We have been doing what we call Assumptive Joint Ventures since 2006, i.e.. we have been putting paperwork in place to assume control of the owners mortgage and the property. As Terry says, it's probably the most dangerous technique we use in our business. The amount of due diligence we now undertake on the owners situation is quite daunting. Along with the other paperwork we use to secure control of the property, it's a technique I'd definitely warn newbies away from.
There is a VF educator out their suggesting that you go in and take control of distressed properties with a 4 page JV agreement. Frankly, if you rely on this agreement to cover your position and the thousands you've invested in the arrears and the property itself, you would have rocks in your head
As Scott mentions, the idea of getting your commission when an Option is exercised and the transfer takes place, is not very appealing to an Agent.
However, like most things in real estate when an Agent gets paid their commission can be negotiated. We know quite a few Rent To Own (Lease/Option) sellers that pay the Agent 50% of the commission when the Lease/Option is established and pay the other 50% when the Option is exercised and transfer takes place. And, of course, these percentages are negotiable
Sure the second 50% is a bit on the never never plan so I guess the Agents just look at it as '50% of something'.
Have you approached the owners to see if they would sell the property to you with vendor finance (VF). I'm guessing the owners aren't finding it easy to sell traditionally so they may consider a VF sale.
Not too much You do get to use the Associations logo on your promotional material and the Association does have a professional code of conduct but the meetings are the 'cream'. The Association doesn't put out a vendor finance newsletter so we filled that space with our newsletter, the VFI News, that's been going for a couple of years now. You can subscribe to the VFI News by entering your email address at: http://vendorfinanceinstitute.com.au/home/
From your question I'm guessing you have some interest in learning more about Vendor Finance. I don't have any first hand experience of Sean's courses but the Vendor Finance Association is a great place to meet vendor financiers. Dates and details of meetings are available at: http://vendorfinance.asn.au/meetings-and-memberships/
there are numerous educators to choose from. Some that spring to mind are:
I'd go back at Richard's (Qld007) suggestion, i.e. Have you consider providing some form of Vendor Finance or second mortgage carry back? 'If you make a property easy to buy, you make a property easy to sell'.
A lot of Lease/Options, i.e. Rent To Own's, have what are called Price Credits built into the agreement, i.e. a portion of the rent is credited towards the deposit on the property, IF the Option is exercised and the sale completed. I've also heard them called Equity Credits and Rent Credits. Same thing though.
You may get a few ideas about doing a vendor finance transaction by yourself or in a JV with an experienced vendor financier at http://www.negative2positive.com.au
Just be aware that second mortgage security is pretty ordinary, especially if your buyers first mortgage is already at a high LVR. That's why second mortgages are so expensive out the in the commercial world, i.e. the people who do this type of lending on a regular basis know the extra risk involved and charge accordingly. In our vendor finance transactions we try to ensure that the second mortgage money we lend is only profit, i.e. if it defaults we're only losing some of the profit.
We do the same as Terry and Richard with the added cover of having the words, 'this property is being sold with and Instalment Contract' included in the policy, i.e. the fact that the property is being sold with an Instalment Contract has been accepted by the insurance company, i.e. Vero.
The buy the house for a dollar idea can be achieved by what are generically called an 'assumptive joint venture' or an 'assumptive lease/option'. I treat them as very advanced vendor finance strategies and would suggest that they should not be considered until you have a good experience level in the VF industry. If you do happen to stumble across one in the meantime, I strongly suggest you ask an experienced vendor financier to look over the transaction for you or even do it together.
I believe it's important to build a good foundation to your vendor finance knowledge and there are numerous educators to choose from. Some that spring to mind are:
Cutting off the FHOG to eligible first home buyers, buying an existing property (2nd hand) is only happening in NSW. It will effect first time buyers, using a vendor finance Instalment Contract, in the same way it will effect a buyer under a 'traditional' Contract of Sale.
Vendor Finance buyers in any State, buying with a Lease/Option (Rent To Own), have never had access to the FHOG. i.e. it's never been available, until they actually 'exercise' the Option and buy the property. In short, in NSW the FHOG will not be made available to any purchaser of an existing property after 30 September.
We have a procedure we call negative2positive in which we, as vendor financiers and Australian Credit Licence holders, assisting sellers to sell there property with vendor finance. The negative2positive website is http://www.negative2positive.com.au
Yes, all our purchasers have always paid to have the legal paperwork drawn up.
We use a slightly different method to live off our positive cash flow. It revolves around 'vendor finance'.
We started out buying properties and selling them with vendor finance, to create positive cash flow to support our buy and hold portfolio. This gave us the result we wanted but ultimately the cash flow created from the vendor finance properties was sufficient to support our buy and hold portfolio and our lifestyle, i.e. we now live off it.
If you do a search for vendor finance on the forum you'll find quite a lot of posts on the subject.
We and our JV partners often buy properties with I/O loans and on-sell them with a P&I vendor finance Instalment Contract. This works for us because all our loans are limited to 5 years on I/O. They then revert to P&I. Us being on I/O and our buyers being on P&I has the effect of pushing our profit forward, by way of greater monthly positive cash flow during the I/O period.
Buyers refinance out of their P&I Instalment Contracts for two main reasons, i.e.
1. They can get a cheaper interest rate via a traditional lender, and
2. When they refinance, they get the Title transferred to their name.
Just a small point regarding the payment of Stamp Duty in NSW. Unlike Vic where it's payable on transfer of Title, in NSW it's payable within 90 days of 'exchange' of Contracts. In Qld it's within 30 days of 'exchange'.