RESIDENTIAL
Each OTP requires careful thought and strategy to ensure your property purchase aligns with your long-term goals .
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Essential Guidelines to follow :
1 . OTP in the name of purchasing entity
Always ensure that the OTP is in the name of the entity that you plan to use for purchasing the property . It is advisable to purchase property in the name of a property company with a holdings trust holding the shares of the property company .
As a property investor , it ’ s generally not wise to buy properties in your name , as this exposes you to risks , including personal liabilities and tax inefficiencies . Proper structuring from the beginning ensures asset protection and better future financing options .
No matter how emotionally attached you become to a property deal , always be prepared to walk away if the OTP terms don ’ t suit your investment strategy .
2 . Declaring 100 % financing from the Bank
The less of your own cash you use , the better the investment . Specify in your OTP that you intend to obtain 100 % financing from the bank . This allows you to keep your capital free for other ventures . If the bank does not offer you 100 % financing , you can still decide whether to proceed by putting down a deposit .
However , including this in the OTP gives you the leverage to walk away if the financing is not favourable .
3 . Utilise the finance clause to your advantage
The finance clause is a powerful protective measure . As made famous by Dolf de Roos in Real Estate Riches , the finance clause states , “ This offer to purchase is subject to and conditional upon the purchaser arranging financing suitable to itself .”
This essentially means that if you can ’ t arrange financing on terms that are favourable to you , you are not obligated to proceed with the transaction . Always make sure this clause is included .
48 REI MAGAZINE OCTOBER 2024