Forum Replies Created
Hi Redhaven
Why don’t you try to get the vendor to hold some of the money in a second mortgage carry back, say 20%to 30% for 12 months, then use a long settlement period to give you the most chance to find a buyer. This means you will not need a deposit to get finance as your LVR is under 80%. If the worst happens and you can’t get a buyer before settlement you can still get the property and on sell it at a later date. Of course you still have to worry about stamp duty but if you can get the money to pay this it should work for you.
Kerwyn.Hi All
I would also like someone to discuss Lease-options in detail. I don’t think they have the same stigma as wraps have and the media has not printed a lot of garbage about L/O as they have with wraps.
Hope someone will explain.
Kerwyn.
[thumbsup2]Hi All
Great discussion.
Unfortunately there are a lot of people out there with a victim mentality and the first thing they do is run to the newspapers or those trashy current affairs programs.
I have not finalised my first vendor financing deal yet so I am no where as experienced as some people on the board.
What I have been doing so far is to get permission from perspective buyers to tape the conversation where I explain the contract. I make sure it is explained in full so if any thing happens down the track I will not be the star attraction on some sleazy TV show.
I have been in a position where I had a great business ruined through one of those shows (although I did not appear personally) I can tell you they are far from ethical; in fact I would say Pluto is closer that their ethics.
All I can say is you have to protect yourself because no one else will.
Merry Christmas
Kerwyn.Hi Bernie
I have heard good reports by an agent call Rentals by Leanne. They only do rentals no selling. Sorry don’t no there number.
KerwynThanks everyone for your impute.
Looks like I am stuck with a P&I at this time, although this may not be to bad in the long run. I don’t think there is any proplem with refinancing later, I ask my broker if there was penalties and he said there was not.
Again thanks for your help.
KerwynHi All
Just got the reply from M/broker the MI have said because it is the first time we have bought and the LVR is 95% they want to see some of the principle being paid. The MI is GE.Now another question, as I don’t like being held to ransom and told what to do by the MI. Is it possible once I have done a bit of a Reno on the place to have it revalued then use the equity to
re-establish a loan which does not need MI and then claim back the MI charge on the original loan?
Is this possible?
KerwynThanks everyone for the reply.
My broker is going to contact the MI tomorrow and find out why they require a P&I.
The lender is NAB and my broker said they were happy with a I/O loan. The amount of loan is $209000 rate 6.51% repayments $1133.80 month with I/O.
My rent income $285 = $1235 month gives me $101.20 cash+.
With P&I 1322.40
Rent 1235
$ 87.40 cash-
Slim margins I know, but as I said I wanted to get the equity to use as deposits on another investment property or 2, then L/O the first one. It justs makes it so much harder to L/O as I have to pass on the $87.50 a month to the buyer which really translates into $188.60 a month more. The difference between the P&I payments and the I/O loan.
Just makes life more difficult.[confused2]
KerwynHi Jumbo 123
You must remember that there are two parts to a L/O one is the lease the other the option.
The buyer although they have agreed to buy the property are still technically a tenant at first so there are two ways to deal with rate rises. As Terryw has said you can simply have a clause that says they will pay interest increases. The other is you can raise the rent up each year at an agreed level to cover any losses or you can do both.
Unlike a wrap you use an interest only loan with a L/O this should help to lesson the impact of rate rises that you pass on to the buyer. L/O is the best of both worlds so you make the rules and as long as the buyer agrees to them then you should be able to maintain you ROI.
Hope this helps.
Kerwyn [exhappy]Hi Jumbo123
I am 100% sure that your buyer does not pay stamp duty up front.Stamp duty is only triggered by an exchange of contracts and as you are not actually exchanging at first the buyer is only leasing the property as any tennant does. If the buyer takes up your option at a later date then they pay stamp duty when they exchange contracts.
The option fee you charge the buyer becomes income for you and is taxable the same as rent money.
Hope this helps. [cool3]Hi Jumbo123
I am relatively new to L/O and am doing my first at the moment. What I have found is you decide the amount of money you want as an upfront option payment. This can be whatever you think the buyer can comfortably afford. It also depends on the cost of the property you have and its condition. I have talked to people who have charged $5000 to $8000 or as little as $1000: so it is up to you. The thing you don’t want to do is max out your buyer, you should aim for a win win situation this way you will have more of a chance that your buyer will stay the distance.
I think your buyer does not have to pay stamp duty because you do not have to register the option fee it is an up front payment to secure a commitment to buy the property at a later date. This fee can be taken off the cost of the property when the buyer activates the option or you can simply keep it or credit only half, it is up to you. The buyer will have to pay stamp duty if they buy you out at a later date as this then becomes a normal property purchase.
[cap]If the buyer chooses to opt out of the option then they lose the option fee.
Hope this helpsHi Nadrob
I am in an area also that does not come anywhere near Steve’s 11 second rule, but don’t let that stop you. I just changed tactics and looked for houses that needed a bit of attention, not over the top repairs but cosmetic ones. Bargain hard with the re/agents point out all the faults tell them its going to cost heaps to bring up to rental standard, then put in a way below offer. Best to put it in writing with all the faults listed and see what happens. You will get alot of no your an idiot but don’t be put off.
I ended up with a really nice 3 bed for $20000 under its valued price.
Spend a little bit fixing it up and you will be surprized that some people are willing to pay more rent to live in a nice home. You know business types who want to make an impression etc. Not only that but you have good equity in the property.[cap]
Hope this helps.
KerwynThanks everyone for the answers.
What I was going to do with the L/O if he give it to me was on sell it to another buyer at a higher rate. The other buyer would have the CG so it would be hard for me to share it with the owner. What I needed was some kind of an incentive to offer the owner so he took up my suggestion. I think he was a bit optimistic expecting a 20% rise in CG in the next 5 years. Looking at the trend from 91 to just before the latest boom 2000 house prices had retreated in 95 by about 3 to 5% before reaching 91 prices again around 99, the lower end housing anyway. I think he was just the wrong person, he did tell me he needed 1.3 million that he had to pay back money that he owed.
Still I would like to know what I could offer a owner that would make it attractive for them so they would consider giving me a L/O on a property if I came across a similar situation again.
Kerwyn
