One Part and Two Part Contract | Basic of Property Investment | Property Investment in Australia

October 9th, 2023

If you’re exploring property investment in Australia, understanding contract types like one-part and two-part is crucial. This article aims to unravel the differences between these real estate purchase contracts without providing legal advice. Think of it as a handy primer on property agreements to help you grasp the basics. Having a working knowledge of key contract terminology and structures empowers you to navigate the process as an informed investor.

One-Part Contracts for Established Properties

One-part contracts are the norm for most properties like existing homes where you deal directly with the seller. These agreements bundle all facets of the purchase into one contract between you and the vendor. If you’re buying a house or land, you’ll sign a one-part contract outlining the full transaction from initial offer to final settlement. This single contract oversees the entire process.

Two-Part Contracts: The Land and Builder

However, two-part contracts become relevant when you’re involved in fresh construction endeavors, such as house and land bundles or townhouse developments. In these instances, the contract is segregated into two separate agreements:

  1. The Land Contract: This agreement sets out the conditions for your acquisition of the land. You engage in price negotiations with the land seller, leading to the creation of a distinct contract specifically for this land transaction.
  2. The Builder Contract: The next agreement is established between you and the builder responsible for creating your new residence. This builder’s contract delineates the details, project timeline, and payment plan related to the development of your property.

This dual-contract structure is commonly referred to as a “two-part contract.” It is particularly beneficial for buyers who want to have a clear separation between land acquisition and construction, enabling them to work with different entities for each aspect of their property investment.

One-Part Contracts for Townhouses and Apartments

In contrast, one-part contracts are prevalent when purchasing properties like townhouses or apartments. In these scenarios, the land developer or builder typically acts as a single party responsible for both the land and the construction. This streamlined approach simplifies the process for buyers, as they deal with a single contract for the entire property transaction.

Additionally, when opting for one-part contracts in new property purchases, you may encounter what’s known as the “10-90 contract.” This arrangement involves making an initial payment of 10% of the property’s total cost, with the remaining 90% due upon completion. This payment structure provides flexibility and can be advantageous for investors.

Payment Structures in Two-Part Contracts

For those engaged in two-part contracts, the payment structure is different. Upon purchasing the land, you initiate payments for the land loan. Subsequently, as the builder progresses through various construction stages, you’ll make progress payments, which are often divided into five stages. These payments correspond to the progress achieved on your property, gradually increasing your financial commitment until the construction reaches completion.

Once construction is finished, you can opt to rent out the property for added income or live in it yourself.

Empire 8 Property: Your Trusted Guide

Empire 8 Property aims to empower property investors with valuable information and guidance throughout their investment journey. Our mission is to build relationships and provide you with the knowledge you need to make informed decisions in the complex world of property investment.

Please reach out if you have questions or need support navigating property contracts, investments, or other aspects of the process. We’re happy to provide guidance to help you traverse this complex landscape confidently.

Stay tuned for our next article, where we’ll continue to provide you with insights and knowledge to enhance your property investment experience.

Empower yourself with Empire 8 Property, and embark on a successful property investment journey today! Contact us today!