A question that I get asked a lot by fellow investors is – “when you buy in QLD, do you visit every property before you buy?”
Very valid question, so I thought I’ll share my strategy on how I’ve done this when I was buying properties up at QLD.
My answer is “no I don’t, I only fly up and visit when I have the property under contract. Otherwise it’s a waste of my time and money.”
A bit about QLD Contract Process
To be able to rely on this strategy we need to understand how the QLD Contract process works. Different to NSW, QLD buying process actually protects the buyer!
Here is how it works – once a contract is signed and exchanged, buyer will be protected by:
1. Standard 5 days cooling off period
2. Standard 7-14 days Building & Pest Clause
3. Standard 7-14 days Finance Clause
Until all 3 points are passed and satisfied by the buyer then and only then the contract goes unconditional.
In other words, B&P and Finance clause are two additional clause that’ll allows buyer to terminate the contract under reasonable basis, which is awesome news for investors buying up in QLD
So you might ask: this is all good information, but how does that help me in buying site unseen?
Let me show you the strategy by splitting the overall purchase process into 2 sections – before contract exchanged and after contract exchanged.
Prior to Contract Exchange – Inspections and submitting Offer
The two key milestones prior to contract exchange are arranging inspections and submitting offers.
For inspections, the trick is you get someone to act as your eye on the ground. This can be your mate, your Property Manager or even your Builder if you have one. Discuss with them about whether they offer pre-purchase inspection as part of their service offering. Some of them are open to do this for you for free while others may want a small fee. For me I’ve used my PM.
My guidelines for pre-purchase inspections are:
1. Liaise directly with agent to check out the property
2. Report back to me on property condition, major work required to be done (such as structural issues, if any), good to have work to be done (such as replacing carpet), estimated rent as well as photos.
Based on the above information I will then be able to paint a picture on whether the property is worth pursuing or not. By working out how much additional reno cost I need to put aside, I can then work backwards to determine my offer price and evaluate the yield. (P.S. I will write a separate article to cover how to do this in more detail using the cashflow calculator :))
Once I have my offer price I can then submit the offer to agent (plus wait and pray haha). If it’s accepted, then and only then I’ll arrange the travel to visit the property yourself. If the offer is not accepted, then just move on to the next deal – rinse and repeat until it’s under contract!
Post Contract Exchange – B&P and Finance
After contract is signed and exchanged, then isn’t it the exciting time of paying a visit to check out your new little IP!? Well, before you book your ticket there are two more step to do – organize Finance and B&P immediately.
Finance is usually the one that is most risky in terms of going over the standard 14 days period. So the first step should be inform your mortgage broker asap so they can start putting the application together for Finance approval. Banks do take their time!
Once you’ve initiated Finance Approval then next up is B&P. What worked for me previously is to book the B&P service first and confirm date & time B&P will be carried out. Then book the ticket and fly up on the same day to meet up with the B&P guy so he can run you through his results in person. That way you get to see the B&P result first hand, and at the same time you get to inspect the IP yourself! Killing two birds with one stone
At that time if you found there are serious B&P issues (such as structural problems), you can also use this opportunity to ask your solicitor to request for a discount on the purchase price (depending on severity of the issue) based on B&P Report or ask the vendor to fix some of the items. Note though they are not legally obligated to do so, but it doesn’t hurt to try!
In the extreme case of structural issues or severe termite damage you can discuss with the solicitor based on B&P Report in order to terminate the contract based on B&P clause. But if they are small defects then you are most likely unable to. For more details on how you can terminate the contract based on B&P clause, seek specific legal advice.
By the time you got your B&P report you would probably have heard back from your broker about finance approval too. If 14 day is fast approaching and you and your broker feel there is a risk you will not get finance approval within the time limit, ask your solicitor to request vendor’s solicitor for additional 7 days extension on Finance clause. It’s somewhat common in QLD that Finance can take 14 to 21 days to approve so most of them time vendor should be able to accept this extension on good grounds.
So in summary my strategy for buying site unseen effectively are:
1. Contact ideally a PM or Builder who you trust to inspect the property and report back based on your guidelines
2. Work out any cost required to tidy up the IP, determine the Offer Price
3. Review (or request solicitor to review), sign the contract and submit the offer
4. If contract is exchanged, then
– Organize Finance with broker
– Organize B&P date and time
– Organize flight ticket to meet the B&P inspector on the agreed date and time to go through B&P results in person and inspect the property at same time
5. Negotiate with vendor on purchase price based on the B&P report
6. Instruct solicitor to request additional finance extension with vendor if finance approval is struggling to meet the standard 14 days deadline
7. Once Finance and B&P are approved, then congrats – contract now goes unconditional! Get ready for settlement
Reach out to us today if you would like to know more about how to deploy this strategy, or get assistance on how to put it in action!