Continuing with the previous topic regarding the property purchasing process, Trusted Finance would like to introduce the process of purchasing a property in Australia for foreigners (who may be outside or in Australia but with a visa less than 12 months).
This process is not much different from that of people with PR or Australian citizenship. The difference is that foreigners who want to buy a house in Australia need to obtain an investment permit from the Foreign Investment Review Board (FIRB).
After having a clear financial budget for your new property purchase and knowing your financial capacity (borrow capacity), the next process is:
- Find your right property: There are many ways to find a suitable property, such as via real-estate agent website: realestate.com.au; domain.com.au; … Please note, most foreign investors are only allowed to buy new (unused) houses, only a few exceptions but need to be approved by FIRB if they want to buy old houses. You do not need and not be guaranteed to have a visa to enter Australia for your property’s purchasing.
- Property valuation: There are also many real estate agents which have both oversea and Australian’s office. You can contact these agents, then go to the websites mentioned at Step 1 to check the price market of that area, and whether the price offered by the agent is good or not? Going through this process also means that you are valuating your potential property.
- Deposit: After selecting a house/project, you need a lawyer to act as your legal representative in the purchase process. At this stage, you would need to deposit money (usually around $2,000), so that the agent can help you to “reserve a place”.
- Apply for an investment license for foreigners from FIRB:
- The lawyer will assist you in obtaining this license from FIRB. The cost for the
- lawyer is around $ 1,200 – $ 1,500 AUD.
- Each license from FIRB will be used for 1 house address only, and you will not be reimbursed for the cost of purchasing this license if you change your investment decision.
- FIRB investment license fees are currently around $ 5,700 AUD for real estate worth less than $ 1 million AUD and about $ 11,500 AUD for real estate over $ 1 million AUD.
- This fee does not include the attorney fees above.
- If you are a husband and wife who buy real estate together, you only need to apply for 1 license from the FIRB.
- Signing a contract: After receiving an investment license from FIRB, you will proceed to sign a contract with the investor and pay 10% of the contract value, minus the deposit amount ($ 2,000 in the above example) into the agent’s trust account.
- Home Loan (Optional): If you need a loan to buy a home, you must submit an official contract (one signed by the buyer and seller) to your lawyer and Trusted Finance. After receiving the contract, Trusted Finance will help you to submit the official contract to the bank to process your loan application. The bank will review the contract again to ensure its validity before proceeding with the loan review. Usually, foreigners can borrow up to 70% of the value of the property’s value. Current interest rates in Australia are also quite competitive compared to interest rates in Vietnam. Even if you are outside Australia and do not have a visa, you can also apply for a loan to buy from an Australian bank. A loan in Australia will make it easier for you to deduct taxable income from renting a home (discussed in more detail below).
- Receive a loan decision from the bank: After obtaining the bank’s approval, Trusted Finance and your lawyer will proceed with the procedures and work with the related parties, you only need to provide required documents or pay the fees according to detailed instructions from Trusted Finance and your lawyer. For foreigners, when buying a new real estate, there are usually 2 types:
- New Apartments/townhouses/ established houses: you need a 10% deposit of the property value; Before taking the house, you need to pay the remaining 90% of the contract value, plus stamp duty and other expenses.
- Buying land and building a house: Usually, you need a 10% deposit for the land, and 5% of the contract to build a house. After that, 90% of the remaining land contract and related costs will be paid when the land is transferred to you. The 95% portion of the value of a house construction contract will be paid in turn according to the construction progress in the construction contract. Stamp duty for foreigners will vary by state/territory (For example, in Victoria it is 13.5% of the value of the property).
- Receive the property:After a successful settlement, congratulations! The property is now yours! Be proud of yourself!
Note: If you are outside of Australia and want to rent out your home, you can sign property management contracts with the real estate agent to find tenants and manage your property. For this rental income, you will need pay taxes to the Australian government. Of course, you can also claim all the related costs to generate this income, including but not limited to: Interest payable to your mortgage; and depreciation from the cost of building the house (refer here).
Before the end of this article, Trusted Finance, once again, whether you purchase a property in Australia, it is unrelated or adds points to your visa application, or immigration application. However, if you have a property in Australia it is an obvious advantage because it is a recognized asset class. Having a property may also indicate you want/intend to commit to the area.
Disclaimer: This article is for general reference only. Trusted Finance will not be responsible for the consequences that may occur when applying these knowledge without consulting with industry experts.
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