The real estate investment process in Australia for foreigners requires following a number of legal regulations and taking specific steps. Below is part of the real estate investment process in Australia for foreign investors.
Step 1: Informed Decision-Making
Investing in Australian real estate as a foreigner involves a structured approach:
- Market Insight: Conduct thorough market research to comprehend Australia’s real estate landscape, covering aspects like location, pricing, development trends, and investment prospects. Seek guidance from consultants or leverage online resources for insights.
- Financial Preparedness: Ensure you possess the necessary financial resources, including funds for property acquisition, deposits, and potential repairs. If capital is limited, explore financing options from banks or financial institutions.
- Property Selection: Align your investment goals with the choice of location and real estate type. Australia offers diverse options, from apartments to single-family homes and commercial properties.
- Property Acquisition: Collaborate with a real estate broker or organization to locate and purchase suitable properties. Once identified, proceed with making an offer and settling on a purchase price.
- Legal Due Diligence: Prior to finalizing the transaction, conduct a thorough legal examination to verify the property’s clear title and absence of encumbrances or outstanding debts. This task typically involves legal professionals or lawyers.
Step 2: Contract Signing
During this phase, customers typically submit a payment of approximately 10,000 to 20,000 AUD, as per their agreement with the sales representative. Subsequently, customers initiate the contract preparation process, with a lawyer reviewing, discussing, and addressing any contract terms that require attention. Normally, customers finalize the sales contract approximately 5-7 days after signing the deposit agreement.
Step 3: FIRB Application
Foreign home buyers are required to seek approval from the Foreign Investment Review Board (FIRB). Typically, foreign investors apply for FIRB approval after signing a real estate purchase contract. The purpose is to ascertain the exact government fees based on the property’s value. Alternatively, investors can apply before selecting a property, though if the property value is lower than anticipated, the paid FIRB fee will not be refundable.
Step 4: Deposit Payment
Investors are obligated to make an initial payment equivalent to 10% – 20% (most commonly 10%) of the property’s value, in addition to 50% of lawyer fees and associated charges (varies by property type, e.g., villa, townhouse, or apartment). This payment is typically made into the Trust Account of the investor’s lawyer about 5 – 7 days after signing the Sales Contract. Subsequently, customers receive a Payment Confirmation from the investor.
Step 5: Full Payment
The remaining payment is divided into stages, depending on the type of real estate:
- For Apartment Purchases: When buying a pre-built apartment or house, customers will pay 80% – 90% of the remaining contract value, along with any outstanding taxes and fees, upon receiving possession. This differs significantly from apartment investments in Vietnam and provides a cash flow advantage for investors.
- For Land and House Construction: In cases where customers purchase land and construct a house, the second payment involves paying 100% of the land value upon land handover, in addition to any remaining taxes and fees. Customers will continue making sequential payments for the house value in accordance with the construction progress outlined in the construction contract until the house is handed over.
These streamlined steps facilitate a smoother and well-structured real estate investment process for foreign buyers in Australia.
Trust Account: Safeguarding Transaction Funds in Real Estate
A Trust Account, also referred to as a Trust Account, is a specialized bank account designated for securely holding transaction funds during various transactions, notably in real estate dealings. It can only be opened and managed by lawyers and companies possessing full practice licenses, and they are obligated to rigorously adhere to the legal requirements and regulations governing such accounts.
It’s important to note that the specific procedures for Trust Accounts may vary depending on the region in Australia and the type of property you are interested in. To ensure strict compliance with all legal regulations and to navigate the correct procedures accurately, it is advisable to seek guidance from a lawyer and financial expert with a proven track record in real estate investments in Australia.
