The Australia Property Investor Guide

Transcription

1 Investor Guide

2 Index 1. The Australian Property Investor Guide 2. Who is All Property Solutions? 3. Why invest in Australian real estate? 4. Can I invest in Australia being an overseas resident? 5. How complex is it to invest overseas? 6. Where should I invest? 7. Off-plan investing 8. Conveyancing 9. Taxation on the property 10. Australian mortgage 11. Multi-currency mortgage 12. Insurance 13. Property management 14. What type of tenants should I be attracting? 15. What type of rental yield should I expect? 16. Foreign currency 17. Steps to purchasing Australian Property 18. Signing the contract of sale 19. Property settlement process 20. Useful links 21. Contact The Australia Property Investor Guide This guide has been designed as an introduction to the regulations involved in foreign investment in Australian property, as well as a guide to the process involved in purchasing property as a foreign investor. Australia is famous for its golden beaches, baked red deserts and glamorous, sophisticated cities, as well as an ancient indigenous history and a young, vibrant culture. As you will discover, Australia has a great story to tell, from its economic strength and cultural diversity to its groundbreaking research and development and highly skilled workforce. Australia is consistently ranked high by the World Competitiveness Yearbook as one of the most resilient economies in the world. Now in its 22nd year of continuous growth, Australia is strategically located in the Asia Pacific, the world s fastest growing region. Australia has strong population growth due to its progressive immigration. Australia s population is nearing 23 million and grew 1.6 percent for the year ending June 2012; substantially higher than the world average of 1.2 percent per year. This trend is expected to continue into the future. As a direct result, many parts of the country are experiencing chronic housing shortages translating into strong tenant demand, increasing rental yields and outstanding capital growth. For property investors, this represents outstanding potential growth in demand and return on investment. Australia has been consistent in terms of strong economic growth and low unemployment rates. Australia is consistently ranked high by the World Competitiveness Yearbook as one of the most resilient economies in the world. Page 1 Page 2

3 Who is All Property Solutions? specialises in helping overseas clients find and buy quality investment property in Australia. We provide a FREE service and assistance in all areas of owning and buying investment property, such as Banking and Finance, Legal, Accounting and Property Management services. Our focus on research brings a greater level of sophistication to our client s investment decision. has quality property investment opportunities right across Australia for you to buy right now. Please refer to our current website property listings to view our extensive range of properties. We focus on investment property in the major cities and coastal regions that are capital growth orientated. The cities of Perth, Melbourne, Sydney, Brisbane and Gold Coast all come with solid population growth forecasts and house price growth potential. We believe these cities will provide a great property solution for investors who require a strong rental yield coupled with substantial long term capital growth. research the market and surrounding area for you, identifying good investment opportunities according to strict selection criteria. We always strive to maximise outcomes for our clients. We help all types of property investors enter the Australian property market. Our holistic approach means we offer services to assist at all stages of the investment process. We address not only the acquisition of sound quality investment property in Australia but also the management of that property and all the affiliated services that goes with it (such as financing, taxation, legal work and property management). The administration package is designed to assist an overseas investor enter the Australian market in confidence. We can assist in every step of the buying and holding process of Australian property. has quality property investment opportunities for you to buy right now. Why invest in Australian real estate? Australia has been one of the world s most consistent Property markets over the past 30 years Investors in Australian property typically purchase with a view to achieving a steady rental income and capital growth in the value of their property. Australia has been one of the world s most consistent property markets over the past 30 years, providing secure returns in excess of 7% per annum over this period, and has experienced fewer years of decline than almost any other international property market. When this is coupled with the fact that the Australian property market has shown an ability to resist downward shifts in prices, this allows investors to hold property over the long term with greater confidence. The Australian property market has proven a sound investment with low volatility in comparison to the sharemarket and other property markets around the world. Property is seen as a tangible investment, and offers investors control and the potential to add value. Bricks and mortar have often been the investment of choice for generations of smart investors. Why? Because the returns are usually steady.it is easier to find finance for real property than shares.it is intrinsically a better security. It is easy to add asset value by renovating or restoring.. off-the-plan purchases frequently yield quick gains, and tax advantages often are available to the buyer. Page 3 Page 4

4 Can I invest in Australia being an overseas resident? The Australian Government recognises the strong benefits of foreign investment to Australia, however it does have foreign investment policies in place to help maintain the stability of the Australian property market. The Australian government encourages off-shore investors, with some restrictions managed by the Foreign Investment Review Board (F.I.R.B.). In very general terms, non-resident investors are free to invest in new or off-the-plan residential property. The government s foreign investment policy seeks to channel foreign investment in the housing sector into activity that directly increases the supply of new housing. As a result of this policy, new dwellings account for most of the properties foreign buyers purchase in Australia and many of them are purchased off the plan before completion of construction. Foreign buyers can purchase off-plan or newly built dwellings (apartments, townhouses) so long as the property has never been sold before and has not been occupied for longer than 12 months. Buyers must apply to the F.I.R.B. for approval to purchase a property. Foreign buyers can also sign a contract to purchase a property, prior to obtaining approval from the F.I.R.B., as long as there is a special condition within that contract that makes the sale subject to approval by the F.I.R.B within a specific time-frame. The F.I.R.B. application process is very straight-forward, applications are free and generally approved within 30 days of being received. With our assistance, the process for purchasing a property is actually quite simple. Non-resident investors are free to invest in new or off-the-plan residential property How complex is it to invest overseas? In actual fact there is very little difference to buying property in your own country. The same fundamental buying process still applies. There s a slightly different legal and accounting system, however All Property Solutions can take care of this administration function and assist in the buying and holding process. Page 5 Page 6

5 Where should I invest? explores the whole of Australia for property opportunities. Location is of course paramount and properties that are within a 5km-10km radius of a major CBD (Central Business District) are the most sought after by prospective tenants and owner-occupiers. When researching a particular property or development, All Property Solutions will focus on factors such as the location, distance from the CBD, demographics of that location, population growth and the reasons why, proximity to good public transport such as train station, bus service & trams (a superb tram system operates in Melbourne), local amenities & recreational facilities (such as shopping, dining, parks, and educational facilities), proximity to major employment centres, house price values and historical growth trends, rental yield growth trends, as well as the supply and demand for property in a particular location. We also look at how attractive is the property or location to potential tenants? What is the rental demand like and what is the anticipated rental yield? A clear understanding of these inter-related issues is critical to making an informed investment decision. We find this is the main reason why interested overseas investors haven t taken the next step to purchasing property. All Property Solutions understand this. We provide years of experience, research and support to make the purchase process simple and easy for you. Over time, as you continue to read and research, certain locations will stand out as potential good investments. At this point, you can narrow your focus and research that location and the properties on offer in depth. research the market and surrounding area for you, identifying good investment opportunities according to strict selection criteria Off-Plan Investing has access to some of the best off-the-plan developments in Australia The most common way for overseas purchasers to buy property in Australia is off-plan before the development is complete. Due to the chronic shortage of housing and new construction in most of Australia s major cities, it is not uncommon for an entire development to sell out prior to completion. Off-plan properties are usually apartments or townhouses or sometimes house-and-land packages. In return for a guaranteed sale before a property is completed, the developers sometimes offer an attractive price that may be lower than the expected value upon completion. At the very least the off-plan prices should be in line with current valuations at the time of purchasing. In most cases, the off-plan purchasing process requires an initial holding deposit to be paid usually about $ $5000 AUD to take the property off the market. Contracts are then issued and usually must be signed within a 21-day time frame. At this point the 10% deposit must also be paid, with no more payments required until construction is completed sometimes one to two years away. has access to some of the best off-theplan developments in Australia and in some cases will have the initial access to an off-plan project, giving our clients the unique advantage of being able to choose the very best apartments or homes in an off-plan development, before it is marketed to the general public. Page 7 Page 8

6 Conveyancing Buying property in Australia requires legal representation. Employing a lawyer who s experienced in all facets of Australian property law brings confidence to any buying process. understand that many overseas clients don t have access to a lawyer in Australia, so we have established relationships with several leading lawyers who understand your needs and concerns as an overseas property investor. Your Australian Lawyer will review the Contract of Sale, courier or the contracts to you and be your legal representation for all your Australian property matters. In order to provide this service in the most effective manner, you will have a direct relationship with your Australian lawyer. Your Australian Lawyer will review the Contract of Sale, courier or the contracts to you and be your legal representation for all your Australian property matters. Taxation on the property? has established relationships with several tax accountants who will assist you with your yearly tax return. Some States and Territories offer stamp duty relief when purchasing new residential properties off-the-plan, thus only a small portion of the stamp duty is payable on the value of the land component and any improvements, as at the date of the signing of contracts. Australia also has relatively competitive depreciation rates, making an Australian property even more tax effective. We recommend you consult your accountant or contact All Property Solutions for further information. Like most countries, you will have to pay tax if you create income from your property investment. However, there are many ways to minimise or negate the tax you pay through tax deductions (costs incurred as a result of creating the income). We specialise in maximising your deductions, as we know exactly what we can claim for you. Utilising an accountant who is experienced in property investment will make the most of your cashflow position. has established relationships with several tax accountants who will assist you with your yearly tax return. Page 9 Page 10

7 Australian mortgage If you are looking to borrow monies for your Australian property, you can source a loan through an Australian bank. Smart investors get their finance pre-approved by their financer so that they can move quickly to secure an investment when they see it. Australia has many different lending institutions, which makes for a relatively competitive environment. They operate in a very similar way to most of the banks around the world. Australian banks are generally willing to lend up to 80% of the property s value to overseas residents. The major lending institutions all have internet banking facilities so you can login from overseas and see a complete transaction history of your account (rental and mortgage payments), transfer money back to your country of residence, transfer money into your account and communicate with the bank online. can manage the loan process and help you find the most cost effective, flexible and well structured loan in the market place. Our consultants are experienced in liaising with clients overseas and provide flexible working hours to make things easier for you. We are in constant contact with you through s, faxes and telephone calls throughout the application and finalisation process. Multi-Currency mortgage Instead of arranging your loan with an Australian bank, you may also consider arranging your loan with an international lender in a mainstream currency such as the Euro, Pound Sterling or Singapore dollar, to name a few. A foreign currency mortgage primarily offers two significant benefits to you, the investor: Significantly lower interest rates than what might be obtained in Australia The potential to reduce your capital debt Whilst lending on a much lower interest rate is extremely attractive, foreign-currency loans do have exchange rate risks as your loan is in a different currency to your income or the currency where the property is situated. can assist you with the multicurrency lending process. Insurance Insurance is relatively inexpensive in Australia compared to other countries. The main type of insurance cover required for an investment property is home contents, building and landlords insurance. have undertaken detailed research of all the insurance companies and will provide the information and applications for your convenience. Page 11 Page 12

8 Property management Property managers are the most convenient way for an overseas investor to deal with all the day-to-day property management issues Employing property managers is the most convenient way for an overseas investor to deal with all the day-to-day property administration. Property managers promote and advertise your property, find and approve tenants, submit bond application forms and write the lease agreements. They ll also look after any maintenance issues such as repairs to a leaky tap or fixing the picket fence. They send frequent consolidated reports illustrating all cash in-flows and outflows, and take the hard work out of maintaining your property. has a catalogue of quality Property Managements throughout Australia for you to utilise. What type of tenants should I be attracting? The young professional market is the most desirable. They generally are well paid social people within the years old age group. Rent is more likely to be paid on time, they demand long leases and are considered a low maintenance hassle-free tenant. They like to live within a 10km radius of the city, in vibrant suburbs that have a great café culture, where shopping is accessible and where there is good supporting infrastructure - close to public transport, parks and sports fields. The type of property they desire is generally a new 1-2 bedroom apartment or townhouse with a car space. Remember these people work hard and like to enjoy the weekends, the last thing on their mind is weeding the garden or mowing the lawn. It is very important to purchase an investment property that complements the suburb and is marketed to the right type of tenant. Page 13 Page 14

9 What type of rental yield should I expect? Foreign Currency When purchasing Australian property at some point in time you will need to send money to Australia either for the initial deposit or to simply top up your Australian bank account. Eventually you will need to extract monies from Australia too, i.e. when you sell your property or collect the income from the property. When investing in foreign property markets a consideration is exchange rate movements and difficulties in transferring funds internationally. A good way of mitigation against exchange rate movements is to establish the loan in the same country you buy the property. There are several ways to send monies and arrange transfers internationally. It pays to think about who you will use to transfer your money across as it could save you thousands of dollars. Most people are unaware that there is an alternative to using their local bank; there are also non bank institutions that operate under the same licensing conditions as the banks, providing security with cost-savings. Foreign exchange companies offer corporate rates and services to individuals, which means great savings on international transfers and more money at the other end. Australia boasts rental yields of 4-7% in its major cities Most large cities around the world experience solid capital growth but lack the rental returns. Australia boasts rental yields of 4-7% in its major cities. Australia s residential vacancy rates are at all time record lows with vacancy rates in Australia s capital cities ranging from 1 to 3 per cent. Vacancy rates under 3% indicate a severe undersupply of rental property. These low vacancy rates are driving rent increases across the country as demand outstrips supply for rental properties. Thus rental yields are on the rise which is fantastic for an investor seeking a capital growth oriented market whilst maintaining a good cash flow position. A good way of mitigation against exchange rate movements is to establish the loan in the same country you buy the property. Page 15 Page 16

10 Steps to Purchasing Australian Property Purchasing an investment property in Australia is similar to investing in your own country however, there are a number of important differences. Get ready to purchase an investment: Investors can often jump into purchasing an investment without getting the fundamentals in place first. Please consider: Finance: Talk to your Australian finance consultant about property investment. Look at how much you feel comfortable borrowing and how to structure the purchase (e.g. Who s name to purchase it in to maximise the tax benefits) Solicitor: You will need a solicitor to review the Contract of Sale and give you advice. They mail the documents to you for signing and act on your behalf. We can suggest a local solicitor if required. Deposit: If you wish to purchase a property in Australia you will need to place a 10% deposit on the property and sign the Contract of Sale. Once completed it is then deemed that you have exchanged on the property and legally committed to the purchase. Generally the deposit can be made by transferring money to Australia or by deposit bond (note some Vendors do not accept deposit bonds so check with your Property Consultant). Select a property: Depending on which property you have selected you may need to deposit between a $2,000 - $5,000 AUD holding deposit into a Trust Account. This transaction will ensure your property is taken off the market for 21 days and no one else can purchase it. The holding deposit is refunded back to your bank account once you have exchanged on the property or if you decide not to purchase the apartment during the 21 days. The holding deposit is held in a Trust account and cannot be withdrawn by any party without your consent. The legal documents will be mailed to you for viewing. During this 21 day period you will need to sign and review the Contract of Sale and send it back to your Australian lawyer with the required 10% deposit. Signing the Contract of Sale: The Vendor s solicitor will prepare the Contract of Sale and send it to your Australian solicitor. Your solicitor will then review the Contract of Sale and attach a contract summary. The Contract of Sale will then be sent to you by courier. Please remember the following: Timeframe: has negotiated to give you an extended amount of time to sign and return the Contract of Sale, given the need to send the documents internationally. The time frame is clearly detailed on the Contract of Sale (normally days). Ensure you understand the time frames provided. If the contract is not signed and returned in this time frame the investment will be released to other investors. Sign and return your contract: Ensure you sign each page of the contracts as specified by your solicitor. Ensure you keep a copy of the courier consignment number so that the contracts can be tracked in transit if required. 10% deposit: Refer to your Contract of Sale for details on the payment of the 10% deposit. In most cases you should transfer the 10% deposit via your local bank or a foreign exchange company. Exchange: Once you have completed the above your Australia lawyer will notify you that you have officially exchanged on the property. Page 17 Page 18

11 Property Settlement Process: The Settlement date is the day when the purchaser pays the balance of the full purchase price and thus receives the keys to the property or takes ownership of the property. In the case of an off-the-plan property, settlement can only take place once the property is complete. There are a number of things that need to be arranged in advance to make sure settlement goes through smoothly. will assist you through the entire process. The following steps usually need to be taken prior to settlement: Mortgage for the property We like to arrange this around 3 months from the settlement date Funds transfer balance of your cash input should be transferred to your solicitor s trust account pending payment on the settlement date Stamp Duty in most states the stamp duty is payable at settlement thus the stamp duty amount should be transferred to your solicitor s trust account Pre-settlement property inspection it s recommended that a qualified building inspector carry this out on your behalf just a few days before settlement Property valuation a qualified valuer should be engaged to carry out a market valuation of the property. This process may be required for financing purposes. Insurances Prior to settlement, we advise of contents insurance and also landlord insurance options. Property Management Prior to settlement, a property manager will be engaged to commence marketing of the property to prospective tenants and ideally there will be a tenant to move into the property as soon as settlement takes place. Settlement Date: the date that the final payments are made and purchaser takes ownership of the property. The last stage of the settlement process is the registration of title - the property needs to be transferred from vendor s name to buyer s name by Registrar of Titles. Your Australian Lawyer will manage this process for you. After the settlement of your property you will have a direct relationship with your Property Manager. This will be for the more day to day property or tenant related queries. All Property Solutions also likes to maintain an ongoing relationship with you. We are happy to answer any questions you may have and also like to be there as support during the ownership of your Australian Property. Useful Links Foreign Investment Review Board» Department of Immigration and Citizenship» Australian Bureau of Statistics» BIS Shrapnel Economic Forecasts» The Australian Financial Review» My RP Data (property research)» Home Price Guide» Australian Taxation Office» Victoria State Revenue Office» New South Wales Office of State Revenue» Queensland Office of State Revenue» Revenue South Australia» ACT Revenue Office» Western Australia Office of State Revenue» Page 19 Page 20

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