Hey people
Just enquiring….When constructing a lease options deal I understand that you enter into an options contract as well as a tenancy lease agreement. Consequently, as part of the lease agreement it is a requirement by the state REI to lodge a bond on behalf of the tenant. So, with this in consideration, when negotiating the deal do you adjust the amount of deposit you ask for to compensate for the bond? I sought of think that asking for a reasonable deposit and bond may make the deal unattractive for the potential tenant/buyer. Any advice?
Kind regards
MagnumPI [eh]
I am not experienced with lease options on residential property but I am experienced with options contract. It is normal practice to pay a premium (fee) to purchase the option contract that give rise to buying the item for a set price within a set time some time in the future.
The bond would relate to the lease and the ‘option premium’ would relate to the option. I would guess that the bond would have to be lodged with the bond board and the premium could be whatever amount you like and you should be able to use that any way you see fit.
In response to your concern, if I was to sign your lease option on your property (and I understood what I was signing), I would have no problem paying the ‘premium’ for the option to buy.
I am sure some of the experienced lease option investors will clear all this up for both of us as I intend using this structure myself in the near future.
Robert Bou-Hamdan
Mortgage Adviser0414 347 771
[email protected]
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Comments made are of a general nature and should not be construed as individual advice.
© 2004 Mortgage Packaging Pty LtdThanks for your response Rob….As you say I think it’s just a matter of playing with the option figures to achieve a win win situation….I am like you, looking to use the lease option strategy for future investments, I may be wrong but I feel it is a more attractive option (Other than wraps) for potential buyers who find it difficult to save a deposit etc….ie they don’t have to come up with a substantial deposit and they can build equity up to the closing date of the option making it more appealing to the banks to lend them money when the time comes etc…..Right now I am going through the motions of building the foundations for conducting lease options before initiating any deals.
Kind regards
MagnumPI [biggrin]
I’m going by memory here…
When I went to Rick Otton’s Lease Options day, he talked about this. He said that basically, the bond is required to protect the LANDLORD in the event of default, tenants doing a runner etc. So in fact you don’t need to collect a bond at all. This is usually much simpler than trying to follow all the correct procedures in handling a bond.
I think that’s right!Keep smiling
Felicity
A bond is not a legal requirement. It is just necessary to register it if you do ask for and take one.
I would like to know if the first home buyer can get the First Home Owner Grant on a Lease Option.
Robert Bou-Hamdan
Mortgage Adviser0414 347 771
[email protected]
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Comments made are of a general nature and should not be construed as individual advice.
© 2004 Mortgage Packaging Pty Ltdrob, is title transfered on a lease option???
if the answer is yes, apply for the fhog, if not…cheers
brahms
Mortgage Broker
[email protected]That is incorrect brahms. You can get the FHOG on a wrap and title is not passed. I will check on Wednesday unless someone tells me prior who knows for certain.
Robert Bou-Hamdan
Mortgage Adviser0414 347 771
[email protected]
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Comments made are of a general nature and should not be construed as individual advice.
© 2004 Mortgage Packaging Pty LtdHi Rob
I believe that the tenant would not be entitled to the FHOG until such time they excercise the option ie. they go through the motions of obtaining a loan to purchase the property as well as any concessions they are entitled too.
Kind regards
MagnumPI [cap]
As far as I am aware, you cannot claim the FHOG on a lease option, as you are not in the process of buying the house until you exercise the option.
With an instalment contract, the position varies from state to state. Some, such as Victoria, allow you to claim the FHOG straight away, as long as you sign a form stating that in the event you don’t go through with the purchase, you will return the grant. Other states require a time delay, or a % of the price to be paid off before paying the grant.Keep smiling
FelicityYou certainly are not elligible for the FHOG on the execution of a Lease Option.
The LO contain the Option document and a standard REIQ (or State equivilent purchase contract) which can be exercised at a set time and for a set price similar to a standard ETO.
Subject to legislation the Lessor maybe entitled to receive rental assistance directly assigned to him as well other government benefits.
As Felicity mentions the FHOG on wrap varies from State to State. In Qld for example you need to wait a minimum of 1 year and comply with several other conditions.
Cheers Richard
richard at fhog.com.au
http://www.fhog.com.auThere is no such thing as a problem.
Just a solution waiting to be foundRichard Taylor | Australia's leading private lender
I’ll add my bit (though it is the same) no if you are implementing a L/O you cannot claim FHOG, however your tennant can still claim rental assistance (where as with a wrap, to my understanding, they cannot).
Rgds.
Lucifer_auRental assistance from who?
Which department?
Robert Bou-Hamdan
Mortgage Adviser
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Comments made are of a general nature and should not be construed as individual advice.
© 2004 Mortgage Packaging Pty LtdWhere else Rob…our good ol’ government with your tax money.
http://www.familyassist.gov.au/internet/fao/fao1.nsf/content/payments-ra#1
And that applies to all Lease Options how?
Robert Bou-Hamdan
Mortgage Adviser
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Comments made are of a general nature and should not be construed as individual advice.
© 2004 Mortgage Packaging Pty LtdNot to all lease options Rob, just the ones where the tenant would qualify for rent assistance.
Originally posted by Lucifer_au:I’ll add my bit (though it is the same) no if you are implementing a L/O you cannot claim FHOG, however your tennant can still claim rental assistance (where as with a wrap, to my understanding, they cannot).
Rgds.
Lucifer_auThat was not made clear in the above statement. That is why I asked about it. I understood this to mean that first home owners could not get fhog but could get rent assistance – nothing more, nothing less.
Maybe I should expand my thinking.
Robert Bou-Hamdan
Mortgage Adviser
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Comments made are of a general nature and should not be construed as individual advice.
© 2004 Mortgage Packaging Pty Ltd“You certainly are not elligible for the FHOG on the execution of a Lease Option.”
Is that to say that when the tennant decides to exercise the option to buy the property they will NOT be eligible for the FHOG if it is the first house they are purchasing?
If the above statement is true, this would seem a bit un fair or am I missing something?
It is only your thoughts that create your future – Be careful what you think!
Hi Nathan
When the client excises the Option, i.e actually buys the property, they are then eligible for the FHOG, if they qualify.
I hope this helps.
Cheers, Paul
Paul Dobson | Vendor Finance Institute
http://www.vendorfinanceinstitute.com.au
Email Me | Phone MeAn alternative way to finance your home.
Section 23A of the Residential Tenancies Act 1994 states that ‘this act does not apply to residential tenancy agreements that are retal purchase plan agreements.’
So maybe you don’t have to include a bond in your agreement. Maybe.
Hi All
I will add a little here.
As far as I am aware there is no law to make you collect a bond on a L/O.
What you should do though is to collect a non-refundable option fee and at least 2 weeks rent in advance, 4 would be better if you can get it. This is a bit of protection if your buyer does a runner.
The good thing is that if they do a runner 2 or 3 years down the track then you get to L/O your place all over again and probably for more money.
Kerwyn.
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