If buying an investment property was a race, then settlement would be considered the finish line and your prize would be finally taking legal possession of your property.
The property settlement process can be daunting, but with a little understanding of the process and the right preparation, the keys to your property will be yours before you know it.
What is property settlement?
Property settlement is the legal process that is facilitated between your financial and legal representatives and those of the property’s vendor. The vendor sets the settlement date in the contract of sale. As a general rule, property settlement periods are usually thirty to sixty days.
Who takes care of what on settlement day?
Settlement day occurs when your solicitor or conveyancer meets with your lender and the vendor’s agents at an agreed time and place to exchange documents and arrange for the balance of the purchase price to be paid.
Your lender will:
- Register a mortgage against the title of your new property
- Release the funds to purchase the new property
Your solicitor or conveyancer checks that:
- Any existing mortgage on the title to the vendor is finalised
- Any third party or person who has rights over the property (a caveat) is removed
- All clauses on the sales contract are fulfilled
- The transfer of land and mortgage is registered with the title office in your state or territory
Make sure you’ve got enough money set aside to cover
- Stamp duty
- Lenders mortgage insurance
- Building and contents insurance
- Other fees and charges
Complete a final inspection of the property
Just before settlement, you’ll have the opportunity to do a final inspection of the property. Often this is done the day before or the morning of the settlement.
The vendor must hand over the property in the same condition as when it was sold. When you view the property for the final time you should check:
- The appliances, hot water system, heating and cooling are all in working order
- Structure, walls, light fittings, window and floor coverings are in the same condition as when you first saw the property
- Locks, keys and automatic garage door controls are supplied and working
You can organise a defects inspection by a Building Inspector if you don’t feel confident in checking these things yourself.
What happens after settlement?
After settlement, your lender will draw down on your loan. This means that they’ll debit the amount they’ve paid at settlement from your loan account.
You’re then responsible for paying land transfer duty or stamp duty. It’s usually paid on the settlement date. The title to the property won’t be transferred to your name until you have paid this duty.
Once settlement is completed, you can collect the keys from the agent and take possession of your new property.
If you have purchased an investment property, organise a depreciation schedule
A depreciation schedule prepared by BMT Tax Depreciation helps to maximise the cash return from your investment property each financial year. To ensure that you claim the maximum depreciation deductions, a BMT Tax Depreciation Schedule will last for the life of the property or for forty years, as specified by the Australian Taxation Office.
BMT also provide a free, easy to use tax depreciation calculator, which can assist you with an estimate of available deductions for any property.
Alternatively, you can contact one of our expert staff on 1300 728 726 for a free estimate of available deductions.