Entering a contract to purchase an investment property is a serious thing and should not be taken lightly. Once a contract is signed you are bound to the terms of the contract and if you have not ensured that the terms meet with your requirements you may not be able to change them.
The top five tips before signing a contract are:
- Buying Entity
Most investors are looking to purchase in an entity, such as a trust, and commonly with a corporate trustee. You need to ensure firstly that the entity is set up before you sign a contract and make sure that the correct name of that entity is inserted in the contract.
If you are buying property with a tenant make sure that the tenancy details are noted in the contract otherwise you could be buying the property without the tenant. You should review the lease before the contract becomes unconditional.
Make sure you allow adequate time for obtaining your finance. Make sure the finance details are completed correctly in the contract. Failure to do so may mean that the contract is not subject to finance.
Have a smaller deposit payable when the contract is entered into and a larger portion payable once the contract becomes unconditional. It may not always be possible to pay the initial deposit when a contract is signed. You need to ensure that the contract provides you with sufficient time to pay the deposit so that you do not inadvertently breach the contract.
- Due Diligence
You should consider having a Special Condition to allow for due diligence to be conducted on a property to ensure that you have the time and ability to conduct such enquiries regarding the property and be satisfied before you commit to the purchase. You may want to check that you can subdivide the block, confirm the structures have all the necessary approvals, check the lease etc. The standard conditions do not allow you rights of termination with this form of enquiry.
In summary before entering into a contract the best advice is to seek professional advice from your lawyer before you sign the contract to ensure that your rights and interests are protected in the process of you purchasing your investment property.