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I agree it is best to preserve your capital and not to risk it on trying regain your former property levels too quickly. Some of the best property advise I received when I was starting out was don't borrow too much. this is why I really love Property Options because they allow you to move into the property market in much bigger ways than your capital or income would otherwise allow. Options can do this because they allow you to acquire property, to control the property and to sell the property without the need to take out a mortgage. We have been using Property Options to control million dollar properties and to put those properties up for sale and we have also been showing and coaching other people how to do it also. Property Options is what Donald Trump used to build his fortune and he did it from a position of being millions of dollars in debt to being millions of dollars ahead.
Of course liquidation and bankruptcy issues affect all property and real estate equally. Stamp duty also applies to all real estate purchases, but stamp duty does not apply to property Options in NSW or Queensland, and even where it does apply to Options such as in Victoria, it is usually the ultimate purchaser that pays the stamp duty not the Option holder.
Hi everyone,
This is a very important question regarding seller (owner) default which could present problems, however with an experienced approach and a correctly structured option contract the issue like all property issues can be managed to reduce or eliminate the risk to the option holder.
It is really important to remember that an option is a legal purchase arrangement which carries rights and obligations, of the 2 types of Options, the Put and Call Option places obligations to complete the deal on both buyer (Option holder) and owner (seller) this is why we prefer to use a Call Option. The benefit of the Call Option is that the owner is obliged to complete the deal but the buyer is not. This is because a Call Option gives you the right to buy but not the obligation – “you have the option to purchase”.
In our Options we include a paragraph which states that the owner is not allowed to prejudice our rights in the deal by taking out a new or modifying an existing mortgage. The level of the mortgage is therefore known and fixed at the beginning and if the mortgage is too high (too risky) we don’t do the deal. so the issue really is the size of the mortgage relative to the value of the deal and thus if the owner defaults on the mortgage the worst case is we can still have the power to sell the deal ourselves and just give the bank their bit at the end.
Indeed we have done deals where the bank was due to repossess the property, and upon the owner presenting our option to the bank, the bank has been willing to extend to that defaulting owner an extension equal to the length of our Option, which rather than being a tragedy to buyer and seller banks will honour the option contract and can save the owner from bank repossession.
Of course the only real risk is if the buyer pays a large Option fee, but our Negotiation Technique means we have never paid an option fee more than a few hundred dollars, and we have routinely signed multi-million dollar properties in this way.
The other main issue on this question was the death of the owner. In most cases a property is owned by more than one person, e.g husband & wife or 2 directors of the company, and the surviving signatory (owner) will be required to complete the deal, with a share of the proceeds going to the persons estate. Even with just one owner the persons estate would be required to complete the deal
This is the great thing about Options it is able to cater for virtually everything with minimal risk..
Hi Larsont,
Perhaps there is another way of looking at options. Focusing on options for Reno's etc, is perhaps using options at their least effective. For example, why not buy the entire property under options, but not a reno property, but one that has far bigger capital improvement possibility.
It takes the same amount of time and effort to put together an option for a reno property worth say $500,000 as it does for a property worth 5mil with 10 times potential profit. We've been signing options for mil$ properties without the need for laying down money or taking up mortgages. We call it the no deposit no loan methodCraig Hall
[email protected]
http://propertyoptionsmentor.blogspot.com/Knowledge is essential, but it means nothing without getting out and doing it. what often happens is people do courses go to seminars and then when we leave those seminars we fall back into our 9 to 5 routine. TAFE courses and seminars don't give you any structure for you once you finish.
A structured program of support and mentoring is essential and thats what we have been doing with people who want to invest in property. It's especially good if the mentoring structure allows you to do it at the same time as your full time job.
We also use options to buy and sell investment property and the good thing about that is that you don't need finance.Craig – Options Mentor
http://propertyoptionsmentor.blogspot.com/Hi Quantum Leap,
My partner and I have been doing options deals successfully for over 2 years now and we are starting to expand as there is only so much 2 people can do. We attended a seminar in Brisbane in 05 and have developed a business model over this time that has massively added to what we learnt originally.
We are based in Sydney and would like to expand to Queensland and other states. We have trained 4 people here in Sydney and 2 in Queensland but we will need a few more. We are certainly open to expanding into Victoria in the near future. We work on profit sharing from 25% to 50% depending on the deal. We have an engineer with 20 years experience in the development industry to do the DA's at our expense.
What we found is that doing a seminar is great, but you need ongoing support and training. so we provide training, 24/7 phone support and monthly meetings, access to property software and our own online 5 minute feasibility software to quickly work out the price of any type of land.
Paul King
http://www.tawdevelopments.com
0403223569
