|
|
|
| Credit
Contracts and Consumer Finance Act 2003 The first point to consider is that any finance arrangements you make for mortgages etc are not covered by the Credit Contracts and Consumer Finance Act as you are borrowing for business or investment purposes. You are always covered by the Consumer Guarantees Act 1993 |
|
| Points to consider when using a consultant or a specialist investment property company | |
| 1. Is the seller the actual owner. | Often
the answer is no, the seller is buying at the same time that you buy and
uses your deposit as theirs. Their purchase contract is confirmed when
your purchase contract is confirmed.
If this is the case ask for a copy of the original sale & purchase agreement and watch the excuses fly. We had a discount because we purchased in bulk - Great but they have not actually purchased anything. We are going to refurbish the property and our sale price to you includes those costs - I guarantee they also include a good profit, no point asking for the cost breakdown it will be hyped and you will never actually see the quotes. These people are in business
to make a good profit from your buying from them, often we are talking
$20,000 to $80,000. This puts you behind the eight ball for years to
come. |
| 2. Are you being charged fees | If
your buying from those companies that specialise in the sale of
investment properties, that offer a Personal Investment Analysis etc for
you and arranging the various elements you can believe you will be
charged fees. They will range from $5,000 to $10,000 even more in some
cases.
Remember that these fees are
in addition to the profits they make by on-selling. Someone has to
pay for those flash offices. |
| 3. What do the fees cover | a)
A free half an hour visit with a chartered accountant - you can get this
yourself. The formation of an LAQC (Loss Attributing Qualifying
Company) and this is not even going to break the first thousand.
b) Legal costs to buy the investment property again take care you may also find you are paying their costs as well. Talk with your lawyer and ask for a cost quote - should max under $1,000 c) IR23B lodgement - Nonsense you can do this yourself for free or ask the accountant to do it. d) Valuation and Depreciation
Schedule - again the cost should be a max $500 if you shop around. e) The cost of Landlords protection and building insurance (If it is within a body corporate you do not need to arrange building insurance) - max budget $1,500 per annum. f) Financing Charges - this is the biggest joke of all, no one pays to arrange finance these days, brokers are paid commissions from the banks and applicants stopped paying application fees several years ago. Beware this can cost you $1,000 or more and it is all smoke and mirrors. So in effect we would be spending circa $4,000 to organize this ourselves. Where does the rest go - well
I guess you can work it out as well as I can. |
| 4.
Warning
Signs (Now called the Blue Chip signals) |
1.
You are offered rental guarantees by the consultation company and not the developer. 2. The consultation company is the developer - check your Sale & Purchase contract thoroughly 3. Valuations are organized for you. 4. The property manager giving the rental appraisal is part of the consulting group. 5. The mortgage broker is on site and part of or associated with the consulting group. 6. You are asked to pay more than $5,000 in fees for all arrangements. 7. The accountant is on site and part of or associated with the consulting group. 8. Providing recommendations for independent lawyers. ------------------------------------------------------------------ |
| 5. Circles of Influence | Despite
your best efforts when dealing with investment property consultants you
will need to be aware of their circles of influence. VALUERS They place far more investment property and valuation business than usual with valuers and will look to confirm contract price of $XYZ or similar to indicate what they want the price to be, the valuer despite being independent is not going to want to lose this volume of business and will play along within credible limits. ACCOUNTANTS LAWYERS PROPERTY MANAGERS |
| Independence Pays | |
| If you want to avoid paying through the nose for the property and those fees then you should use an independent consultant. | Here
are the costs you need to cover. These costs can all be budgeted and
included in the deposit finance.
1. Consultation Fee $3,000
(Includes Investment Analysis & Mortgage Finance Application) It is the job of the
consultant to negotiate the best possible fees for the accounting and
legal costs. |
| What are the benefits of using an independent consultant. | The
first and major benefit is that you get what you pay for and no
more......... No profit on refurbishment costs No price hike on the property purchase price. Realistic rental appraisals. Realistic valuations. Independent Accounting and Legal advice, you have already paid the consultant so they are not bothered what the other professionals say. ------------------------------------------------------------------ |
| DIY Pays Slightly Better | You
save the $2,000 consultancy fee but have all the work to do
yourself. Your call. ------------------------------------------------------------------ |