Buying investment property in Australia – A simple 4-step process

Buying investment property in Australia has become a norm, at least for English-speaking Asian countries especially Singapore and Malaysia. Familiarity with Australia, its stable economy having weathered the last global financial crisis unscathed, stable growth in property prices, sound legal procedures, banks’ friendly lending policies and its welcoming policy towards foreign investors are reasons for buying investment property in Australia.

As a foreigner buying investment property in Australia, one should take the following steps to ensure your experience investing in Australia would not turn into a nightmare.

Buying investment property in Australia photo by Sandra Pang

Buying Investment property in Australia – Step 1: Know Yourself

As the saying goes ‘begin with the end in mind’. Always begin with specific objectives or goals in mind. An example would be e.g. $100,000 in gross rental income from your investment properties in 15 years’ time. You can then work towards the goal with a knowledgeable consultant who understands the whole works of buying investment property in Australia and how it works.

You should know your own borrowing capacity before jumping straight to the acquisition process. Your borrowing capacity is the amount banks are willing to lend you based on your current assets and liabilities. You may also work this out with your investment consultant, after which a route map can be developed for you to follow through.

Buying Investment property in Australia – Step 2: Know Your Strategies

Having goals and plans are first steps to your investment process. The next step is to know your strategies. These include strategies to minimize tax – in Australia, there are capital gains tax and income tax; ways to improve cashflow – use of multicurrency financing options and understanding their risks involved and structuring of your loans; and acquisition and exit strategies to incorporate all these elements within an investment time frame. Your investment consultant will be able to help you understand the strategies involved in a relatively easy manner.

Buying Investment property in Australia – Step 3: Know Your Products

Different types of properties behave in different ways. They have also different risk profiles. One way to ascertain the risk level is to look at how much banks are willing to lend based on the collateral itself. Once you have done steps 1 and 2, your investment consultant will help you determine the best products that would suit your plan. When buying investment property in Australia, always research on the areas proposed – e.g. demographic trends, population growth, median price growth, asking rentals in that area and demand and supply situation trend for the next 10 years as that will really determine if there will be any capital growth for your investment property.

Buying Investment property in Australia – Step 4: Know the Buying Process

Foreigners are required to submit their foreign investment application to the Foreign Investment Review Board (FIRB) for approval by the board. This is usually done by the buyer’s conveyancer/solicitor. The documents required at the buyer’s identification papers like passport and an application form (Form 4-Notice under Section 26A to be exact) and an approval is usually obtained within 30 days of application. When buying investment property in Australia, buyers should include a clause in the contract of sales to protect themselves just in case FIRB does not approve their application. The investment consultant should advise the buyers that all deposits are held in trust by the vendors’ solicitors and any interest accrued paid (if buyers are eligible to them) to the buyers at settlement as stated in the contract of sales.

If you approach the right consultant who understands the entire process of buying investment property in Australia, assisting you with application of finance and settlement, getting the right tenant for you and referring you to a accredited tax agent to file your taxes, you can be assured that your experience of buying investment property in Australia will be an extremely pleasant one.

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