Top ten tips to mitigate risk when building

What you need to get right before you get started!

Investing in property is one of the biggest financial commitments you will ever make – if not the biggest! And while it’s not without risk, that risk should be managed, so you can continue to confidently build your property portfolio (and that brand new townhouse) through challenging times. Here’s our top ten things to get right before you get started.

1 GET THE RIGHT PURCHASING ENTITY

This is the financial framework you will use to purchase your property. It can provide a layer of asset protection and peace of mind in case things go wrong. So before you buy the property, you need to know what name you’re buying in. Some common structures and entities include:

  • Personal name/s
  • Self-managed superannuation funds (SMSFs)
  • Family trusts
  • Unit trusts
  • Hybrid trusts
  • Companies

There can be significant differences to your lending options, deposits and your personal risk. So get your structures correct at the start to make sure you’re managing risk appropriately.

2 USE A LICENSED BUILDER

Laws vary across Australia, and every state and territory has its own individual licensing authority. Make sure that your builder is registered with the Building Practitioners Board in the relevant state. Ask for their registration number, then check their registration on the building authority website in your state.

3 ASK FOR EXAMPLES OF THEIR WORK

While you’re checking if they’re a licensed builder, check out their other projects online, or even better, visit in person. Don’t be afraid to speak with their clients and check out their reviews online. Do your homework!

4 CHECK WITH A LAWYER BEFORE SIGNING!

For all major domestic projects, builders must issue a written contract. Before signing, make sure it meets legal requirements by seeking independent legal advice. Ensure any variations to plans and changes in price are documented and agreed in writing.

5 CHECK THE PUBLIC LIABILITY INSURANCE

More checking! Make sure they have a public liability policy. It doesn’t matter how good a builder they are, accidents can and do happen – including damage to property or injury to another person.

6 CHECK THE BUILDING INSURANCE

Before a builder undertakes any significant works (the dollar amount varies from state to state so check requirements), they must take out domestic building or builders warranty insurance for the project. This is designed to protect you if your builder becomes insolvent, dies or just disappears! So before construction starts make sure your builder provides you with a domestic building insurance policy or a certificate of currency covering your property.

7 APPOINT AN INDEPENDENT BUILDING SURVEYOR

A building surveyor provides independent oversight of construction work, ensures that the works are completed as described (and to industry standards) and can instruct the builder to rectify defective work.

Make sure your relationship with them is water tight, as they are now your new best building buddy. They will inspect the build at intervals throughout construction, sign off on each stage and, finally, issue the occupancy certificate.

That’s why it’s essential to appoint a building surveyor independent of your builder. You can either appoint your local council's building surveyor or engage a private surveyor – either way, you can find a surveyor on the building authority website in your state.

8 PLANNING AND BUILDING PERMITS

Ultimately, it's your responsibility to ensure that planning and building permits are obtained, however it’s also very common for your architect or builder to arrange the applications on your behalf. Just decide who is best placed to manage the process.

9 COMMUNICATE, COMMUNICATE, COMMUNICATE

Along with all of this checking of credentials, licenses and insurances, you need to actively seek out regular updates from your builder and your surveyor. Better still, find out when inspections for your property are due and then diarise to follow up on how they went. In addition, while you can ask your surveyor to carry out as many additional inspections as you require, keep in mind that this will add to your costs.

10 DOCUMENT PROGRESS

While you’re at it, take regular photographs so you have a record of building progress to brag about along the journey...and to rely on should something go wrong.


Once you’ve considered the risks, completed your due diligence and made sure that you have the best protections and buffers in place to cover any surprises…it’s time to check in with your property mentor to start saving for your next investment! And if you don’t already have a dedicated property advisor on your team, then book in a free one to one mentoring call to find out how we can help you start making educated and planned progress today!

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