How to purchase a NRAS property

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Before purchasing a NRAS property it is important that you completely understand the NRAS Process.

Even though the property has been NRAS approved by the government it doesn't become an actual NRAS property until the tenant moves in. Most of these properties available under NRAS are off the plan and are yet to be built.

At all time your are in control of the process and you own the property. Because you own the property you can sell it at with or without the NRAS attached to it and you can choose to opt out of the NRAS Scheme at any time.

When you meet with our consultants we talk you through the process and make sure you fully understand your options. The only thing you have to decide on is which property you wish to buy.

If you need assistance with finance we can also assess your eligibility and recommend the most suitable loan products for your situation.

Once you have decided on a property a $1000 refundable holding deposit is then transferred into the vendor solicitor's trust account

Contracts are drawn by vendor's solicitor then sent to you. Contracts have a 21 day finance clause. Settlement usually occurs 14 days after unconditional on finance.

How to lodge a land subdivision

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If your intention is to subdivide your property to allow you to build multiple dwellings then an application must first be made to the Development Assessment Commission (DAC).

The following information must be submitted with an application for land division:

A completed Development Application Form

Relevant Fees

Nine copies of the proposed land division plan drafted in accordance with requirements outlined in the Development Regulations

Two current copies of the Certificate of Title

As the requirements for land division plans are very specific most applications for land divisions are prepared and submitted by a licensed surveyor on your behalf.

If the land division relates to houses that you intend to build on the land it is recommended that you lodge a Development Application for the proposed development with the Council prior to lodging an application for land division with DAC. This will demonstrate that the newly subdivided blocks are of the appropriate size, shape and orientation to cater for your intended purpose.

How to market your subdivided property

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When completing a subdivision there are only 3 alternatives approaches which can be adopted

1.Land Only

2.House & Land

3.Completed House

In practice it may be difficult to sell a vacant block of land because many potential purchasers may not be experienced with the building process. They may have concerns about what type of house they can fit on the block, which builder they should use to build the house and how much it will cost for their completed home. As a result of these concerns many potential purchasers may consider it too risky and may decide to buy an existing house.

To alleviate these concerns your Real Estate Agent may suggest that you market the block of land as a House & Land Package. A House and Land Package involves 2 contracts, one for the house and one for the land. These contracts can be signed at the same time or separately.

The advantage of this for the purchaser is that plans will have already been drawn up to suit that block and an indicative price will give the purchaser an idea of whether their new home will fit within their budget. The purchaser then has the flexibility of changing the plans and renegotiating the price directly with the builder.

The advantage of this method for the property owner is that they are still only selling the block and do not have any involvement with the house contract. The prospective purchaser deals directly with the builder regarding any changes required to the building plans. This method is likely to result in a much quicker sale of the block as the purchaser will be much more informed and more likely to make the decision to purchase the block and build at a later stage.

The final option is for the property owner to build the house and then sell as a completed home. This is the most desirable option for the purchaser as they can see exactly what they are getting and as a result they are likely to pay the highest purchase price.

However the downside for the property owner is that the risk of the project may increase as there will be significant costs associated with building and the timeline of the project will be much longer. This exposes the property owner to the possibility that the market adversely changes during this time or the property owners financial position may change resulting in the possibility that they cannot complete the project.

How to avoid the pitfalls of building

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Unfortunately due to the complexity of the building process it is common for the builders quotation not to include all the items which are required to complete the home,

some items which are often not included in quotations are additional footings, stormwater, rainwater tanks, driveways & perimeter paths and landscaping.

This is why it is essential that before deciding on a builder that you first have some plans drawn up to be clear exactly what it is you would like them to quote you on.

Another advantage of drawing plans up independently is that you maintain copyright over the plans. Many people are not aware that if a builder draws the plans up for their clients then the builder owns these plans. This means they cannot shop around to other builders with these plans and ensure the best possible price.

It also means that if you choose to leave the builder due to cost blowouts or time delays it is very hard to do so as the builder will not let you take those plans to another builder. The builder knows that you are unlikely to switch builders as this will involve you having to change the plans to avoid copyright which means you have to re-lodge the plans to council and redo all the engineering work done to date. This can result in significant additional costs and time delays.

It is advisable that you attempt to fix the price of the contract with the builder prior to signing the contract. This will ensure that you do not get any significant cost blow outs during the course of the build. To fix the price of the build you may have to provide full working drawings and engineering plans to the builder so they can correctly calculate the appropriate footings required.

A Development Consultant can assist you with preparing this information and may also assist with your negotiations with the builder to ensure that the contract includes all items required to complete your new home.

How construction finance works

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When entering into a building contract you should check that the contract has a condition that allows you to make every reasonable effort to get finance by a specific date, so that if you are unable to get finance the contract will not proceed.

It is important that you take the time to 'shop around' for a lender before you enter a building contract. An experienced Mortgage Broker will be able to assist you to ensure the best possible lender for your requirements.

There is an important difference between getting a loan to build as opposed to a loan for an established property. When you employ a builder, you agree to pay the builder by instalments (called progress payments) depending on specified building milestones being achieved. Usually, you will only pay interest on the amount of the progress payments that have been paid to the builder, not the total amount of the loan.

So, until the final progress payment is made, you will generally only pay interest on the amount of money actually paid to the builder.

There are a number of ways you can organise your finance for building however the most common way is to extend the existing loan for land to finance the construction of your house .

In today's financial market the maximum amount extended for new dwelling construction is approx 95% of the total construction cost. This means that if your house cost $200,000 to build you would be required to contribute $10,000 to the construction cost from your own cash reserves.

It should be noted that a considerable saving can be made on stamp duty when constructing a new home compared with purchasing an existing home since stamp duty will only be paid on the land not on the construction of your new home.

For example if you bought a block of land for $200,000 and build a house for $200,000 you would only pay stamp duty on the land (approx $10,000). Whereas on an existing $400,000 house you would pay stamp duty on the full purchase amount (approx $20,000)

Another major benefit existing for first home buyers when building a house is that they may be eligible for the First Home Buyers Grant (FHOG). The FHOG is currently $15,000 for newly constructed dwellings