After the initial excitement of deciding to purchase a property, it's essential to familiarise yourself with the various stages involved in this complex process. These stages, or phases, ensure that buyers are well-prepared and can make informed decisions at every turn. Understanding the intricacies of these phases can help mitigate the risk of unforeseen expenses and streamline the path toward a successful property acquisition. Let's delve into the three critical phases of property purchase. Each of these phases plays a vital role in transforming the dream of property ownership into reality, while also safeguarding against the common pitfalls that can arise during the purchase process.
1. Due-diligence phase
The journey begins when you sign a contract to buy a property, but it's not yet unconditional. During this period, you'll encounter various setup costs and likely need to pay a deposit, typically around 10%. Costs in this phase can include:
- Valuation fees: Required by banks for mortgage approval, ranging from $800 to $1,200.
- Travel costs: If you're visiting the property from a distance, this could range from negligible to up to $1,000 for flights and accommodation.
- Lawyer fees: Some lawyers charge upfront, especially for off-plan purchases, which can be around $300.
2. Pre-settlement phase
This phase varies in duration, from a few weeks for existing properties to several months for new builds. During this time, you'll need to ensure the property is ready for tenants or personal occupancy. Unexpected costs may include:
- Healthy homes and smoke detector tests: Essential checks that ensure the property meets safety standards, costing between $200 and $400.
- Meth testing: A precautionary measure costing approximately $200 to $300.
- Extra keys and access fobs: Prices can vary, but expect to spend around $10 per key or up to $150 for electronic systems.
- Rubbish bins: A peculiar but necessary expense for new builds in certain areas, costing up to $250.
- Gardening and lawn maintenance: To keep the property presentable, which could cost around $150.
- Chattels: Investing in essential appliances like washing machines and fridges could add $1,600 or more to your costs.
3. Settlement phase
The final stage involves paying the remainder of the property price and officially transferring ownership. Costs here include:
- Conveyancing fees: Lawyer's fees for finalizing the purchase, typically $2,000 to $2,500.
- Rates and insurance: Prorated payments to cover the period immediately after purchase, potentially adding up to $1,800.
- Building inspector: Even for new builds, an inspection is advisable to catch any construction issues, costing $700 to $1,100.
Additional considerations
- Construction interest: If you're financing the purchase, interest can significantly increase the total cost.
- Entity setup costs: If buying through a company or trust, setup fees can range from $0 to $2,500.
- Bank cashbacks: Some banks offer cashbacks to cover part of your purchase costs, usually between $5,000 and $10,000.
Planning for the unexpected
The total setup costs for purchasing a property can range from $7,000 to over $10,000. It's crucial to have a financial buffer or a revolving credit facility to manage these expenses. Furthermore, keeping detailed records of all transactions is vital for tax purposes.
Understanding Stages and Costs for Complete Preparedness
Purchasing a property involves more than just paying for the asset itself. Being aware of the various stages and potential costs ensures you're fully prepared for the financial commitment. At Property Brokers, our goal is to equip you with the knowledge to navigate the property market confidently. Remember, while these costs may seem daunting, they're part of investing in your future. With careful planning and the right advice, you can manage these expenses and enjoy the benefits of property ownership.
