As we have reviewed in our Australian property market update, while some property markets in Australia seem to be reaching their peaks, other markets are just getting started. Buying a home in Australia while living abroad has many benefits, but it can be difficult when being overseas. It does not need to be. Here are six steps to buying a home in Australia while living abroad that you can follow to make it easier and ensure you get the best return.
6 Steps to Buying a Home in Australia While Living Abroad
1. Confirm you can finance your property in Australia
Often the biggest stumbling block to buying a home in Australia while you are living abroad is to obtain bank finance. Australian banks have been tightening the rules for lending to Australian expats, and many expats who were previously able to borrow money have found their borrowing capacity dramatically reduced (or become non-existent).
So, before wasting any time on researching potential property investments, give a mortgage broker a call to find out (a) whether you will be eligible for a loan, and (b) what your borrowing capacity is. Find out who I recommend and more about why I recommend a mortgage broker here, and more information on how to finance a property in Australia while living abroad here.
2. Determine your selection criteria for buying a home in Australia
Are you looking for property as a long term investment or perhaps wanting to buy your dream home prior to returning to Australia to live permanently.
Do you plan to move into the house when you return to Australia, or will the property be for investment purposes? Are you wanting a low maintenance, brand new apartment, or an older property that has future development or renovation potential?
Once you have decided on your property selection criteria it is time to start searching for a property.
3. Start Searching For Your Property or Engage a Buyers Agent
Many people are uncomfortable using a Buyer’s Agent or think they are not worth the money. These people think they can do all their searching and due diligence using realestate.com.au and google maps. I personally do not recommend ever buying a property that you or someone independent to the selling agent has not inspected.
While some people may have access to friends or family that are willing to do a lot of running around for them, for other people living outside Australia there are many benefits to using a buyers agent. A buyers agent will short list properties for you based on the selection criteria you have specified. They will physically inspect the property and checkout the neighbourhood and street the property is on. How often have you gone to personally inspect a property to rent (or buy) that you found advertised on the internet, and it was only when you physically inspected the property did you realise that the kitchen or living room was much smaller than what appeared in the photos, or the advertisement conveniently forgot to mention the high voltage power line running past just behind the house?
Buyers agents can also assist with the coordination of all the paperwork, building inspections (eg. structural checks, termites etc), and work with your mortgage broker and settlement agent to ensure everything goes smoothly. As it can be difficult for expats to meet the witnessing requirements of various mortgage documents, your buyers agent may also be able to give power of attorney to your Buyers Agent so that they can execute documents on your behalf – removing one of the major stresses and difficulties of buying property in Australia while living abroad. Read more on the benefits of using a buyers agent here.
4. Negotiate Purchase Agreement and Complete Settlement
Once you (or your Buyers Agent) have negotiated a contract to purchase your home, you will then need to undertake the various inspections and approvals that were a condition of your offer. These might include :
- Building Inspection Report (generally focussed on the structural integrity of the property)
- Termite & Timber Pest Inspection Report (to identify any termite or timber pest damage)
- Finance Approval – it is good practice that no matter how confident you are in your ability to obtain finance, that your offer should always be subject to obtaining finance approval.
Once you have completed all the conditional requirements of your contract, you can then advise the Sellers Agent that the contract is now unconditional and that you will be proceeding to settlement.
5. Obtain a Tax Depreciation Report
In my article on rental property depreciation I explain in detail the benefits of depreciation. Essentially, depreciation is a tax deduction you can claim that represents the loss in value of the building and fittings of your property during the course of the year. Depending on the age, style and size of your property it may be possible to obtain in the order of $3000 to $10,000 per year in depreciation tax deductions.
The best time to get a depreciation report is as soon as you purchase a property. In order to claim depreciation tax deductions you will require a depreciation schedule prepared by a licensed quantity surveyor. I recommend Washington Brown, and have negotiated a $55 discount when you request a report via the links on this page, or when using this application form. The cost of a depreciation schedule is usually tax deductible, and the cost will usually be made back in reduced tax in your first tax return. While it is best (and most convenient) to obtain a depreciation schedule before you start renting your property, it is never too late to get one. In addition, just because you may have purchased an older property, does not mean there won’t be good depreciation deductions available.
6. Make any improvements to the property that may be required
The final step (in our 6 steps to buying a home in Australia while living abroad), and depending on the type of house or apartment you have purchased, is making a few improvements to the house prior to renting it out. Does the property need a new paint job or new carpets in the bedroom? It is good to think about who the ideal tenant is for the property and to make sure it will be attractive to that ideal tenant. For example, if you are targeting a young professional couple with no kids then they will probably expect the house or apartment to have a dishwasher. If the house is likely to be attractive to a family, then you want to make sure,for example, that the backyard is secure.
For more ideas on what you might want to do prior to renting out your property, check out my article here.
Is a Buyers Agent Right For You?
Take the stress out of buying a property in Australia by working with Milk Chocolate Purchase Concierge. Milk Chocolate specialise in purchasing property and undertaking renovations for Australians living abroad. They work exclusively for the buyer.
Milk Chocolate offer a true concierge service, taking care of every last detail of your property purchase. Using the latest technology, data and communicating in your time zone ensuring the experience is rewarding and enjoyable.
Mention the Australian Expat Investor when contacting Milk Chocolate, or complete the form below, and you will be entitled to not only a free initial consultation to discuss your needs and to see if Milk Chocolate is right for you, but you will also receive a free voucher to the value of A$500 to treat yourself to a celebratory dinner in your country of residence when you sign up to use their services (and pay your initial fee).
Disclaimer : This information is for educational purposes only and does not constitute financial or taxation advice. As this information is not advice and has been prepared without taking into account your objectives, financial situation or needs you should, before acting on this information, consider its appropriateness for your circumstances. Independent advice should be obtained from an Australian financial services licensee before making investment decisions, and a registered (tax) financial advisor/accountant in relation to taxation decisions. To the extent permitted by law, we exclude all liability for any loss or damage arising in any way. We may receive referral commissions from companies mentioned in this article.