Pre-Purchase Legal Advice - Secure Your Investment

It never ceases to amaze me how many simple and innocent mistakes clients make when they buy their investment properties - mistakes which could easily have been avoided by running their potential decisions past a team of experts.

It never ceases to amaze me how many simple and innocent mistakes clients make when they buy their investment properties, which could easily have been avoided by running their potential decisions past their team of experts, more on that in a moment.

When I ask my clients if they were to spend hundreds of thousands of dollars on a car if they would just hand over the cheque and then work out later if they got what they paid for?

Of course not!

They would place their trust in the experts to verify the fine detail of the car at every level, accident free, verification of mileage, speaking with the service centre that performed all of its historical work amongst many other checks and pay in the grand scheme of things, a small fee to these qualified experts to have some peace of mind upon which they will confirm their decision to purchase, or not.

The approach to purchasing an investment property is no different, I’m a firm believer in assembling a panel of experts to draw advice from when acquiring an investment property, in my team I have:

1. An accountant – but not just any accountant, you need to do your homework and search for the one that gives key structure and tax advice around your circumstances, and ensures it is matched to you goals that are provided by a;
2. Financial planner who provides the overall holistic wealth creation plan, this person shows you the targets to aim for based on your personal risk profile, and that profile is then matched with a;
3. Finance broker who would source the most appropriate funding options for your purchase and finally a;
4. Legal advisor to be that final step to check on a myriad of documentation before you sign and commit yourself to the contractual bottom dotted line.

The review of a contract, prior to purchase, is by far the best investment a property investor can make with a qualified property lawyer.

There would be key clauses and dates which a buyer needs to be aware of so that they may assess whether or not they can fulfil their obligations in full, and whether or not the option exists to terminate the contract without suffering too severe a financial penalty to do so, if at all.

Sale contracts are generally constructed for the benefit of the seller, however, there is always scope to negotiate specific terms and special conditions that balance the contract out in “fair” favour to the buyer in the event of circumstances arising outside of the control of the buyer.

The purchasing entity is also a primary consideration, for the entity the buyer may wish to use is perhaps the one with the best prospects of financing success, but equally can be the entity that is left exposed in the event of it being pursued by creditors for reasons completely unrelated to the property itself.

A hybrid option of a clean, non-trading entity (Trust or other suitable purchasing vehicles subject to qualified advice being provided) as the buying entity underpinned with a personal guarantee offered to the financing institution is one way to limit the liability and exposure of the property to unrelated third-party claims.

The moral of the story here is a review as suggested could range in fees from $500 - $1000 + GST which is an added cost granted, however look at it as a form of insurance, best to cry at the expense being thrown away at the beginning to avoid the tears after the event when you are stuck in a contract that is potentially going to cost you thousands, if not tens of thousands.