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.
I have been asked a write something on what consist of a good property investment team, and where would you be able to find these people? Let’s have a look below and tackle each role one by one.
The Property Investment Team Members
During any property investment journey the following teams are critical to your success:
1. Mortgage Broker (MB)
3. B&P Inspectors
4. Buyers Agent (BA)
5. Property Managers (PM)
Today we’ll cover Mortgage Broker, Conveyancer/Solicitor and B&P Inspectors.
1. Mortgage Broker (MB)
The Role: to provide credit advice on how much an investor can borrow, and ensure the fund is available during settlement of property.
Most of the property investors actually underestimate the importance of having a good mortgage broker in the team. A good mortgage broker can help you in the following way:
– Assess your situation and advise on your borrowing capacity
– Review and select the most suitable loan product for the IP purchase
– Structure the loan correctly to ensure at later stage funding will still be available so a property investor can continue to purchase more IPs
– And, takes 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 – it can be a difference between obtaining funding from banks for 3 properties vs 6 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 a common misconception is that brokers are just good for interest rates. A good mortgage broker doesn’t just talk about rates – interest rate is just a small component in the overall scheme of equation but he/she should be focusing on what the property investor is trying to achieve. i.e. the 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 are 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 will be absolute paramount member of the team.
Where can you find good Mortgage Broker? Speak to other investors and usually a good broker will not be shy of referrals!
The Role: to provide legal advice on the sales contract, oversees the contract exchange and ensure settlement of property takes place in a smooth fashion.
A good conveyancer/solicitor will be able to assist in the following way:
– Provide legal advice on the contract process
– Represent buyer in a contract process, once signed contract has been exchanged (which then becomes a legally binding document)
– Represent on buyers behalf to seek extensions on any of the finance or B&P clause
– Represent on buyers behalf any negotiation required, or fulfillment or execution of special conditions
– Perform agreed free/paid searches on behalf of buyers such as title, council, development plan etc
– Attend on the day of settlement to complete settlement process on behalf of 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. So 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 represent them. So 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, however 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 to find a good conveyancer/solicitor? Again this is where investor network comes in handy. The best way is to seek referral from 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 Property Chat – Legal Issue sub-forum for recommendations:
3. Building &Pest Inspector (B&P Inspector)
The Role: to provide professional advice on building and pest for a target property.
A good B&P Inspector will be able to assist in the following way:
– Conduct building & pest inspection of the target property, and advise on any building defects (existing or potential) and also any pest issues (both existing or potential)
– Provide a formal building & pest report of the target property (sometimes it will be two different people carrying out each task – one for 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 onsite on the day
– An outstanding Building Inspector (who usually holds an active Builder license) 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 Inspector 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 Building Inspector 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 Building Inspector who is happy to provide 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 – refer to my previous post on “how to determine best offer price“.
So in this context B&P Inspector are there to help an investor to minimize 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.
In Part 2, we’ll cover off Buyers Agent, Property Managers and Accountants – another three critical team members of your investing team! Stay tuned.