Property Investment
Donât use Opes if âŚ
In this article youâll learn why Opes Partners might not be the right fit for some people and why.
Property Investment
5 min read
What is the Property Power Position?
Property Investment
5 min read
What if you could get to the point where you have first dibs on a property.Â
The seller canât sell the property to someone else, without you getting the chance to buy it first.
This is called the Property Power Position.
In this article, youâll learn what the Property Power Position is, how it works, and when you can (and canât use it).
Itâs when you secure the first right to buy a property and no other buyer can pip you at the post.Â
You might think â âHow do I get into the Property Power Position?â
Well, first you sign the contract (the sale and purchase agreement).Â
Yes, before you do anything else, you sign the contract.Â
But, it canât be any old contract. It must be âconditionalâ. That means you can pull out of the contract but the seller canât (usually for 10 days).Â
Signing a contract can feel nerve-wracking, especially for first-time buyers. After all, youâre signing up to buy a property worth $600k+.
I understand why investors feel nervous about this. I remember signing my first contract: my hand was shaking. But there are reasons why you do this.
Buying a property requires a lot of steps ... and these steps cost money.
The last thing investors want is to spend thousands on doing research on a property, only for someone else to buy the property first.Â
But if you donât have a contract with the seller ⌠that can often happen. Thatâs why serious investors get aproperty under contract first.Â
Signing the contract often gives you 10 days to do your checks on the property before you have to make a final decision.Â
At the end of that time frame, you can either:Â
#1 â Ask for an extension. If you need more time, you can extend the contract. Just keep in mind the seller has to agree.
#2 â Cancel the contract. If itâs not the right property you can cancel the contract and walk away.
#3 â Buy the property. You think, âThis is the property for meâ and go unconditional.
But hereâs the key:Â You're the one in control. You can walk away during those 10 days; the seller canât.
Of course, you need to include the right clauses to protect yourself, and weâll cover those next.
When I first started Opes Partners I met a lawyer to figure out how to best protect buyers.
He recommended four key conditions, which weâve used in every contract since:
You take the contract to your lawyer, who has two weeks to review it line by line. If they donât approve you can cancel the contract.Â
If you canât get the money from the bank, you can back out and walk away.
Due diligence is just a fancy word for research. Basically, it means you can do whatever checks you want on that property.Â
If something doesnât sit right, you back out using the Due Diligence clause. No questions asked.Â
This one gives you the ability to just say, âYou know what? Thatâs actually not the right property for me. Iâve changed my mind (for whatever reason),â and you cancel it.Â
This is very similar to the due diligence clause. Theyâre the same thing.Â
But, I like to put the right to cancel clause into contracts so investors feel more comfortable.Â
Not everyone knows what a due diligence clause is, but a right to cancel clause is self-explanatory. It means: âI can walk away if I want to.â
If the seller accepts your offer, theyâll sign the contract too.
Once youâve completed due diligence and are happy with the investment, you must tell your lawyer to confirm the contract.Â
We call this âConfirming the Commitmentâ.
At this point, you pay a 10% deposit, usually within 3â5 days. But this deposit doesnât go directly to the seller â itâs held in trust by their lawyer, so they canât access or use it.
While signing a conditional contract isnât as risky as it might sound, you should still have a genuine intent to buy the property. Aka, you donât want to be signing contracts willy-nilly.Â
Because youâre still going to be spending money, and itâs still a waste of money if you decide itâs not for you.Â
A Detail Dive (due diligence) can cost you up to $4,000 if you go ahead with the property.
If you cancel it after only sending your contract to your lawyer, youâre still going to spend about $500 getting them to check the contract.Â
Investors often worry about âaccidentallyâ committing to a property before theyâre ready. However, understanding how conditional contracts work can help you feel more comfortable.Â
By signing a conditional contract, you cannot accidentally buy a property.
I joke with clients that the only way to accidentally buy a property is to sneeze at an auction and put your hand up as a bid.Â
But signing a conditional contract isnât like that. It puts you in the driverâs seat, giving you control over the outcome.
You must actively work through your conditions with your lawyer. And you have to confirm that youâve met those conditions before the contract becomes unconditional.
Getting into the Property Power Position isnât just about securing a deal â itâs about protecting yourself.
With the right clauses in place you can confidently make offers, knowing youâre in control of the process.Â
Managing Director, 20+ Years' Experience Investing In Property, Author & Host
Andrew Nicol, Managing Director at Opes Partners, is a seasoned financial adviser and property investment expert with 20+ years of experience. With 40 investment properties, he hosts the Property Academy Podcast, co-authored 'Wealth Plan' with Ed Mcknight, and has helped 1,894 Kiwis achieve financial security through property investment.
