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Once you find a property that you think will work you need to act fast. First of all you need to evaluate the market. If the market is slow and sluggish then you probably have plenty of time to do your due diligence etc without having to get the property under contract. However if the market is moving fast like it currently is in Auckland, then I don’t bother waiting. I get the property under contract as soon as possible. You need to do your basic due diligence. What’s the rent, whats the yield and make sure the numbers work. Then put an offer in on it, negotiate the price and negotiate the terms. You have to be flexible on terms of price, but you wont normally get away with both. Include a clause that will allow you to revoke the contract if some of your due diligence doesn’t add up. Talk to your lawyer for more but here are the 2 clauses I use (please note this cannot be considered legal advice)

Purchasers approval:
This agreement is entirely conditional upon the purchaser approving all matters that the purchaser considers may concern or affect the property or its commercial viability of the transaction within ___ working days.

Access: The vendor shall upon this agreement upon becoming unconditional, allow the purchaser and any professionals, prospective purchasers and tenants (invitees) full access {insert any particular reasons here if needed, eg. for renovation etc} up to and including settlement date. This will be done with respect to the tenants under the Residential Tenancy act 1986

These clauses allow me access to the property and the right to bring any tradesmen with me to do any further due diligence that I require. The first clause allows me to break the contract incase there is anything I do not like. It also covers all the other conditions such as finance and LIM’s.

The next step would be to bring my team to the property and get a building inspection, a valuation, any renovation quotes. I would also go about getting 3 different rental appraisals and any proof of current rent (tenancy agreement etc) if I was planning on keeping the current tenants in the property. Read the LIM follow up anything that needs following up. I would also have my lawyer doing a title search, and my mortgage broker arranging finance.

It is also a good time to go about any further negotiations, especially if you pick up anything out of the ordinary or you may have left out of the sale and purchase agreement. For example in one purchase the tenant had filled the front yard with rubbish, it was in this period that I had my lawyer renegotiate with the vendor that the rubbish had to be removed by settlement. I also tried to have a few things around the house fixed, but that was without success.

I should now have enough information to make an informed decision about whether or not I wish to proceed with the purchase. I would give my lawyer my decision and they will inform the agent and the vendors lawyer. If I went through with it, I would then pay my deposit into the agents account.