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The typical purchase process for investors looking to buy off the plan apartments in Australia
Many investors are choosing “off the plan” investment property. In Australia buying “off plan” usually requires 10% of the purchase price as a cash deposit, this should remain in a solicitor’s trust account and not be accessible by the developer until project completion. Purchasers need to check their contracts prior to signing to ensure this is the case.
There is then typically no more to pay until the project is fully complete and ready to occupy. The buying “off the plan” practice allows investors to get involved in a project early on and lock in the current price. In the hope that by the time the project completes it will have already had some capital growth and rental growth.
Please note as regards Stamp Duty:
in some States of Australia stamp duty on the purchase may be payable prior to the property completing.
The general purchasing process:
Most projects require an initial holding deposit once you have selected the particular property that you intend to purchase. This holding deposit is usually between AUD$2,000 & $5,000, is usually partly refundable should you have a change of mind prior to signing contracts, and should be held in a trust account.
Once a holding deposit is received the vendor’s solicitor will prepare a contract of sale. This is usually a few days after the holding deposit has been sent. We strongly suggest to all of our clients that they use the services of a local Australian solicitor who is independent of the developer and the developer’s solicitor and who solely represents the purchaser. It is important to have legal representation in the geographic area in which you are purchasing to ensure that the particular legal requirements for that locality are being met.
The contracts, once prepared are sent to the purchaser’s solicitor. They in turn review the contract, suggest and negotiate any changes that they feel are in your best interests and forward the contract to you, with their covering notes.
The general time frame that most of our developers agree to (for off the plan projects) for our purchasers is to allow 21 days from contract issue to have contracts signed and returned and the 10% cash deposit transferred. Once the contract has been signed by the purchaser and the vendor (with no outstanding conditions) and the 10% deposit has been paid it is considered to be “unconditional”. This 10% is generally held in a trust account by the developer’s solicitor. It is important to ensure that the 10% is held in trust and is not available to the vendor until the project is complete. This will be specified in the contract.
Local Australian investors often have the option of exchanging contracts using a Deposit Bond or Bank Guarantee (to the value of 10%) rather than using 10% cash. This option varies from project to project, so please check this option with us.
Once contracts have exchanged, there are now no further property payments required, until the project settles (completes).
Several months prior to settlement your solicitor will contact you to prepare for settlement. It is important at this time to:
Organise Finance: We have experienced mortgage brokers who are available to assist both our local and non resident investors.
Organise a pre settlement inspection: You can do this yourself, though we suggest that in addition you use the services of an independent builder to inspect your property on your behalf.
Organise an Australian bank account: If you are borrowing funds in Australia you can organise this with the same lender. In any case you will require a local account to have
the rent paid into.
Organise a local property management agency: You will require the service of a local property management agency to manage your investment, find and manage the tenant, ensure that rent is paid in to your account and that property costs such as council rates etc are paid.
For interstate and international investors, all of these things can be readily organised without you needing to personally visit.
You can take care of each of these steps personally, or we can assist where required or if you are a non resident investor, you can take advantage of our Full Service option