Forum Replies Created
Hi Paul
The property is in Point Cook West Melbourne and the price is $460k, 4 bedroom 2 bath.
Cheers
PaulHi Everyone
Remember that you should seek legal advice only from qualified lawyers regarding vendor finance.
I thought it would be a good idea to provide this link to the vendor finance lawyers website for any queries regarding vendor finance for real estate in Australia.
http://www.vendorfinancelawyer.com.au/vendor_finance_answers.htm
There are questions that relate to caveats and bank disclosure so feel free to do your due diligence.
Hi Casanovawa
When it comes to tax, yes you have to pay tax on:
the 25k deposit
the positive cashflow &
the backend.You can of course claim depreciation, interest etc.. but the government will not allow you to make money without getting taxed. Still as Steve Mcknight puts it its better to make money and get taxed then to lose money and not get taxed.
If you put your trust structures in place you can save an incredible amount on tax, probably best to speak with your accountant about that. We had to reorganise our trust structure a bit but now it is working well.
Cheers
PaulHi Number 8
Was the vendor financier residential, commercial, business? If they were residential I can make a calculated guess as to why. If the buyer does not put a caveat on the property then they are not aware if the vendor is taking their payments and not paying the banks. this is rare however it can happen. This means the vendor loses the property and in turn so does the buyer. Again i must stress, Prequalify the investor, make sure you have a good lawyer who is familiar with vendor finance and protecting every party involved.
We are diligent when it comes to these things because it is the difference between success and failure.
cheers
Hi Intrigue
The caveat means that whomever has registered it has an interest in the property. So if someone does a title search they will be aware of the caveators interest in the property. The Registrar of Titles can not deal with the property without notifying the caveator first.
As of the 31st december 2010 if you are looking to do multiple vendor finance deals then you will need to be registered with an Australian Credit Liscence because you will be a credit provider.
A good lawyer is absolutely beneficial.
I have put this information down on our website, so have a browse and see if it helps.
http://www.vendorfinancehomes.org/
This page specifically answers common questions about Vendor finance
Vendor finance FAQPlease feel free to contact me if you have any questions, I am more than happy to help.
cheersThat is correct Intrigue
The vendor's name stays on the title and yes if they fail to make payment you retain ownership of the property. The buyer can put a caveat on the property which is generally what happens.
The buyer has to pay stampt duty up front in every state except Melbourne where it is deferred until they get a bank loan.
Your figures:
"If we say it takes them 3 years you would earn $23,868K in the over and above morgage amount (the $153pw) + the $68K = $91,868?"
are correct. As you can see it is a great way to get fast returns on investment with minimal risk.
The only risk the vendor faces is if the buyer fails to pay and then defaults, however the vendor retains the property. (This all comes down to the initial qualification of the buyer again). A lot of people do not go through this process thoroughly because of the excitement of the deal but I must stress how important it is to qualify them properly.
Hi number 8
answers to your questions:
1) The bank, You can inform them if you like, it is completely up to you.
I do not quite understand why you are interested in the banks perspective about it? Why invlove them at all, you are not changing your contract with them and they have no part in the process. General rule of thumb in the bank is as long as you are consistently servicing your mortgage then they are happy.*NOTE if you do want to refinance and harness any existing equity you have in the property be sure to refinance before you enter a vendor finance contract.
2) It depends on different investments; some JV partners are happy to share a percentage of the deposit &/or the ongoing profit. It is really up to different investors and we work out a way to make everyone happy. Basically investors buy the property and we do the rest to convert it to a positive solution for them, and share the profit after. It is really flexible as the aim is to obtain a win-win situation for everyone.
With the question about someone with a cash job going for a 25 year contract, it all comes down to qualifying them and what the investor wants out of the solution. If the investor wants a return in a few years then we would not qualify a buyer who would not be able to provide this outcome.
Hope this is helpful.
Cheers
Hi number 8
Generally we structure the contract that the for the first 2 years we charge the standard variable rate, then it progressively increases (1%, 2% etc…) each year to motivate the buyers to buy us out. This provides positive cashflow for a few years and then a lump sum payout generally after 5yrs at most.
The idea is about fast return on investment without having to wait a decade or 2 so that we can move on to the next bigger investment.
Vendor finance/installment sales contract is legal in Australia except for south Australia and has been for over a century,
Here is the link to vendor finance info on this website https://www.propertyinvesting.com/strategies/wraps
However I understand that theory is one thing and practice is another, it took a lot of fumbling around when we first began. feel free to contact me if you would like to have a chat.cheers
Cheers Mate
Hi Richard,
We have already registered for the Australian Credit License so that we are compliant before 31 Dec 10
At the recent Vendor Finance Association meeting Lewis advised us its better to be safe than sorry.
Cheers
Paul
I am not trying to sell you anything.
I am just trying to help, but if you want to take the negatively geared path its your choice, i am only trying to provide information i wish i had with my first property investment. would have saved me tens of thousands of dollars.
I will not reply anymore
all the best with your investment choice.
Hi cellphone
I will give you a current example.
There is a couple that my partner and I know and they want to buy a 400k home, but they dont qualify for a normal bank loan.
We step in and mark up the price by 17% to make it 468k
We then create a contract (vendor finance agreement) that says they agree to the marked up price and will put a 25k deposit down, then they pay principle + interest repayments on the remaining remaining amount for the next 25 years.
They are responsible for outgoings such as rates, utilities, body corp so we do not pay for that.
So as you can see their repayments are higher than ours and we have no outgoings as well.
usually they pay out the agreement in a few years once they finally qualify for a mortgage from the bank and then we receive the remaining amount owed.
This is our website if you want more information http://www.vendorfinancehomes.org
Feel free to email me if you like [email protected]
cell phone,
Are you looking for just a buy and hold or would you like to get a return on your investment immediately.
I use wraps or vendor finance as my property investment solution, it gives me peace of mind because no matter how interest rates move I stay positively geared.
Also I mark up the price so harness equity growth immediately. (part of it is the buyers deposit, currently positive cashflow and in a few years time the payout of the backend)
I hope this info was helpful.
They are looking to buy a house in Tarneit at approximately $340,000 – 370,000.
Looking at paying $10,000 above purchase price, at a 1.5% increase in interest rate.Paul
