Property investing is not a single-person game, so I want to stress the importance of having a good team around any property investor to be able to accomplish a successful property investment journey.
1. Mortgage broker
Role: to provide credit advice on how much an investor can borrow, and ensure the fund is available during settlement of property.
Most property investors actually underestimate the importance of having a good mortgage broker in the team.
A good mortgage broker can help you by:
- assessing your situation and advise on your borrowing capacity
- reviewing and selecting the most suitable loan product for the IP purchase
- structuring the loan correctly to ensure at later stage funding will still be available so a property investor can continue to purchase more IPs
- taking majority of the headache out of you having to deal with banks for any funding issues during settlement
A good broker is a critical team member to any investor’s successful property journey; there can be a difference between obtaining funding from banks for three properties versus six properties if the loan is not structured correctly.
Ideally, a good broker should also be an investor so he or she will understand what investors are after and how to best guide them.
Note that a common misconception is, brokers are just good for interest rates. A good mortgage broker doesn’t just talk about rates; interest rate is a small component in the overall equation, but they should be focusing on the property investor’s goal.
Above all, they usually don’t charge clients a single cent! Brokers are remunerated by the banks for each of the loan they write. And, there is a huge effort required to ensure clients are looked after, so don’t think their job is easy as it seems, because it’s not.
I can also relate that most people would prefer to go to banks directly. But, if you are really serious about property investing, then a good broker is absolutely a paramount member of the team.
Where can you find a good mortgage broker? Speak to other investors and, usually, a good broker will not be shy of referrals!
Role: to provide legal advice on the sales contract, oversee the contract exchange, and ensure settlement of property takes place in a smooth fashion.
A good conveyancer/solicitor will be able to assist by:
- providing legal advice on the contract process
- representing the buyer in a contract process, once a signed contract has been exchanged (which then becomes a legally binding document)
- representing on the buyer’s behalf to seek extensions on any of the finance or B&P clause
- representing on the buyer’s behalf any negotiation required, or fulfillment or execution of special conditions
- performing agreed free/paid searches on behalf of buyers such as title, council, development plan, etc
- attending on the day of settlement to complete settlement process on behalf of the buyer and transfer of stamps/title, and advise buyer when settlement has been completed
A conveyancer/solicitor is required to handle all the legal aspects of a property purchase. When you need a contract reviewed, a conveyancer/solicitor will be your best friend.
They will be able to provide general legal advice, and in particular advice on the impact of a special conditions or hidden clause within a contract which most investors will not be aware of.
My recommendation: don’t proceed to make any offer until you have a contract checked out by a conveyancer/solicitor!
Your conveyancer/solicitor will represent you as the buyer in a property purchase transaction. The seller (vendor) will also have a conveyancer/solicitor who represents them.
Once the contract has been signed and exchanged, then all the formal communications will be handled by both side of conveyancer/solicitors. They will ensure any further requests/negotiations from the buyer/vendor are being discussed, as well as any special conditions are met so that the contract can proceed in an agreed fashion (or terminate, as required) onto the next stage.
Also, Joe Blob may be your best conveyancer/solicitor buddy next door, but when you purchase in a different state you will not be able to use him. Each state has different law/legislation, so when you purchase interstate you will need to find a conveyancer/solicitor who can provide legal advice in that state. Usually a local solicitor that resides in that state will be able to provide such advice/service.
Where do you find a good conveyancer/solicitor?
Again, this is where investor network comes in handy. The best way is to seek referral from an investor who has purchased previously in the state you are currently looking to purchase. They would then be able to refer (or not refer) the conveyancer/solicitor details which they have used.
Alternatively, have a look on the Legal Issues section on the Property Chat forum.
3. Building & pest inspector (B&P inspector)
Role: to provide professional advice on building and pest for a target property.
A good B&P inspector will be able to assist by:
- conducting building a pest inspection of the target property, and advise on any building defects (existing or potential) and also any pest issues (both existing or potential)
- providing a formal building and pest report of the target property (sometimes it will be two different people carrying out each task – one for the building and the other for pest inspection)
- The B&P inspector should be able to walk you through and discuss the inspection result on the day if you are able to meet him/her on-site on the day.
- An outstanding building inspector (who usually holds an active builder licence) will be able to provide a rough estimate on the cost associated with fixing any major/key defects.
- An outstanding pest inspector will be able to advise on whether the property has had termite damage previously, and to some extent also able to trace back where these termites may have been residing – for example, a rotten tree branch sitting in the corner of a garden.
B&P inspectors are a vital team member during purchasing as a small cost upfront could save you up to thousands of dollars down the track!
May it be building defect, active termite infestation, these are expert skills where you and I who are not trained in this area will not be able to identify.
Some really good B&P inspectors will also be able to provide guidance on the repair cost for defects listed, but it’s not a common act and definitely not within their due responsibilities to do so. If you can find a B&P inspector who is happy to provide an estimate for you, treat him/her like a gem in the team!
This means you’ll be able to work out estimated repair cost required and establish the optimal offer price.
In this context, B&P inspectors are there to help an investor to minimise the risk of unexpected future outlay.
Note, however, pre-purchase B&P inspection usually don’t go into the detail of asbestos. Some B&P inspectors will mention presence of asbestos however will put a caveat on the completeness of asbestos reporting being “out of scope” from the pre-purchase inspection report.
Again, B&P inspectors are best chosen via words of mouth. Referral sources are the best as someone has tested and done it before, and if they are happy to recommend service, then the B&P inspector must have been doing something right.
About the Blogger
David Shih is a Sydney-based investor who have built and amassed a property portfolio across NSW and QLD. David has a real passion in helping others with property investing, personal development and believes having the right mindset and optimism is absolute paramount to the success of everything in life. David is sharing all his tips, lessons and experiences in his blog which can be found at mypropertystories.wordpress.com. He is happy to talk property anytime via Facebook, Google+, Twitter (@diyshih) or via the blog.