Thank you to all
I remember something Steve McKnight said at one of his seminars- if your house is not selling (and assuming your have done a reasonable marketing campaign), then the only reason is that the asking price is too high. I see houses sitting on the market for months and months and the only reason is that is it priced at $50k too much. Have you had the house valued by an independent valuer (not a real estate agent wanting to sell your property for you) to check that your asking price is reasonable??
Cheers,
LukeHi Angelina
Using some form of vendor finance to help sell a property that hasn't sold, is a great idea. The challenge with offering to "carry back" 20% is that your buyer's lender is probably going to give a thumbs down to the idea. I ran into this same problem last week, when someone offered to carry back 20% of a property we were looking at.
Based on all the above we'd suggest you use something like our "negative2positive" process. It has the potential to allow you to sell your property at a premium price and allow you to get a deposit up front, positive monthly cash-flow and a fixed lump sum captial gain payment when the new vendor finance buyer refinances.
Sandra on the Testimonials page of our website is a negative2positive lover
Cheers, Paul
Paul Dobson | Vendor Finance Institute
http://www.vendorfinanceinstitute.com.au
Email Me | Phone MeAn alternative way to finance your home.
Hi,
Please email me so i can give you details of the property itself. Perhaps you can help me one way or another. Thank you.
Angelina
Thank you Paul and Luke,
I’d like to post the information about the property here and creative solutions that I can think of. I hope you all can help with further suggestions or offers. To those who will email me directly, I’d be happy to email you the floor plan, the RP data valuation and the land valuation from NSW valuer office.
Here is the description of the property:
1. Over 6.5% return
2. Capital growth in excess of 15% on average
3. Perfect corner block, only one neighbour
4. sub-divided into 7 flats (5 studios and two one-bedrooms)
5. Individually metered, so owner only pays the house lights
6. Coin operated laundry machine and dryer makes $2,500 to $3,000 p.a. approximately
7. All professional tenants, no unemployed, no low income, no students
8. Great feng shui. 7 bedrooms, 7 kitchens, 7 bathrooms, 5+2 = 7.
9. No work needs to be done internally, except the outside needs cosmetic repairs
10. Zoned residential, always able to obtain residential rates from banks.The property sold for $1.72M in July last year on an option. The buyer wanted an option of 6 months in order to apply to North Sydney Council for a change in use from residential to commercial. She wanted to use it for a pilates centre. The Council rejected the proposal so she backed out of the deal in January this year. We kept the option fee.
Mel Ciampa, our solicitor, can prove this because he wrote the option and has the contract of sale signed by all parties.
It sold again for $1.620M last month, it fell over again.
The property income is $2,000 per week. I am prepared to sign a three-year lease so that the new owner does not have to worry about managing seven lessees.
Total out-goings is only $10,000 per year, not including land tax.
These are the out-goings:
$4,800 approximate for top insurance cover for building and contents
$2,800 for Foxtel Cable
$3,200 for Council Rate
$ 800 for house lights
$1,200 for water charges
___________
12,800 totalIncome from coin-operated washing machines and dryer, approximately $2,500 to $3,000 per year. I use this to pay for water and house lights. So in total out-goings is only around $10,000.
Due to high rental income; and, it being zoned residential, we have always been able to obtain an 80% loan with banks. St George has valued the property at $1.65M over 18 months ago during the depth of the financial crisis. Since then Cammeray’s median price has grown in value by 33%.
I’m desperate for a genuine sale (that will eventuate) that I’m prepared for the following options:
Option A: Favourable sale of $1.55M. Quick settlement, all paid up. No vendor finance. This is heavily reduced price. Bargain basement. We have already made money on the option fee and the failed sale.
Option B: Sale price of $1.72M. Deposit of $172,000, permission for us to use the funds for another project. Up to one year settlement in order to help them organise their finance or sale of other property. We need to use the money so a deposit bond will not work for us.
Option C: Sale price of $1.62M. Vendor finance 20% at favourable rate of 7% fixed for three years. This is the cheapest second mortgage rate ever.
Option
Sale price of $1.72M. Vendor finance 20% at NIL interest for two years. After two years, if they still need our money, a bank home loan interest can be negotiated. However, buyer still needs to reduce principal balance by $3K per month as a minimum. We need the cashflow. Since the bulk of the loan can be serviced by rental incomes, the $3K monthly principal reductions on the vendor financed amount would be all you have to worry about.Would you please get back to me ASAP? If any potential buyer/s have another thing in mind, I am prepared to listen if the deal can be closed quickly. Please give me their feedbacks, and if a win-in situation can be arrived at, I’m listening.
Thank you.
Again i dont want to be a party pooper but Options B,C & D wont run through NCCP these days.
Cheers
Yours in Finance
Richard Taylor | Australia's leading private lender
You may need to get a commercial rate for this type of property
The yield must be in the range of >7% due to risk associated with this type of propertyHi,
I agree with the NCCP factor. Definitely correct and I have been very much aware of this.
We have always been able to obtain residential rates for this property. We originally borrowed 80% of the purchase price from the Merchant of Korea. Refinanced with La Trobe, also at residential rate; on 80% of revaluation. And, now with Westpac. It is zoned residential, looks like a house, smells like a house and valuers have always been instructed to value it as a house.
It is with Westpac, and anyone with a Westpac Personal Banker can swing it.
Thanks for the responses and take care all.
Angel
Hi again,
For those who are curios. NO, it is not cross-securitised with another property. It is a stand alone deal with Westpac.
Doesnt have anything to do with the lender NCCP would prevent any lender from lending based on the fact there is no guaranteed exit strategy within the next 24 months.
Cheers
Yours in Finance
Richard Taylor | Australia's leading private lender
Hi Richard,
I don’t suppose that anyone thinking of buying a million dollar will have just this asset to speak of. Well, I hope not. I also wouldn’t want to risk $344,000 of my own money without due diligence.
As much as I would like this sold DESPERATELY, and that an understatement… I’m also still lucid and not yet suicidal.
What I’m saying is, i personally would want to see how the buyer plan to exit. And, of course, the usual assets and liabilities statement.Thank you for expressing your concern. Take care.
angel
Hi all,
Where am I? Surprisingly, I received no “offers” from Forum members. But on the other hand, i wasn’t surprised either as it’s not positively geared enough.
I emailed this same info to some young guns I mentored in the past. They are not members of the forum yet but I am encouraging them to become so… both to give and to receive education.
Here are the “counter-offers” and they are interesting to say the least.
Young guns, when they put their minds to it, can deliver the goods. I have to say all of them interest me, in one way or another. I will pick the “winning offer” by mid-April (that is if no other offers arrived in the mail – Email).
Young gun 1: (23, Female, no property yet). She did the calculations. Well, we sat down and did the maths together. Her offer: I keep the property in our names (business partners and I). Sign contract at $1.72M (three years settlement). She banks $500 a week towards the property as forced savings.
Pros: She only loses the accumulated $500 per week if she backs out ($26K if she backs out in 52 wks)
Potential of property to grow more value in 3 years (we estimate closer to $1.8M to $1.95M)
She can on-sell before the end of 3 years (We will take ours, and she will take hers)
She doesn’t have to pay stamp dutyCon: How to do a contract for this type of “creative thinking?”
Young gun 2: (25, male, has one property). His offer, $162M. He borrows 80% from the bank. I vendor finance 20%. He basically owns a million dollar property for the price of the stamp duty and other costs. The rent return pays the bank loan and out-goings if he could get an interest of around 7.45% mark 3-year fixed. Due to his existing home loan, he can’t afford to pay the vendor financed amount. No money to spare. His solution: “Instead of giving you payments for the 20%”, he goes,”Why can’t you be a silent partner and continue to own part of the property?” Fair enough! Why not?
Pros: The title transfers to him.
He is neutrally geared for a million dollar property
He knows I’m always around to be his mentorCons: How do you prepare a contract to reflect this arrangement?
What’s a fair split? Considering he practically got it for nothing and costing him nothing to maintain?Exit Strategy: Review his portfolio in 3 years time. When he has enough equity, he will buy me out. Pays me back my 20% and the capital gains. If there’s not enough, we carry on as usual.
Young gun 3: (28, male, has 3 properties). His proposal: I’d rather not say as it can be hinky. It appeals but this would have to be the last resort. If you’re intrigued PM me.
It goes to show that it is possible to acquire a million dollar property – safely – at a YOUNG AGE. You just have the audacity to ASK. No harm asking. These young people cared what works for me but they also know what works for them. I was mighty proud of myself as i was the one who taught them.
To be honest, the deals don’t give me anything much but I have no financial issues. I do however want the cash flow as I want to invest overseas and continue to venture into new areas of investing in Australia. In the main, I want to get rid of our crippling NSW land tax bill.
I will give you more info as time passes. I suppose by mid-April, we should all know where we are.
Take care.
Angel
The yield must be in the range of 7% due to risk associated with this type of property.You need to get a commercial rate for this type of property..
Hi Alaric,
I will repeat myself, at the risk of sounding like a broken record. It is currently mortgaged with Westpac, on residential rate at 80% LVR, interest only. I am paying 7.09%
I have spoken with my Personal Banker, and he affirmed that Westpac is prepared to assist my buyers on residential loan. Can we now, please everyone, put the interest rate down to rest? Please. It is ON RESIDENTIAL LOAN. If you give me your email address, I will scan the loan contract and email it to you.Currently, too, the rent has another 10% of upward movement because I only increased rent once in three years. In fact, the tenants are ready to sign new leases for the new owners. I have advised them that rent is likely to go up 10% and they are happy to stay regardless. Do the math, my friend.
Thank you.
Angel
I don’t know the area – but just a thought – If it’s not selling to me it means the price is wrong.
If you offered it for $ 2 million no one would buy it.
If you sold it for $500,000 lots of people would snap it up
The price is somewhere in the middle – when you get the price right someone will buy it
Darling,
t sold twice but deals fell through twice for different reasons. I'm using it now to help someone a leg up. Read thread entitled, "One of the most amazing people I have ever met."
Take care.
Angel
Sale price of $1.72M. Vendor finance 20% at NIL interest for two years. After two years, if they still need our money, a bank home loan interest can be negotiated. However, buyer still needs to reduce principal balance by $3K per month as a minimum. We need the cashflow. Since the bulk of the loan can be serviced by rental incomes, the $3K monthly principal reductions on the vendor financed amount would be all you have to worry about.
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