Hi Ruth & Albro

Ruth, apologies for the non functioning negative2positive (N2P) website. It 'went down' yesterday afternoon.  Our website person is madly trying to fix it and as soon as it's up again I'll PM you.

Yes we do offer a service to help people set up a one off vendor finance deal.  Normally the site would send you a questionnaire about your property and once I get the completed questionnaire back, I can contact you with a few ideas.

If you PM or email me I'll send you the questionnaire.

Albro, my suggestion would be to steer away from your proposed plan as the chances of getting an owner to give you the Option you're looking for aren't good.  Once the  http://www.negative2positive.com.au  website is back up, have a look through that.  Also have a look at  http://www.jvpropertypartners.com.au  These two sites may help you get an idea of how to structure your transactions.

However I'd strongly suggest you get some vendor finance basic education before you try to 'go solo'.  If you don't, it's kind of like trying to fly a plane without any flying lessons – easy to crash and burn

Cheers,  Paul

Hi Smm91

Whether it's income protection insurance or mortgage protection insurance, if it were me, I'd make sure I had some type of insurance to cover you.

Cheers,  Paul

Hi Derek

I have been saying to vendor financiers for some time, that 'the authorities' would find a way of regulating Lease/Options, the only remaining vendor finance technique not regulated by the National Credit Code.  I thought they may accomplish this regulation by an amendment to the National Consumer Credit Protection Act 2009 but the various, State based, real estate agent legislation may just do the job.

Regarding this case in WA, it has created a legal precedent and it will be interesting to see how other States react.  We have already seen a lot of vendor financiers become Australian Credit Licence holders and authorised Credit Representatives.  In the not too distant future I believe a lot of vendor financiers will become licensed real estate agents, with even more becoming Agent Representatives.

We saw this coming and got our real estate agent licence last year.  All good for the industry from my point of view.

Cheers,  Paul

Hi ssusanh

In relation to the discussion above, I'd suggest you stick with Richard and "tell the truth".

However in relation as to where to start looking for a properties that are available with vendor finance (VF), here are a few suggestions:
http://www.renttoownhome.com.au
http://www.vendorfinancedirectory.com.au
http://www.gumtree.com.au

A few VF listings are now creeping onto realestate.com.au and Domain so, they too, may be worth a look.  May I also suggest that you do some research about buying with VF.  Some suggested places to start are:
https://www.propertyinvesting.com/strategies/wraps
https://www.propertyinvesting.com/strategies/lease-options
http://negative2positive.com.au/information/about-vendor-finance
http://www.vendorfinancelawyer.com.au/vendor_finance_intro.htm

Cheers,  Paul

Hi wiebke

If Terry isn't available, I'd recommend Tony Cordato of Cordato Partners.  His office number is 02 8297 5600.  I've work with Tony on many very creative transactions since 2003 and I know he is a fervent real estate investor.

Cheers,  Paul

scha9799 and Andy, at this point it would be a good idea to get to know the difference between an Instalment Contract (IC) and a Lease/Option (sometimes called a Rent To Own).  Have a look at:
https://www.propertyinvesting.com/strategies/wraps
https://www.propertyinvesting.com/strategies/lease-options

scha9799, everything you're looking for is available with an IC, except the 2 year term.  The new National Credit Code (NCC) has a real challenge with a short term followed by what is effectively a balloon payment.  However there are ways of writing up an IC for a longer term but, at the same time, inserting various mechanisms into the IC to 'movtivate' the buyer to refinance into a traditional loan within, say, the first 5 years.  However all such 'motivating mechanisms' must be taken into account when initially qualifying an IC buyer.  If you are not locked into a 2 year term an IC may work.

As Terry mentioned, a 2 year Lease/Option would work, except for you making the tenant/buyer responsible for the council rates, the water rates, the insurance and the maintenance on the property.  All State Residential Tenancy Acts won't allow this.

Questions.
1.  With an IC the VF buyer will be responsible.  With a Lease/Option you will be responsible.
2.  You wouldn't write up an IC for 2 years – hence not applicable.  For a Lease/Option, after 2 years both the Lease and the Option would expire and, if the tenant/buyer did not 'exercise' the Option they would normally have to vacate.
3.  An IC is the only way to pass on these costs but an IC would not 'fit' if you are locked into a 2 year term.  With a Lease/Option you can get a two year term but you can't pass on these costs.
4.  Yes,  http://www.vendorfinancemanagement.com.au   (Disclosure – we own VFM)
5.  It should cost you approximately $1,200 to $1,400 to get the IC or Lease/Option drawn up but we get the buyer to pay this cost.

More information on this concept is available at  http://www.negative2positive.com.au   (Disclosure – this is also our website)

Cheers,  Paul

Hi JT

Luke mentioned above that Steve 'used vendor finance to build a cash flow business.'  Instead of selling your Corlette property at a loss (if you sell it for what you bought it for in 2008, it will be a loss), another alternative may be to sell the property with vendor finance (VF).  This has the potential to convert your Corlette property to positive cash flow and, at the same time, fix (lock in) your capital gain.

If you wish to free up your equity in the property first, i.e. before you convert it to positive cash flow by on-selling it with VF, it may be possible to redraw from your loan.

We have just sold a property close by (in Salamander) with VF.  It was sold at a premium price and is now generating about $500 per month positive cash flow.  Considering your Corlette property is probably extracting some serious dollars from your pocket each month, a turn around to making a few hundred dollars per month from the place (after all expenses), may be worth considering.

Cheers,  Paul

Those books mentioned by Luke are all excellent and I too recommend them.  I also suggest you get an expert accountant or solicitor to advise you on trust structures, as there are a lot of them.  I'd suggest you contact Terryw, a very regular contributor to this forum.

Cheers, Paul

Hi Cintaku

I agree, i.e. it's always helpful to show to show the win-win nature of the transaction.  I find the easiest way to do this is via testimonials, e.g.
http://negative2positive.com.au/testimonials/sandra-sua#  and
http://negative2positive.com.au/testimonials/ann-evans

Cheers,  Paul

Hi Liam

Thanks for you PM on this same question.  I've replied via PM but here's my response anyway:

'As far as I know, no traditional lender, i.e. bank, building society, etc, will allow you to 'compromise their security'. If you look at most standard mortgage documentation, you need to get their approval to renovate the property, sell the property and rent the property, among other things. Obviously both they and everybody else ignores these requirements but the 'banks' put these conditions in the paperwork so they remain in complete control, i.e they like to remain in a position where their mortgage documentation allows them to 'call in' the loan when they feel they need to.

On the other side of the coin, a delinquent loan is bad for a traditional lender's balance sheet. The reality is, if the traditional lender gets paid each month, they remain happy and everybody goes about their business.

One of the strange things about traditional lenders' attitude towards vendor finance is the fact that, if you go to any 'branch' you will be told they will not approve what you are proposing. Yet, I have two business associates that got $7 million and $5 million lines of credit from two of the big 4 banks, to purchase residential properties and then on-sell them with Instalment Contracts, while the bank's underlying loan remain in place.

I guess that's the difference between consumer and commercial banking, i.e. one section says no, the other yes. We have built our vendor finance business since 2003 and have never had a challenge with an underlying loan lender. Why? Because we make sure they get paid each month

Cheers, Paul'

Also, when asked the following question by an PI insurance underwriter, i.e. '"How does the lender (vendor financier) overcome or address the issue of assignment of property under a mortgage with the financial institution?" the following legal opinion was provided:

'The answer to your question is a technical one – there is no assignment of property in an instalment contract. What happens is that the vendor is entering into a Contract for Sale. It is only on completion that an assignment (known as a Transfer) takes place.

An Instalment Contract is a Contract for Sale with a delayed completion.

The Bank / Lender’s consent is required for all Contracts for Sale, so there is nothing different here from standard procedure.

In terms of timing, a vendor notifies their Bank / Lender that they require a Discharge of Mortgage (by providing a Discharge Authority) shortly before completion is due. I find that Banks will hold open their discharge arrangements for a limited time, each Bank being different. The point is that the Banks do not like being notified a long time beforehand – some like the NAB require completion to take place within about 4 weeks after notification

Therefore, it does not accord with Bank practice to notify a Bank that a discharge is required under a Contract for Sale with a delayed completion until completion is imminent.

I trust that this answers the enquiry.'

Cheers, Paul