Are you considering property investment in Australia? If so, it is essential to ensure that your purchase goes smoothly and offers a great return on investment.
As boring as it may sound, conducting proper due diligence will help you make the best possible decision when choosing a property for investment. To do this, we’ve put together a useful checklist of key considerations to make when performing due diligence before making your property investment in Australia.
We’ll explore what critical issues need to be investigated during the pre-purchase process — from understanding the local economy and neighbourhood dynamics to researching building regulations or checking current rental yields — so that you can feel confident with every investment decision you make!
Due Diligence Checklist
Fire & Flood
One crucial aspect to consider is the risk of fire and flood in the location you’re interested in buying.
Australia is no stranger to natural disasters, and certain areas are more prone to bushfires, floods, and other hazards. As such, it’s critical to investigate these risks and their potential impact on your property.
When assessing flood risk, you should look at factors such as the proximity to waterways, drainage systems, and flood-prone regions. Similarly, fire risk assessment involves examining factors such as vegetation coverage, slope, and proximity to vulnerable areas.
It’s worth noting that these risks can affect not only land management but also building design, construction, and insurance premiums. Before making a purchase decision, it’s important to factor in additional costs and potential consequences.
Building, Asbestos & Pest Inspections
Building inspections can highlight any structural defects or issues with the property that may not be visible to the naked eye. This could include problems with the foundation, walls, roof, or plumbing, which could potentially be expensive to repair or impact the value of the property in the future.
Pest inspections assess the property for any signs of pest infestations, such as termites, which can cause severe damage to a property’s structure. It’s essential to know if there has been any previous damage and the extent of it, as repairing this can be costly.
Asbestos inspections are necessary for older properties in Australia. Asbestos was widely used in construction in the past, and it poses a significant health hazard. Trained and accredited asbestos operators should remove any asbestos used in construction.
By carrying out these inspections, investors and property buyers can be confident they are making an informed decision and are not caught unaware of any issues that may impact the property’s value or pose health hazards.
So, before you invest in property, make sure you perform due diligence by conducting building, asbestos, and pest inspections to safeguard your investment.
Easements, Encumbrances, & Sewers
Assessing easements, encumbrances and sewers is essential to ensure that you are making a sound investment decision. An easement is a legal right to use someone else’s land for a particular purpose, such as a pathway or utility lines.
Encumbrances, on the other hand, are limitations on the property title, such as a covenant or lease agreement. It is important to read all documents carefully to ensure that you understand the terms and conditions of any easements or encumbrances that may affect your property.
Another critical factor to consider during the due diligence process is the location of the sewers. Knowing the location of the sewers is essential if you plan to develop the property. It can affect the design and cost of the development, as well as any environmental impact assessments that may be required.
By taking the time to assess easements, encumbrances and sewers, you can ensure that you are making a well-informed decision when making a property investment in Australia.
Tenancy, Body Corporate, & Strata Agreements
When buying an investment property in Australia with current tenants, it’s crucial to understand their lease agreements to avoid legal complications in the future. Check that all leases are in order, and there are no issues with the tenants.
If you’re considering buying a unit in a strata title property, you must also conduct due diligence by reviewing the property’s body corporate responsibilities. As a member of the body corporate, you’ll be required to pay levies to maintain the common areas, hence adding this to your property due diligence checklist is crucial.
It’s also recommended to request a Strata Report to ensure the strata property is well-maintained, adequately financed, and has no major issues or defects. By conducting due diligence, you protect yourself from any future complications and make informed decisions as a property investor or buyer.
Title Deeds & Planning Permits
Title deeds provide essential information about the legal ownership of a property and any use restrictions, while planning permits are required for significant developments. Without performing due diligence and checking the title deeds and planning permits, you could face costly legal issues in the future.
In Australia, state and territory governments are responsible for regulating planning and development. Before purchasing a property, it’s wise to check with the local council to see if any permits have been granted or are required. This will help you avoid any surprises or setbacks when it comes to developing or using the property.
Additionally, it’s essential to understand the intricacies of title deeds. These documents reveal ownership information, any outstanding mortgages, and any rights of way or easements that could affect your ability to use or develop the property. Accessing and reviewing title deeds is a crucial step in the due diligence process.
By understanding the importance of title deeds and planning permits, Australian investors and property buyers can make informed decisions and avoid costly legal situations. Seeking professional legal advice is highly recommended to ensure a smooth transaction and protect your property investment in Australia.
Zoning & Development
As an Australian investor or property buyer, it’s crucial to perform due diligence when it comes to zoning and development regulations. These regulations dictate how the land can be used and developed, and it’s important to ensure that the property you’re interested in complies with current zoning regulations.
You can easily find out the zoning for a particular property through your real estate agent or by doing your research at the council office. It’s also essential to verify that the previous owner’s licences and permits are current, ensuring that all conditions have been met and that the licences and permits are in good standing.
Amenities, Infrastructure & Schools
Always assess the amenities and infrastructure in the area, as these factors can significantly impact the value of the property.
Tangible amenities such as onsite parking, swimming pools and gyms are great value-adds for a property, but it’s essential to also consider the intangible amenities. Easy access to local transport links, proximity to retail outlets and entertainment facilities, as well as quality schools, can all increase the desirability and therefore value of a property.
It’s important to delve beyond the surface level and research the current and future planned infrastructure in the area. For example, areas undergoing significant development may experience increased demand and therefore great potential for capital growth.
Market Trends & Suburb Investment Grade
With the Australian property market constantly fluctuating, it is essential for investors and property buyers to conduct proper market research. One must assess the local economy and determine whether it has the potential to bring in stable and long-term growth.
Additionally, investigating the rental demand within the region is another important step in evaluating the property’s cash flow potential. Investors must also consider their investment’s liquidity, ensuring they can withdraw money or borrow against the investment as needed. Management ease and the property’s ability to hedge against inflation are other crucial aspects to evaluate.
Finally, it’s also essential to review the investment’s tax benefits before making an informed decision. All of these factors contribute to the overall investment grade and will ultimately determine your property’s success in the long term.
Need Help With Due Diligence?
Buyer’s agents Monopoly Wealth is dedicated to helping clients make informed decisions when it comes to purchasing investment properties. Our Digital Property & Suburb Report is a powerful tool that streamlines the due diligence process and provides detailed insights about a property and its surrounding area.
The tool uses a comprehensive demand to supply ratio tool that analyses key property statistics to provide a convenient score out of 100, giving you an overall summary of the market’s potential.
Our report examines more than 15 critical factors that assess the risks, growth potential, and possible value of a property. From market cycle timing to ripple effect potential and rental growth, we provide you with all the necessary information to make a well-informed decision.
With our report, you can avoid making decisions with your heart and instead, trust that you are making a smart investment based on solid data. Additionally, Monopoly Wealth can recommend a mortgage broker for finance setup and structuring to ensure a smooth run to settlement.
Save yourself the hassle and let us do the work for you. Complete our checkout form, and we’ll do the rest.
