This article is aimed at the first-time buyer entering the industry. I will go through a basic staged plan to assist with the process. This list is by no means exhaustive but is intended as a general guide. Some of you may require a more detailed approach or, if you’re lucky enough, maybe even a simpler approach.

The latest print edition of Resort News is out now. Read it HERE

Pre-contract

Step 1: Do your homework

Review as many businesses as you can. Get a feel for the type of complex that ideally suits you. You may want a permanent complex with minimal office and garden hours, or you may be chasing a dollar and looking to purchase a larger short-term complex, or perhaps something that has been run down and is in need of some TLC.

Step 2: Find out what your budget is

Seek advice from an industry specialist financier or finance broker to determine how much you can borrow and what your budget is.

Step 3: Find the right complex and negotiate the price

This will depend solely on your circumstances. Discuss your offer with the applicable agent and hopefully you will reach a verbal agreement. It’s not uncommon for the offer and acceptance process to take some time.

Step 4: Engage an industry specialist accountant and lawyer

You will need both to assist you with the process, but the immediate priority needs to be the establishment of a business ownership structure. This can be as a sole trader, partnership, company or trust, or a combination, depending on your circumstances. Taxation and asset protection considerations generally weigh heavily on this choice, as circumstances can vary greatly.

Typically, your accountant will establish the structure, then your lawyer will document the contract and advise you on the details.

Post-contract

Step 5: Sign the contract

Generally speaking, the contract will contain three major conditions: firstly, income verification; secondly, finance; and thirdly, legal due diligence (which also covers body corporate approval).

Making sure you understand each is crucial. In essence, this gives you three get-out-of-jail cards should you need them, and your circumstances change through the process.

Step 6: Income verification

Your accountant will complete the income verification in accordance with the contract for sale. This will be for a recent 12-month period (or a projection if off the plan), with a view to verifying an actual net operating profit figure as specified in the contract.

This profit figure is usually the number the vendor’s accountant has calculated for the same or a similar period. Owner letting agreements are also checked, and any variances in letting pool numbers during the verification period are also reported.

Step 7: Obtain finance

Your financier will require a copy of the income verification report and various other documents. Your financier may also require amendments to the body corporate caretaking agreement.

Step 8: Follow your solicitor’s advice

Your solicitor will guide you through legal due diligence, including obtaining body corporate approval.

Unconditional contract

Step 9: Statutory and licensing requirements

Make sure all applicable ATO registrations are in place, as Australian Business Numbers can take up to 28 days to be processed. OFT licensing can also take longer than expected, so make sure this process is well advanced.

Step 10: Record-keeping

Careful consideration needs to be given to record-keeping for the trust and general bank accounts. We recommend specialised software be purchased or leased. Advice from your industry-recognised accountant should be sought before simply going with what the vendor was using.

Settlement

Step 11: Handover process

You will need to negotiate the handover process with the vendor, which commonly involves one week prior to and one week following settlement. Try to extract as much knowledge from the vendor as possible during the agreed period.

I also recommend having a coffee or similar with the chairperson of the body corporate as soon as possible following settlement. After all, the body corporate committee can be your strongest advocate or your worst nightmare.

In summary, always stick to and take advice from your industry-experienced accountant, financier, solicitor and sales agent, and the purchase process should run as smoothly as possible.

Good luck to all those readers looking to purchase sometime soon!