Monday, May 8, 2017

3 Stages of the Conveyancing Process

When you’re buying or selling a home, knowing the conveyancing process can help you understand the legal intricacies of how a property is transferred from one owner to another.

Though the exact details differ depending on your situation, typically there are three stages of a conveyancing transaction: before the contract, contract to settlement, and after the settlement.

Before the Contract

The conveyancing process doesn’t start when you have a contract in place; it begins when you express interest to purchase a property. Before you give the vendor an offer to purchase their property, you should be in talks with your conveyancer to talk to them about your plans and goals for the purchase.

As a purchaser, you will generally pay a deposit when you place an offer on a property. However, this doesn’t mean that there’s a binding contract in place or that the property can’t be removed from the market. It just means that you’re serious about your offer.

As a seller, accepting an offer verbally doesn’t mean you’re legally bound to any agreement, either. The transaction only becomes official once both parties have signed the contract with mutually agreeable terms. Ideally, you want your conveyancer involved in the process of creating and/or reviewing the contract of sale, as it spells out the conditions of the transaction.

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Contract to Settlement

After you’ve exchanged contracts, there is generally a cooling-off period, which gives you time to rescind the contract if you wish to do so (save for auction contracts, where the cooling-off period does not apply).

This is also the time to prepare for a smooth settlement, so you need to do several things, such as arrange payments for stamp duty; prepare and examine any mortgage agreements; check any planned developments that could affect your property; and do the final inspection.

Meanwhile, your conveyancer will calculate settlement adjustments for council and water rates and, if applicable, land tax, rent and body corporate contributions. Your conveyancer may also send the vendor a list of formal questions about the property, known as requisitions on title. This document reveals information that may not have been previously disclosed during the initial property inspection.

When the settlement date arrives, your conveyancer or their appointed agent will attend settlement on your behalf to meet the vendor’s representative and both parties’ respective bank representatives to exchange transfer documents, relevant stamp duty forms and any other legal documents and pay the sum owing to the vendor including the balance of the purchase price, adjustments and legal fees. 

Overall, your conveyancer ensures the completion of all necessary conveyancing steps so that the settlement will run without a fuss. But that’s now  not where their role ends…

After the Settlement

Before breathing a sigh of relief, there are still some things that need to be done after settlement.

This is the time to register the transfer documents with the Land Titles Office to formally change property ownership. During this stage, there will also usually be a discharge of any existing mortgages, withdrawal of any existing caveats, transfer of title, and transfer of the mortgage to the new mortgagee. If you are purchasing the property through a loan, your bank will do all this for you. Otherwise, your conveyancer can assist you with the stamping and lodging of these documents for registration after settlement.

You might also need to inform relevant authorities – like the relevant owner’s corporation or property manager – that you’re the new property owner, thereby completing the conveyancing process when you buy a home. Again, your conveyancer will handle this for you.

At Think Conveyancing, we aim to make the process as seamless and stress-free as possible for you, which is why we take care of all of the above-mentioned tasks and more! For an obligation-free quote, don’t hesitate to contact our friendly team on 1300 932 738 or contact us online here.

Monday, May 1, 2017

The Key Differences Between Strata And Community Title

Thinking of buying an apartment near your workplace, or a unit in a glamorous new high-rise development?

If you’re not yet ready to purchase your dream home with a sprawling garden in the suburbs, you may be considering a more economical choice, as a unit or apartment. These types of properties have a strong appeal with tenants and owner-occupiers alike – plus, they have their own set of rules that ensure equal rights and obligations to every homeowner.

But before you dive into an apartment purchase, you must familiarise yourself first with strata and community titles, which are the two kinds of titles you’re likely to encounter.

They are key differences between the two types of titles, such as the following:

Boundaries

When referring to strata titled properties, we are generally talking about townhouses, units and some commercial properties.

The common link in these dwelling types is the fact that they are divided into units, rather than land allotments. Unit divisions are determined through structural divisions of a building, not by reference to the land. For instance, the inside lining of the wall, the bottom of the ceiling, the top of the floor – all of these can be used as references of where a particular unit begins and ends.

On the other hand, community titles are divided by land allotments referred to as lots rather than units. Instead of dividing the space based on building parameters, each lot owner is awarded their respective parcels of land with its own title, defined by surveyed land measurements, often without limitations on height and depth unless specified in the community scheme.

Both strata and community titles have common property areas like shared driveways, swimming pools, and other amenities. These common areas are shared by the members of each strata or community and generally aren’t exclusive to any particular unit or land owner unless exclusive use of a particular common area is allocated by the developer or granted by the strata or community corporation (e.g. car spaces, lift foyers, rooftop access, etc).

This means that as an owner of a strata titled property or community title property, you may be buying into a property with access to other lifestyle amenities, such as bike tracks, outdoor entertaining areas, parks, playgrounds, communal relaxation areas and lakes.

If you’re confused about the boundary lines in regards to a property you’re considering buying, your conveyancer should be able to shed some light on the situation for you!

How much should a conveyancer cost? >>

Maintenance

For strata titled properties, a legal entity called a strata corporation (or also known as an owners corporation or body corporate, depending on the type of scheme and which state or territory the property is situated at) administers and maintains the common properties on behalf of all unit owners. The unit owners themselves comprise the corporation.

The same goes for community titles, with a community title corporation that is responsible for administering the rules within the community, as well as maintaining and insuring common properties.

To maintain the common areas, owners in either type of title have to raise funds and contribute based on their unit or lot entitlement – the capital value of their unit or lot compared to the value of all units or lots (as the case may be). In other words, the bigger your unit or lot is, the higher your contribution to the corporation will be.

Insurance

A key difference between community and strata titles is insurance.

Strata corporations take care of the building and public liability insurances to cover the whole building and its common properties. However, it’s the unit owner’s responsibility to cover the contents insurance of his or her respective unit.

On the contrary, community title owners have no obligation in maintaining and insuring other lot owners’ buildings.

In a community title situation, the individual owner of each lot is responsible for the insurance of any building on their lot. The community corporation is only responsible for insuring any common area buildings or structures.

This is one of the biggest differences between Community Title and Strata Title, and it could potentially expose you as a property owner to some risky outcomes.

For instance, can you imagine the potential for financial loss if a complex of 8 apartments catches fire and burns to the ground – and only 5 of those individual property owners have building insurance?

If you are considering buying a property with a community title, we suggest you seek out personalised legal advice to ensure that you’re aware of the risks and have a full understanding of this structure works. Feel free to contact our friendly team Think Conveyancing for an obligation-free quote or to discuss your situation; call us on 1300 932 738 or contact us online here.

Thursday, April 27, 2017

Conveyancing Considerations When Developing Property

Slicing and dicing an existing block of land so you can create a new property (or properties) has historically been a tried and true development formula for success in Australia.

However, if you’re considering diving into property development for the first time, there are a number of factors you need to take into consideration. Just like any other investment strategy, the decision to move forward requires careful thought – not to mention, a great group of experts around you.

Obviously, you have to invest in research so you can gain knowledge about the property developing process and potential profits. You also have to consider the location and see if it fits the demographic you’re going after with your project. Laws, rules and regulations may vary depending on your state or territory, so it’s essential that you educate yourself about all relevant restrictions.

As your conveyancers, we can help provide you with the legal guidance and expertise you require to effectively manage your property development project. Keep in mind that you will need a number of other qualified experts on your team, including a builder, town planner and an accountant.

An accountant is as essential as the rest of your experts, because one of the biggest conveyancing considerations you must be aware of when developing are the taxes. From a legal standpoint, you need to get in front of them at the beginning of the project – or risk costly mistakes at the end.

Most commonly, issues arise around capital gains tax (CGT) and goods and services tax (GST). Take a look at these two tax types and how they might affect property development:

Capital Gains Tax (CGT)

CGT is a tax levied on the profits you make when you sell a property. Whatever gain you make on the sale of a CGT asset is considered a capital gain and should be included in your assessable income for that financial year’s income tax.

As a property investor, you’re eligible for a 50% discount if you’ve held onto a property for longer than 12 months. However, once you decide to develop the property with the intention of selling it, your property purpose changes from being ‘a capital asset’ to being ‘trading stock on hand’.

This change in property purpose means that you won’t be eligible for the 50% CGT discount – even if you’ve held the property for more than 12 months and are receiving rental income from it.

Goods and Services Tax (GST)

As a day-to-day property investor, you don’t need to concern yourself with GST. But once you make the leap from being a property investor to a property developer, GST is one of the additional taxes you may need to pay.

GST is a broad-based tax of 10% on most goods, services, and other items consumed or sold in the country. As a developer, you are creating a new product, which will be subject to GST.

Before you register for GST, you need to make sure that the specific development you’re going to create is taxable. In general, you need to register for GST if you build new residential premises for sale. If you’re just subdividing land that you’ve held long-term solely for rental purposes, then you may not need to register for GST. You can also claim GST credits for any construction costs related to the sale.

To further complicate matters, you may be able minimise your GST payable by applying the margin scheme, which is based on the difference between the purchase price and the sale price. When you use the margin scheme, you become entitled to claim any GST credits you have paid to your suppliers.

As you may be starting to appreciate, there are a number of complex rules and regulations guiding your development, so it’s important to work with the right conveyancer and accountant from the outset, so you can be guided accordingly. For an obligation-free chat about your project with our friendly team at Think Conveyancing, contact us on 1300 932 738, or request a free quote online.

Monday, April 3, 2017

Considerations Before Buying An Investment Property Interstate

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Looking to diversify your property portfolio? It might be time to step out of your comfort zone and look for properties outside your state or territory.

Buying an interstate property can be a smart move, especially if you’ve found a market that suits your budget and investment strategy. According to Real Estate Institute of Australia president Peter Bushby, buying interstate can be used as a clever strategy to buy at the bottom of the cycle and enjoy capital gains in the future.

However, there are several factors that you need to consider before you buy interstate residential property. As conveyancers, we’ve seen plenty of people make costly mistakes because they rushed into projects or failed to properly research their investments. Here are some of your top considerations:

Location

Learning about the area or location of your property is crucial when investing interstate. To begin with, you should learn about the renters in the area and what type of properties they’re looking at.

Check out demographic insights regarding the features and amenities that could end up being the most popular for your target market, such as the number of bedrooms, the presence of a lawn or garden, and property size. You should also research population growth trends and employment levels as this could affect your long-term capital growth.

Budget

Buying an interstate property is not just about looking at the property price. You also have to consider how the other costs stack up.

Take some time to research about the costs in the area you’re considering, as these vary between states and territories. These costs include property taxes, stamp duty, registration fees, and even interstate airfare costs if you need to travel to and from your investment property now and then.

It may be best to talk with a financial advisor or accountant regarding the acquisition and ownership costs when you buy interstate.

How Good Conveyancers Use Building And Pest Reports To Save You Money >>

Laws and regulations

Just like property prices, laws and regulations vary from state to state, so you need to familiarise yourself with the relevant restrictions.

For example, you need to know about the offer and acceptance procedures in your chosen state. The length of cooling off periods may also vary. If you’re considering getting a home loan, lenders may also impose postcode or location restrictions that you need to be aware of.

A conveyancer can help you navigate the different laws, rules and regulations in the area where you’re buying your property.

Property cycle

Property values move in cycles, so it pays to know where the state market you’re eyeing is headed. Your local property market may be booming, but that might not be the case with other markets.

There are plenty of independent property research websites and businesses that can guide you regarding where an interstate market is heading and where they sit in the current cycle. This will allow you to avoid those heading south and get better opportunities in booming regions.

Property management

Finally, you must consider how you’re going to manage an interstate property. Self-management would be quite difficult, so hiring a property manager is your best bet. They can do regular inspections for you, as well as repair and maintain your property without you having to fly all the way to your interstate property. Again, this should be factored into your total investment costs.

These are just some of the considerations you’ll need to take on board when you contemplate investing interstate. Remember that you must engage a conveyancer who operates or has knowledge on the local legislation and conveyancing practices within the state or territory you’re buying in, so be sure to work with an experienced and qualified conveyancer who can offer valuable legal advice about your interstate investment. For an obligation-free chat about your plans with our friendly team at Think Conveyancing, contact us on 1300 932 738, or request a free quote online.

INFOGRAPHIC: Queensland FAQ – Buyer (May 2016)

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For more information about our services, experience or fees, don’t hesitate to contact our friendly team on 1300 932 738. You can also contact us online here.

Tuesday, March 28, 2017

Risks When Buying New and old properties

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When you purchase a property, whether for investment or to live in, there are always risks involved.

As an astute buyer, it’s up to you to do as much as you can to mitigate these risks. This is where having an experienced conveyancer on your team can really pay dividends, as we can help you review the risks and mitigate them if required.

Here are a few of the most common risks you might face when buying property, and how to mitigate them:

3 Risks when buying new properties

  1. Building or structural issues: Just because a property is new, that doesn’t mean it’s going to be completely free of faults and issues. If the builder has cut corners or taken shortcuts, it could result in costly and time-consuming repairs, not to mention the hassle of chasing the builder for rectification work.

    Mitigate this by: Asking questions about the builder. Do they have a good reputation and a strong track record for delivering quality projects?
  2. Low capital growth: Some buyers purchase real estate ‘off the plan’ in the hope that the property’s value will increase by the time it is constructed. If this fails to eventuate, they can find themselves financially tied to a property they can’t afford, as it may be difficult to secure finance for the full amount.

    Mitigate this by: Ensuring you don’t sign a contract on a property that you can’t afford to settle. You should have access to enough funds to settle the purchase even if no growth happens between contract date and settlement.
  3. No ‘unique factor’: Some larger off the plan developments can deliver dozens or scores of identical properties to the market. These are all similar homes and it can therefore be difficult to set yourself apart from the competition when trying to find a tenant or buyer.

    Mitigate this by: Redirecting your search to smaller, boutique property projects with 20 or less units within the building.

3 Risks when buying older properties

  1. Hidden damage: Sometimes, this can be as low risk as the cupboards being a little mouldy inside. Other times, this could mean there are substantial structural issues that could cost tens of thousands of dollars to repair.

    Mitigate this by: Having a professional building and pest inspection carried out on the property before you buy. Be sure to go through the results of the inspection with your conveyancer, so you can identify any areas of concern.
  2. Low depreciation: When you’re purchasing a property to invest in, part of the tax benefit you will derive is generated from depreciation. This is a tax deduction that allows you to legally claim your property’s depreciation in value as it gets older. Obviously, the older the property, the lower the depreciation benefits, which makes the investment less profitable for you.

    Mitigate this by: Ensuring you can afford to own the property before any tax incentives have been factored in. You could also consider investing in properties that have been renovated, as they would potentially offer higher depreciation benefits.
  3. Smaller returns: Given the choice between living in a new property and an older one, most people would choose the more modern accommodation. As a result, in many real estate markets newer properties can attract a premium rental return of 20-50% more than similar, older-style properties in the same suburb.

    Mitigate this by: Investing in good quality properties that are either newly renovated (or have renovation potential), with plenty of features and amenities that local renters are looking for.

These are just some of the risks of investing in different types of properties and ultimately, the right property decision for you will depend on a number of personal factors. As conveyancers, we are part of your team of experts on hand to help you make informed property decisions. If you have any questions or wish to discuss your situation in further detail, please contact our friendly team on 1300 932 738. You can also contact us online here.

Monday, March 6, 2017

Conveyancing and Tax: What Can You Claim on Your Tax Return?

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Australia may be one of the only countries in the world where its people look forward to tax time. At least, Australian property investors do; they are always excited about end of financial year, because property investors have access to numerous tax deductions!

While it’s true that many of the fees involved in property investments are tax deductible, some of the expenses you incur as a landlord are not in fact allowable deductions.
According to the Australian Taxation Office, there are three main types of rental expenses:

  1. Those that cannot be claimed
  2. Those that can be claimed as immediate deductions
  3. Those that can be claimed as a deduction over a number of years

Those that can be claimed immediately means that they will be reflected on the income year that the costs were incurred. These may include bank charges, body corporate fees and charges, council rates and insurance. You may also claim the cost of advertising for tenants, and you can claim interest charges incurred on loans, as long as the property is being rented or is available for rent.

But can you claim your conveyancing fees?

According to the ATO, you may immediately claim some legal costs and lease document expenses, as long as these were incurred in the course of renting out an investment property.

However, broadly speaking, conveyancing fees (and other expenses like stamp duty) charged on the transfer of the property cannot be claimed as deductions.

This is because these expenses are considered to be costs incurred on the purchase and sale of your property, rather than costs that incurred as part of owning your income producing asset. As such, they are deemed to be ‘capital costs’ and are not deductible.

However, all is not lost – you don’t lose out on tax benefits altogether. Instead of being able to claim an immediate deduction, your conveyancing costs will form part of the cost base of your property. This is important, as when it comes time to pay capital gains tax upon the sale of your investment, any money you have spent on conveyancing can be taken into account for the purpose of reducing your tax liability.

Keep in mind that legal expenses incurred during the management of your property are entirely different, and may be tax deductible immediately. Running costs are considered by the ATO to be those that are incurred to maintain the property. For instance, legal expenses associated with the lease would be considered a running cost and would therefore be tax deductible against the rental received.

What are the differences between a conveyancer and a solicitor? Learn more here.

Working out your tax rights and responsibilities can be complicated and at Think Conveyancing, we always advise our clients to seek out the services of an experienced accountant to help you maximize your tax return. Of course, we’re always happy to help with any aspect of our conveyancing requirements, so for more information on our services, please contact our friendly team on 1300 932 738. You can also contact us online here.