal costs, stamp duty, pest and building inspections, lender?s mortgage insurance and application fees.
  12. Research the property market. Remember to consider economic drivers, planned infrastructure projects, the law of supply and demand, and the current state of the property cycle in your chosen area.
  13. Based on the research, confirm more specific property type, locations and price brackets remembering to ensure they are affordable for you.
  14. Review any selected short list of properties and consider how each property will fit your long, medium and short term goals.
  15. Set up bank account for your investment property(s) ? subject to the structure you have chosen. You will need your rents to come into it, and your mortgage and any other bills to come out. Its best for this to be separate from your personal living expenses account.
  16. See STAGE 2 for your next steps.
 
STAGE 2 - THE BUYING PROCESS
  1. Select a Solicitor (in the relevant state of the property)
  2. Review the short list of properties and do a cash flow analysis on the best property(s). Decide on a target property to begin with. Consider initial offer price and maximum potential purchase price.
  3. Begin negotiations and submit offers. Remember the best offers are usually submitted in writing
  4. Pay any agreed deposit to accompany your offer. Remember this is paid to the selling agent?s trust fund, if the property purchase does not proceed then you will be refunded. Providing a deposit lets the vendor and the selling agent know how serious your offer is and often gets the property at a better price. Depending on the state there may be a non-refundable component for exiting the sale under the cooling off terms (in NSW its 0.25% of the purchase price)
  5. Continue negotiations as required.
  6. Your offer is accepted.
  7. Forward a copy of the contract to your Solicitor to begin title and strata searches
  8. Sign any contract documents that have not yet been signed.
  9. Contact Insurance Broker/Company. Arrange building Insurance (for NON strata properties ie houses) and landlord/contents Insurance (ALL properties). Remember if a property is damaged after you have signed a sales contract you can be deemed the current owner so its important to insure your property BEFORE settlement.
  10. Forward a copy of the contract to your Broker so they can request a valuation.
  11. Select a Building and Pest Inspector
  12. Request an inspection conducted to be fully aware of any structural or pest issues. Note: Most building inspection services require payment in advance of sending the report.
  13. Receive Building and Pest inspection report back ? review the report and discuss as required.
  14. Provide any final paperwork to your lender as required by Broker
  15. Valuation is completed.
  16. Receive advice of formal financial approval.
  17. Liaise with Solicitor to advise that Building/Pest/Finance conditions are met and no concerns from Solicitor regarding title and strata searches. (Note: if concerns are raised these may require repair or renegotiation, if major concerns are raised then this is the opportunity to EXIT the purchase)
  18. Request Solicitor to proceed to unconditional exchange
  19. Unconditional exchange occurs. Both the buyer and seller are now legally committed in the buying process.
  20. Receive mortgage documents from lender. Sign and return these to lender.
  21. Settlement date is booked between Solicitors and Lenders.
  22. Your Solicitor will advise of the amount of money owing at settlement. This will include stamp duty, council rates adjustments, legal fees, mortgage fees etc. It will resolve depending on the balance of deposit already paid with the offer. You need to ensure enough money is available and sent to your solicitor several days in advance to ?settle? the property. (Solicitor can help)
  23. Settlement occurs! You now own a property, congratulations.
  24. See STAGE 3 for your next steps.
 
STAGE 3 - OWNERSHIP

  1. Review/interview the available Property Managers (PM) local to the property purchased.
  2. Select a suitable property manager. Remember that good property managers will pay for themselves and a bad one will cost you thousands. Don?t choose based on lowest price, but quality of service and reputation.
  3. Sign a contractual leasing agency agreement between yourself and your property manager. Ensure the terms are reasonable.
  4. Provide your PM with your bank account details for all rent to be deposited. (Remember it usually makes sense have this as the same account set up for the mortgage payment for the property and its best to have a separate account from your regular personal living expenses.)
  5. Have PM pick up keys from selling agent.
  6. Complete any cleaning/cosmetic/renovation work that may be required to appeal to the tenant market. Remember that a property that presents well with attract better tenants and save you money in the long run.
  7. Choose a Quantity Surveyor (QS) to complete a Depreciation Schedule to help reduce tax and improve cash flow.
  8. Arrange Depreciation Schedule. Note: Most QS services require payment in advance of sending the report.
  9. Decide on setting market rental price.
  10. Advertise and market the property (Property Manager)
  11. Select tenant (Property Manager)
  12. Proceed to signing of Lease (Property Manager)
  13. Your property is now tenanted.
  14. Develop an agreed communication method with your property manager such as email. (recommended to ensure you have a record of agreements made)
  15. Clarify whether the property manager or yourself are paying bills such as council rates and insurance.
  16. Set up a filing system (it doesn?t matter if you use folders, filing cabinets or all digital ? whatever you are comfortable with and whatever you will actually keep up to date) to keep track of all your property documents.
  17. The filing system should have at least the following sections: (however you word them is up to you)
  18. Purchase Documents
  19. Legal
  20. Insurance
  21. Building and Pest Inspection
  22. Pest Control Ongoing
  23. PM Contract
  24. PM Monthly Statements
  25. PM Inspection Reports (include Photos or have separate section)
  26. Body Corporate/Strata
  27. Renovation Receipts
  28. Quantity Surveyors Report
  29. Other expenses
  30. Council Rates
  31. Water Rates
  32. Keep your filing system up to date each month. Remember each property is like a small business that will bring profit over time but requires a few minutes of work each week.
  33. Develop a reminder system for paying any bills related to your property or ensure they are all being sent to your PM and remember to check your statements to ensure they are paid on time. If you prefer set up direct debits from your chosen bank account at regular intervals for mortgage and other regular bills.
  34. Authorize your PM to conduct repairs to the property as required, keeping your property in good repair keeps tenants happy and saves you money in the long run. Request that they send you photos with each inspection report and request additional photos if they have repair requests that sound out of the ordinary or unreasonable.
  35. Review your ability to purchase another property. Remember that owning multiple properties is the fastest way to build wealth through capital gains and cash flow growth.
  36. Meet with your Accountant prior to tax time each year to discuss any tax, repair, renovation issues to ensure you are maximizing your deductions.
  37. Visit your property as often as you can. There is no substitute for seeing a property personally as even the best property managers don?t look with your eyes, the eyes of an owner. Its your property for your future after all, so take care of it.
  38. Use data services or contact an agent or valuer in future years to request a market appraisal for your property. Who knows how much it will have grown? You might have some hidden equity that you can access to form the deposits for even more future properties. Reviewing the potential profit you have made can be inspiring and motivating as well.
  39. Repeat the process when you can safely afford to purchase more property and build significant wealth over time.
  40. Remember that this is a business formula for long term wealth creation. The more systematic you can be in how you apply the above steps the faster you will achieve your goals.
  41. Review your long, medium and short-term goals. Read/listen/view material that keeps you inspired to reach those goals. Be patient. Remember that habits and short term actions are what determine our long term outcomes. Your mind is your most important asset. Feed it well.
 
I'd probably switch the planning section down to 6, 7, 4, 5.

No point deciding on a purchase price range if its not viable. Finance largely dictates the type of strategy which can be undertaken, especially in financially constrained environments.

I wouldn't necessarily suggest it is required to get a pre-approval. Pre-approval *if* necessary is more realistic.

The meetup should cover 10 & most of 11's parts too.
 
I'd probably switch the planning section down to 6, 7, 4, 5.

No point deciding on a purchase price range if its not viable. Finance largely dictates the type of strategy which can be undertaken, especially in financially constrained environments.

I wouldn't necessarily suggest it is required to get a pre-approval. Pre-approval *if* necessary is more realistic.

The meetup should cover 10 & most of 11's parts too.

Good point Cjay - I will switch up my original. Re the other bit I know its impossible to have 1 checklist that will suit everyone but if I have as many contingencies in as possible (like pre approval etc) then its hopefully as close to comprehensive as it can be.

Danwatto - customise away but if you add anything good let us all know!
 
Boy that is an exhaustive list...you forgot the 4th most important stage though. :eek: Without this stage all the previous stages are pointless.
 
Had forgotten all of the steps we go through to purchase an IP and manage it over time. Seems a lot less once you have been doing it a while....
 
danwatto did you come up with any improvements?

I have a big word document but it's not complete.

The scope is a bit bigger though as it covers strategy as well.

Am doing a couple of purchases and will take notes anything I want to add. So short of time at the moment but will save this thread and come back when I've tidied up things.

Actually I better re read your list so I don't miss anything!
 
Is this list the secret to being a Buyers Agent? This is all you need?!

I think they do more than this. Experience, negotiation, market knowledge, access to contacts/network etc. Not to mention the huge amount of time it takes (although it can be enjoyable) .
 
Back
Top