Prevent A Nasty Property Surprise

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Home buyers and real estate investors are being warned to watch out for the hidden traps that may be lurking in their potential property purchases.

Leaky showers, cracked ceilings and self-opening doors are among the signs pointing to bigger and more costly “nasty surprises”, the Association of Building Consultants says.

Spokesman Chris Short says understanding a building’s condition and the likelihood of future repairs is vital when assessing a property purchase and managing a mortgage.

“Many homes are tidied up for sale, with the pre-sale spruce ranging from a basic clean through to bagging cracks, repainting, retiling and re-grouting, and even new floor coverings,” The makeover might look good, but it also masks what might be more sinister problems such as termite damage, salt damp, structural issues, unlicensed and dangerous electrical work, and more.

For example, a leaky shower might seem harmless on the surface but if the leak is allowing water to flow into the soil next to your home, it’s likely to attract termites.

Short says building inspections can be particularly valuable for investors who will not be living in the property they buy. You need to know it well so that you’re clear about urgent maintenance requirements to meet your obligations as a landlord – such as ensuring smoke alarms are hardwired – and the cost of long-term maintenance.

Property academic and author Peter Koulizos says beginners should always consider a building inspection.

He adds to make sure the report is a written one, rather than a verbal agreement. Some of my students have been able to negotiate the purchase price down by the repair amount or they have just pulled out.

Five Things First Home Buyers Need to Know

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First Home Buyers, before you decide to purchase your first property there are a number of things to consider, including your current personal circumstances and financial status.

  1. Think about why you want to buy a home

Do you want to live in it or will it be an investment property? This can help determine the kind of loan you apply for and home you buy, depending on your short and long-term plans.

  1. Research potential properties and loans

Knowing the market is crucial, so do some research on the areas you are targeting, check out auction clearance rates and recent sales, as well as price trends in the area. Once you are aware of what you are looking for and the approximate price, the next step is saving a deposit.

While some lenders will offer loans if you have saved less than the usual 20 per cent deposit, being able to show a record of good saving habits will aid in getting your loan approved.

Then, when you talk to your finance broker about applying for pre-approval on the right type of loan, ask for their help to work out what you can afford in terms of repayments.

  1. Factor in other costs involved

Depending on the property, there can be a number of additional costs, so ask your finance broker what other payments you will face. This can include, but isn’t limited to, stamp duty, loan establishment fees, legal and conveyance services, utilities, property insurance, maintenance and lenders mortgage insurance. How have the proposed changes in the 2017 NSW budget improved my position?

  1. Think about your future

Just because your current situation allows you to get a home loan, that doesn’t automatically guarantee that you will still be able to service it in five years’ time. Is there a possibility your role at work will change? Are you considering going back to study and reducing your working hours?

  1. Get professional help

With so many things to consider, getting professional help is highly recommended. There are many experts in the industry and it is in your best interest to use them for tasks such as property checks, pest checks and any other legal queries. Going it alone can prove costly. Avoid nasty surprises down the track by getting the right people to do the appropriate checks for you from the beginning.

 

Call us on 1300 252 088 to discuss how the NSW 2017 budget changes will save you money

The Pros and Cons of investing in Commercial Property

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The debate on whether it’s better to invest in residential over commercial continues to divide investors.

Proponents of investing in residential say it’s the least risky option, while those who are in favour of commercial would argue that commercial is safer due to its cash flow potential.

Many investors of course don’t choose between the two: They look at both to see how it may fit their portfolio.

The case for investing in commercial property

Higher returns on investment

The average rental return for residential properties across Australia’s capital cities is 3.6% according to CoreLogic RP Data. In contrast, it’s not uncommon to get anywhere between 8% and 12% gross rental yield for commercial properties.

Longer leases

While a residential tenancy can turn over every six to 12 months, a commercial tenancy can be anywhere between three and 10 years. Tenants also tend to stay longer especially when they’ve invested some capital customising the premises.

No rates and other outgoings

Unlike residential properties where landlords are liable for paying rates, such as council, water and body corporate, commercial tenants often pay these outgoings for you.

Smaller deposits

Commercial properties at the lower end of the range are generally lower priced compared to residential properties so you need a smaller capital outlay. For example, a car park may cost $80,000 as opposed to $400,000 for a small bed-sitter. Investing in commercial property could be a great way to get into the market sooner compared to saving for a residential property investment.

Potential risks associated with Commercial Property

Commercial properties are sensitive to economic conditions

When the economy is strong, businesses flourish and demand for commercial properties generally rises. But when there’s an economic downturn, demand for commercial premises usually falls.

It takes longer to find a tenant once it becomes vacant

While commercial properties attract long-term leases of three to five years or more, it can take longer to find a tenant. It’s not uncommon for commercial properties to have long vacancies, which means you will need to cover all the cost during this period.

It’s vulnerable to changes in supply

Changes in supply conditions can create potential problems for investors. An increase in new property coming on the market in the same area creates a threat to existing tenancies as tenants may look to upgrade or expand. Strong supply can also reduce potential yields.

Changes in infrastructure in the area can be detrimental

While major infrastructure changes in the area can attract commercial investments there, it can also lure tenants away from existing areas and older commercial premises. This could result in your property becoming vacant.

Values can drop sharply

The value of commercial properties closely correlates with the lease on the property. If a commercial property becomes vacant, or the lease is about to expire, the value of the property would generally be expected to fall. In contrast, any price falls associated with residential properties are generally less dramatic and usually happen progressively over a longer period.

So, should you buy commercial or residential?

It depends where you are now in your portfolio. If you’re looking to diversify and want a cash flow injection, a well-located commercial property might be a good addition. Just make sure you do thorough due diligence and understand the risks involved.

 

By: Nila Sweeney

Loans involving family & friends

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Has a family member or friend asked you to be a ‘co-borrower’ or guarantee a loan for them? Before you say yes, think carefully – you could lose not only your money, but valuable assets such as your house or car.

What is a guarantor or co-borrower?

Co-borrower

You are a co-borrower if you sign a loan with someone else.

In most instances both you and the other co-borrower are jointly and individually liable for the debt. If the person you borrow the money with is unable to pay their share of the loan, you will be responsible for repaying the full amount outstanding.

Guarantor

If a credit provider is not willing to give a loan to a person on their own, they may ask for a guarantee. If you sign a guarantee for a friend or family member, you are known as the ‘guarantor’ of the loan.

When you sign your name as a guarantor, you are legally responsible for paying back the entire loan if the other person cannot or will not make the repayments. You will also have to pay any fees, charges and interest.

As a guarantor you don’t have the right to own the property or items bought with the loan.

Reasons you might have to say no

Think very carefully before guaranteeing a loan. Is there another way you could help without becoming a guarantor? For example, could you contribute to a deposit so that a guarantee is not needed?

Consider how you will pay back the loan if your friend or family member can’t. Can you afford the repayments? Do you have savings you can use or assets you can sell to pay the debt? If you do have to use your own money or assets to pay off someone else’s loan, you could be risking your financial future.

What about your relationship with the borrower if something goes wrong? It may be better to say ‘no’ now and avoid damaging your friendship.

The effect on your future loans and credit report

You will need to tell your credit provider about any loans you are a guarantor for, when you apply for credit. They may take into account the loan repayments on the loan you have guaranteed when they assess your ability to repay a new loan. This may stop you getting a new loan even if the person who’s loan you are guaranteeing is making the repayments.

You may end up with a bad credit record if you and the borrower can’t pay back the guaranteed loan. The loan will be listed as a default or non-payment on your credit report, making it hard for you to borrow money for several years.

You may also affect your credit score, a number based on an analysis of your credit file, at a particular point in time, that helps a lender determine your credit worthiness.

If you provide security, such as a mortgage on your home, to guarantee someone else’s loan, you may not be able to use your home as security for your own loan. You may even end up losing your home if you don’t pay out the guaranteed loan.

You may also be made bankrupt by the credit provider. Even assets you haven’t offered as security for a guarantee may then be sold to pay the outstanding debt.

Questions you must ask before you sign the loan

Before you guarantee a loan, ask the credit provider the following questions.

  1. What type of loan am I guaranteeing?

Be very careful about guaranteeing a loan that has no specific payback time, such as an overdraft. This kind of loan could potentially go on forever.

  1. What should I check if I am asked to guarantee a business loan?

Find out everything you can about the business. Ask for a copy of the business plan to understand how it intends to operate. It’s also important to look at the business’ financial state. For example, check past financial statements and speak to the business’ accountant to make sure the company is in good financial health and has good prospects.

  1. Is the guarantee for a fixed amount of money, or is it for the total amount owing?

You are better off guaranteeing a fixed amount because you will know exactly what you owe. If you sign a guarantee for the total amount owing, you will be legally responsible for what the borrower owes now and in the future. This could include interest, fees, charges and penalties. If you think there has been an increase in the amount you agreed to guarantee without your consent, seek legal advice straight away.

  1. Exactly how much am I guaranteeing?

The guarantee should clearly describe how the amount of money you owe will be calculated if the worst happens and the borrower does not pay. If you are not comfortable with the amount, ask if you can reduce it.

  1. Do I have to put up assets as security?

If the loan is not for personal, household or domestic purposes, you may be asked to put up an asset such as your house as security. This means the credit provider can sell your house to pay the debt if the borrower defaults on their loan.

  1. What should the loan contract tell me?

Get a copy of the loan contract from the credit provider. It should tell you:

  • The amount of the loan
  • The interest rate, fees and charges
  • Whether the loan is secured (where the borrower has to put up an asset, such as their house, as security)
  • How long the borrower has to repay the loan
  • The amount of the repayments

ASIC’s Moneysmart

Should you Renovate Before you Sell?

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With TV shows such as The Block and Reno Rumble gaining immense popularity in the last few years, many homeowners have been inspired to carry out their own makeovers and add value to their homes.

A question real estate agents often get asked is “should we renovate before we put our home on the market?”. Sellers are often under the impression that if they extensively renovate their home, they’ll be able to make a tidy profit when it comes time to sell.

While renovating often does add value to a property, many sellers overcapitalise on their renovations. Improvements can add value; however, the outlay can often exceed the return.

For example, major renovations such as kitchens and bathrooms can cost anywhere between $10,000 to $30,000. While it may add some value to your home, you are unlikely to recuperate, let alone double, the costs and efforts that were involved with the improvements.

It’s important to acknowledge that lifestyle improvements are very different from pre-sale renovations. Adding renovations such as a pool or deck to be used throughout the years can be beneficial for your family’s lifestyle and therefore it is money well spent. However, if you intend to add a pool or a deck with only the intention of making profit, you may be sorely disappointed. It’s also important to remember that everyone has different tastes – a buyer that loves everything else may have no use for the pool that you’ve spent thousands on installing.

While properties often need repair and maintenance to keep them looking their best, this should not be confused with large renovation projects. Your home should be presented well in order to achieve the best price possible – but there is no need to get carried away. The longer a property is kept, the greater chance there is of recuperating the value of the improvements. If a property is sold soon after a renovation, the likelihood of regaining the full financial costs are minimal.

Bruce Harry 

What is rent-vesting? Could it be for you?

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Many people are feeling locked out of the housing market as prices in the areas they want to live become increasingly unaffordable. However, sometimes the best way to approach something is from the side, rather than from the front.

More and more young couples and families are figuring out that the key to achieving their dream of owning property is to take an alternative approach – rent where you actually want to live, and buy where it is most affordable and then rent out that property.
Investing before purchasing your own home may seem like a backwards approach, but it can be the smartest way to gain property ownership in the current economic climate.

Why are Aussies rent-vesting? 

There are several advantages to taking the so-called ‘rent-vesting’ route, the primary one being that you can enter the property market sooner and start building wealth as an investor.

Because the property is cheaper, the deposit needed may be lower (but obviously, you would need to check with your lender) and you thus don’t have to spend years saving, which can only be a good thing. A large amount of potential home owners get caught in the trap of renting and being unable to afford a deposit for a home of their own, so by lowering the deposit goal, more people would be able to reach their savings goal while they are renting.

Buying an investment property first also means you don’t have to compromise on location and price when buying, as you don’t have to buy within your ideal area. The focus is solely on affordability and the value of the property as an investment that can help you save for the property you really want.

The key drawcard for homebuyers is the fact they don’t have to sacrifice the lifestyle they want in order to work towards buying their dream home – they can live near the city or beach or the good social amenities while using this investment property to save.

If it is an option for you, buying several cheaper investment properties can potentially be a way to build wealth quicker than buying one more expensive home.

The game plan

Increasing numbers of first homebuyers are strategically building property portfolios in order to get where they want to be.

If researched and planned with care, rent-vesting can be a great way to break through the affordability barrier. But it might be a good idea to consider these things before investing:

  • Can you really afford it? Just because it is cheaper to buy this property than the one you really want, it doesn’t mean you can automatically afford it.• Have you done thorough research into which areas have low prices to
  • Buy but also have solid rent rates and a strong likelihood of increasing in value?  It is wise to take your time considering which property would be the most likely to help you achieve your goals.
  • Are you being flexible about what you want from this investment property without being too lenient? Strike a balance and find a property with a promising outlook.
  • Have you talked to your financial adviser or broker? Get a really solid understanding of how much you will need to save and what impact this investment would have on your financial situation.

It can be confusing to know whether to get a variable rate or fixed rate mortgage, and what features are important. That’s why it’s important to not only check the right rates, but make sure that you’re getting the right features in your home loan. Get help choosing the right home loan.

Property Depreciation 101

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Just like you claim wear and tear on a car purchased for income producing purposes, you can also claim the depreciation of your investment property against your taxable income.

Seasoned property investors know all about this one. In fact, some will take depreciation into account before purchasing their investment. But it’s not just for the pros. Anyone who purchases a property for income-producing purposes is entitled to depreciate both the items within the building and the cost of the building itself – against their assessable income.

Every year, thousands of dollars go unclaimed by property investors who are none the wiser. All it usually takes is a qualified quantity surveyor to inspect your home and prepare a report for your accountant. The savings can be substantial.

What is property depreciation?

There are two types of allowances available:

  • depreciation on Plant and Equipment;
  • and depreciation on Building Allowance.

Plant and Equipment refers to items within the building like ovens, dishwashers, carpets and blinds etc.

Building Allowance refers to construction costs of the building itself, such as concrete and brickwork. Both these costs can be offset against your assessable income.

Depreciation is known as a “non-cash deduction” because it’s a deduction that you don’t have to pay for on an ongoing basis – the deductions are in-built within the purchase price of your property. All other deductions, such as interest, levies, will cost you and require payment on an ongoing basis.

Is my property too old to claim depreciation?

The simple answer is no. If your residential property was built after July 1985 you will be able to claim both Building Allowance and Plant and Equipment. If construction on your property commenced prior to this date, you can only claim depreciation on Plant and Equipment. But it will still be worthwhile.

Commercial and industrial properties are subject to varying cut off dates.

Who should calculate the depreciation?

If your residential property was built after 1985 your accountant is not allowed to estimate the construction costs. Similarly, real estate agents, property managers and valuers are not allowed to make this estimate.

Tax Ruling 97/25 issue by the Australian Taxation Office (ATO) has identified quantity surveyors as properly qualified to make the appropriate estimate of the construction costs, where those costs are unknown.

Whereas accountants can offer advice around other aspects of tax depreciation, construction costs and property depreciation are technical in their own right. quantity surveyors are specialists in the accurate measurement of construction costs with a view to maximizing a client’s financial position in relation to their property assets.

Will my property need to be inspected?

The Australian Institute of Quantity Surveyors (AIQS) Code of Practice stipulates that site inspections are necessary to satisfy ATO requirements.

A quantity surveyor will ensure all depreciable items are noted and photographed. This ensures you won’t miss out on any deductions. The documentation can then be used as evidence in the event of an audit.

The best time to get an inspection of your property is immediately after settlement and hopefully just before the tenant has moved in.

However, even if you bought the property three years ago, you can I still make a claim in most circumstances. Your accountant can amend your previous tax returns up to two years back. There are some exceptions, so contact your tax agent or the ATO for clarification.

Can I still claim if my property is renovated?

Yes. The Quantity surveyor will need to know how much you spent on renovations. This is an ATO obligation. If the previous owner completed the renovations, you are still entitled to claim depreciation. In either case, where the cost of renovation is unknown, a Quantity surveyor has been identified by the ATO as appropriately qualified to make that estimation.

How much will my depreciation schedule cost?

The cost of preparing a tax depreciation schedule varies depending upon the type of property you’ve purchased, location, size and numerous other factors. Generally, the leading quantity surveying companies offer a money back guarantee to save you twice your fee in the first year or they give you the report for free.

So, you have nothing to lose – and deductions to gain! Quantity surveyors’ fees are 100% tax deductible.

 

– Prepared by Washington Brown, Quantity surveyors

Investing in Commercial Premises through a SMSF

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Some of the most important decisions a business owner will make are about their premises: whether to rent or buy, where to base the business and even the style of the property are important to get right. For those with a self-managed super fund (SMSF), there is one more option to consider: landing business premises and an investment property at the same time.

Figuring out whether buying your commercial premises through your (SMSF) is an option that’s suitable for you is imperative to the success of your investment.

There can be many gains through purchasing commercial property through your (SMSF), including creating a certain level of freedom by smart use of resources.

“It frees up capital for the business owner. They are unlocking super to do more for them,” explains a finance specialist.

Further to this, the property is protected against insolvency. Depending on the type of business, this can be particularly appealing.

“There’s a tremendous level of protection of assets within super, so it ticks the asset protection box for a lot of SMEs that may be subject to litigation due to the nature of what they do,” the specialist says.

Then there are the tax benefits.

“While it is in accumulation phase, income tax is only $0.15 in the dollar. In retirement, as the law stands, its zero,” says the industry employee. This means that the money accumulated in an SMSF through the investment does not get taxed.

On the flip side, there is an absolute element of responsibility on compliance matters. You are the trustee of an SMSF and you need to understand what those responsibilities entail.

You must pay commercial rates for rent through a prearranged lease agreement and, although having a protected asset is great for some businesses, it also means that equity is locked within the fund. You can’t take earnings elsewhere.

Having a SMSF means you can’t give all this work to someone else to do for you, but you can seek advice.

At Brickhill Financial Solutions we work with accountants and financial planners to form an experienced team to assist you with your requirements.

 

Give us a call on 1300 252 088 to find out more.

Financing of a small business

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Many people dream of running their own business but four out of five never do it. If you’ve got a good idea, develop a business plan, then talk to an accountant or business adviser about your finance options.

Your business finance or commercial finance options include:

  • Business loans
  • Commercial loans
  • Lines of credit
  • Home equity loans
  • Franchise funding
  • Venture capital

How much money does your business need?

A lot of small businesses fail not because they’re offering a poor product but because they run out of cash. How much money do you need for your business? Not just to pay for set-up costs but to cover your living expenses while you get established? Don’t even think about going into business until you’ve done a detailed business plan and cash flow projection. Otherwise you’re planning to fail.

Business finance vs commercial finance?

Both business finance and commercial finance are generally secured by either commercial or residential property. However, business finance is probably more associated with small business or SMEs (Small to Medium Enterprises). Commercial finance tends to relate more to the financing of commercial property.

Business loans

Business loans are where the finance is for business purposes and the interest cost associated with the loan is tax deductible against the profits of the business. Small business operators provide security by way of residential or commercial property.

Commercial loans

A commercial loan is where the finance is for the purchasing of a commercial property, commercial property development or business purchase.

Similar lending requirements apply to both business and commercial loans. Commercial loans are secured either by commercial or residential property. With larger corporate borrowers, lenders can rely purely on the assets of the company as loan security e.g. trade debtors.

Lines of credit

With a line of credit, you’re given a borrowing limit by the lender and you draw down money – up to that limit – as you need it. The advantage of a line of credit is that you only pay interest as you draw down money. The disadvantage is that the rate of interest may be higher.

A line of credit should be “fully fluctuating”. ie It should only be used as a short-term financing option rather than for the purchase of major commercial plant or equipment.

Home equity loan

Many people have limited cash reserves but have built up equity in their homes. That is, their homes are worth more than they still owe on their mortgages. You can tap into this equity to help finance your business or investment by taking out a home equity loan.

Start-ups versus existing businesses

If you’re thinking of running your own business, you should be aware that it’s generally easier to get business finance for an existing business rather than a start-up. Lenders tend to view start-up businesses as inherently risky whereas an existing business has a track record they can review. However, there are business finance options for start-ups.

Franchise finance or franchise funding

To meet an emerging need, new business finance products have come onto the market to help people buy franchises and equipment. Lenders can be more inclined to provide franchise finance because, while your business might be new, it could be based on a proven formula.

Venture capital

Venture capital (VC) describes where a lender gives you funds in return for a stake in your business. The further your idea is from fruition, the less likely the venture capital or VC firm will be to give you the money, and the more equity they’ll want in return.

To discuss your business finance options, call us on 1300 252 088.

 

DIY inspections: how to spot a lemon

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There’s no shortage of horror stories about people who have bought a property that looked fine on the outside but which, in fact, hid serious defects, in other words a lemon. 

 

Major problems and faults can cost property buyers many thousands of dollars to fix (that’s if they’re fixable at all), not to mention the emotional strain of watching your ”successful” purchase turn into a disaster.

So how can you avoid buying a lemon? The rule, as always, is to buy your home using your head, not your heart.

This means ensuring you thoroughly and objectively assess properties for signs not only of existing problems but also problems that may occur down the track.

When inspecting a property, you should do two types of checks. The first is your own initial appraisal and the second – if you’re serious about the property – is to bring in the experts, who can ensure that the home is free from defects.

Inspecting a property, yourself

When inspecting a property, don’t just look at its upsides but be on the hunt for potential downsides as well. This will not only save you from buying a disaster waiting to happen but can also save you the cost of getting a professional inspection if you decide the problems are severe enough to know the property is not for you.

A good way to go about your inspection is to divide the property into three areas – the inside, the outside and the surrounding land and structures. The following is a list of things to look for; however, you should also add anything else you feel is important to review.

Insider’s tip: If you have friends or family who have recently bought a property or have expertise in this area, ask them to come with you. They may be able to give you some pointers on what to look for and, with less emotional investment in the result, they might be more objective.

Inside the dwelling:

Water pressure: Turn on the taps in the kitchen, bathroom and laundry. Check the pressure and colour of the water and how well it drains.

Damp: Check for stains, water marks and paint damage. Sellers will sometimes paint over damp to hide it, so use your sense of smell.

Cracks in the walls, or doors that stick: These can be signs of subsidence or movement. If the damage is severe, it may indicate a big problem that would cost thousands of dollars to repair.

Sticking windows: If windows don’t open and close properly, the frames may have warped (if they’re wood) or rusted (if they’re metal). New paint jobs can hide both. You can tell if wood is going to rot by pressing it with your finger – if it’s soft, there’s a problem.

Mould: If there’s mould in the bathroom, it’s usually a sign that there’s a ventilation problem that needs to be fixed. In addition, you’ll need to re-grout and repaint.

New paint: Paint is often used to hide faults. Run your hands over the walls and look at them from different angles to see if you can find any problems.

Bathroom: Check for damaged enamel and broken surfaces. Loose grout and cracked or lifting tiles can be signs of water damage. Check the plumbing and pipes for leaks.

Hot-water service: Ask about the age of the unit and how well it performs. Check for leaks and rust and ask when it was last serviced.

Insulation: If you can, look through the manhole into the roof to check the age and condition of the insulation and ask whether the walls are insulated.

Pests: Look for signs of pest trouble, such as rat or mousetraps or poisons. Sagging floors, springy floors and steps, as well as hollow-sounding beams, can all be signs of termite damage. If you’re serious about buying a property, you should think about getting a professional pest inspection.

Electrical wiring: Old-fashioned switches and sockets can be signs of old wiring that could need replacing.

Heating and cooling systems: Inquire about the age of the units, their service records and whether they are running well.

Floor coverings: Check the carpets for wear and tear and decide whether they’ll need replacing. Lift any rugs to make sure they’re not covering any damage.

Fly screens: Make sure fly screens are fitted where necessary and aren’t damaged. They can be surprisingly expensive to replace.

Kitchen and laundry: Check the age and quality of the benchtops and cupboards and make sure there’s room to accommodate all your appliances.

Decor: Changing the wallpaper or repainting is simple to do but can be expensive, especially if you hire someone to do it. Consider how much work needs to be done.

Renovations: If you’re planning to renovate, it pays to go a step further and check the ease with which tiles can be lifted and carpets removed. If you can, and it’s safe to do so, get under the house to see if floorboards can be polished or whether they need replacing. Check the quality of the fixtures and fittings to see what needs to be updated or restored. Think about how much work the kitchen and bathrooms will need.

Room layout: Make sure there are the right number of rooms in the right places, as well as sufficient storage to meet your needs.

Power points: Check that there are enough points in the right places and think about whether you’ll need to add more.

Furnishings: If you already have furniture, think about how it will fit with the property, whether you’ll need to replace it and how much additional furniture you’ll need.

Outside the dwelling

Orientation: Check which direction the house faces and whether the living areas will be too hot or cold.

Plumbing: Check the external pipes for leaks and rust.

Fuse box: Make sure it’s modern and meets safety requirements. If you have doubts, get an electrician to check the box and the house wiring before you buy.

Guttering: Look for leaks, rust, warps, holes and signs that the gutters overflow. Think about whether the leaves from nearby trees will cause problems. Check whether the downpipes and drainage are in order and fixed well to the storm water drain.

Asbestos: Ask whether and where asbestos has been used. Most often, it’s found in walls, roofing and fencing. It is always best to have asbestos assessed and removed professionally.

Roof: Check for missing, cracked or sliding tiles. A sagging or undulating roof can be a sign of underlying structural issues.

General appearance: Check the overall state of the building and look for damaged windows, cracks in the brickwork or cement work and whether it needs a new coat of paint.

Extensions: Check the quality of the workmanship on any extensions and ask to see the council approvals.

Termites: Ask whether the area is prone to termites or other insects and double-check what you are told with the local council. Check for termite damage wherever any wood touches the ground, such as alongside walls, pergolas and decking.

Surrounding land and structures

Trees: Trees nearing the end of their lives can pose a danger and be quite expensive to remove. Check the age, condition and type of trees in the garden and check whether any trees – including those owned by the neighbours – have the potential to damage your property by falling or dropping branches.

Garden: Check the general condition of the garden and consider how much work will be required to maintain or improve what’s there. Check whether there are sufficient taps for watering and whether the garden’s size and shape will meet your needs.

Privacy: If the property is overlooked by neighbouring houses, it can affect your enjoyment of your outside spaces. If the neighbours can see in, think about whether screens, fences or high-growing plants or trees might fix the problem.

Fencing: Check the fences and gates for damage. If repairs are needed, find out what your share of the cost will be.

External structures: Check carports, sheds, pergolas and decking to make sure they are stable and in good condition.

Pools and spas: Look for cracks or bulges in pool bottoms and sides and check lighting, filtration and heating systems. Check for evidence of leaks or repairs and the condition of the surrounding paving. Ask for evidence of any maintenance and servicing. Pool repairs can be expensive, so bring in an expert if you have any concerns.

Drainage: Wet or muddy patches in the garden can indicate poor drainage. Check for water damage on both the main property and any surrounding structures. These checks are imperative if the block of land slopes or is at the base of a hill.

Insider’s tip: It is often difficult to get approval from the local council to remove trees, something that can affect your landscaping and renovation plans.

After your inspection, reflect for a moment on what you’ve discovered. Document your findings and estimate how much any repairs will cost. Weigh up whether the costs outweigh the benefits of buying the property.

If you still want to proceed with the purchase, it’s time to bring in the experts.

An edited extract from The Great Australian Dream: A Guide to Buying Your First Home, by Peter Boehm