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To be clear, here is an extract from Schedule 1 of the NCCP. So, if you are in the business of buying and renovating properties for profit then NCCP does not apply. If you borrow in a company or trust name the NCCP does not apply. If the people you borrow money from are not in the business of credit provision the NCCP does not apply.
When you take a loan from the bank in the company or trust name they get you to sign a paper that states that you are taking loan to buy property for business purposes and NCCP does not apply.5 Provision of credit to which this Code applies
(1) This Code applies to the provision of credit (and to the credit contract and related matters) if when the credit contract is entered into or (in the case of precontractual obligations) is proposed to be entered into:
(a) the debtor is a natural person or a strata corporation; and
(b) the credit is provided or intended to be provided wholly or predominantly:
(i) for personal, domestic or household purposes; or
(ii) to purchase, renovate or improve residential property for investment purposes; or
(iii) to refinance credit that has been provided wholly or predominantly to purchase, renovate or improve residential property for investment purposes; and
(c) a charge is or may be made for providing the credit; and
(d) the credit provider provides the credit in the course of a business of providing credit carried on in this jurisdiction or as part of or incidentally to any other business of the credit provider carried on in this jurisdiction.Hi Steven,
I think you are overcomplicating the issue. I would not worry about being caught under the NCCP as what your dad does is more like a JV where he is an unsecured lendor and he does not run a money lending business, he simply invests cash for a profit. There are a number of qualifiers to be classified to be in the business of money lending and he does not fit them, the same goes for GP.
To be on a safe side, just pay for consultation and obtain legal advice from a professional but I would not worry about it.
In my experience, you first find a real money making business and then worry about the details if you try to plan for every eventuality without something tangible to apply it to you will never succeed.I think Richard is wrong, as mentioned above, to be caught under the NCCP you need to be in the business of making loans. For example, if you have sold your property with vendor finance you don’t need a license for a one off event. Similarly, for a one off money lending to help your friends with finance you don’t need to be licensed. Once you start lending to ordinary folks you then deemed to be in the business of money lending and thus need to be licensed.
I am invested in the Richard’s fund so can vouch for him. I think he has set up a very clever scheme where loans are advanced to multiple borrowers and not for development purposes. 3-6 month loans at 17% interest in my opinion are safer than first mortgages for 12 or more months advanced for construction at 10-12%. So well done Richard. My only “dissatisfaction” with his fund is that the rate to investors is fairly low, that’s why I would prefer to invest directly in the similar pool of mortgages as his fund. I understand that it requires experience but you can’t get experience by just sitting and doing nothing so it makes sense to start small with less return lower lvr etc. and learn as I go.
Any thoughts on how to start?No, I don’t have the credit license
Also, to answer previous comment RateSetter is a bit of a joke. Unsecured lending at 3% p/a is the same as you would get at the bank. What I am looking for is first and second mortgages where loan is in my name.I would say stay away or be very careful. In these types of deals there is really nothing left in the property for the buyer as both builder and marketer have taken all of the profit. Buyer’s only hope is that market would keep rising thus covering all of the extras.
Here is an example – developer is selling lots for 300k, builder secures the lot on option and can build a house there for lets say 250k which allows for 40k profit margin. Marketer then puts another 40k on top and property is sold to the buyer for 590k. Both builder and marketing company know that there is no way for the buyer to make any money in the next 10-15 years.
There is no such a thing as a wholesale builder. There are investment builders who run very cheap standard houses so you end up in a new estate with a cheaply build house that you have paid a premium price for. You are better of buying something where you can manufacture some growth.Most so called property advisors in Australia are marketers flogging new off the plan property of house and land packages with commission between 30 and 60k.
I am not saying that there are no decent people but after years working with marketers I can tell you that in large percentage of cases the game is rigged and not in the buyer’s favor.
The simple test to apply to Asciential Property Group is to see if they charge any commission. If they charge you a normal buyer’s agent commission then it is probably safe to use. If their services are free and they say that the builder pays them then run away.
