The Vendor Finance Association of Australia can be found at:
http://www.vendorfinance.asn.au/

Cheers,  Paul

Hi Rusty

Now you're talking about an Instalment Contract (sometimes called a Wrap).  All you mention is possible but, before we start structuring your transaction, I'd suggest you do a little study

Have a look at:
https://www.propertyinvesting.com/strategies/wraps
https://www.propertyinvesting.com/str…/lease-options
http://www.negative2positive.com.au/index.php?option=com_content&view=article&id=50&Itemid=75
http://www.vendorfinancelawyer.com.au/
http://www.vendorfinance.asn.au/ The Vendor Finance Association of Australia

Cheers,  Paul

Hi Rusty

Yes, the main challenge with your plan is the $110K deposit.  It would be unusual to get it but I'd still go to the Agent an let him or her know that you'll go with the idea if the buyers can come up with $110K.  You can work out the rest if they can get past this basic requirement.

Cheers,  Paul

Hi Rusty

What you are describing is a Lease/Option, i.e. a Residential Lease and a Call Option.  This would give the tenant buyers control of the property, with the Residential Lease giving them possession of the property and the Call Option giving them the right (but not the obligation) to purchase the property at anytime during the term of the Option, for a fixed price.

If you are happy with the figures above that's fine.  However, in comparison to a lot of Lease/Options, the upfront option fee ($110,000) is quite high and you haven't offered any "equity credit", i.e. no portion of the rent is credit towards the purchase price.

The interesting thing about Lease/Options is that they are hugely flexible, i.e. they can be structured  in just about any way the two parties can agree on.

I think your biggest hurdle may be the size of the upfront option fee (deposit) you're asking for but, as they say, if you don't ask, the answer in no

Also, knowing VF'ers quite well if you don't want the property to be on-sold again with another Lease/Option (an arrangement sometimes called a "sandwich lease/option"), make sure you tell the Agent that you will not allow any sub leasing of the property.

Cheers,  Paul

Hi Coalstar

Always check with your lawyer and accountant but yes, you can write almost anything into an Option Agreement that both parties agree upon.  And if this Agreement is generating income for one of the parties, that income will have to be taken into account in its overall tax position.

Cheers,  Paul

Hi Tracy

Yep 50% does seem quite high but our Investors have still been getting an annualised return of approx 20% on the funds they contributed to the JV.

Some then go off, having learned how to do it and go solo.  No sharing then    Some just like the return and do another JV.  One of these investors has told me that he'd rather make a profit on his VF education.

Others have done the long weekend training, not felt confident when Monday morning rolled around and done a JV with us as a profitable, confidence building process.

Do more research and think about how self motivated you are.  With that realisation you should be able to chose, (a) a long weekend of training, followed by a lot of self motivated action, (b) a JV or (c) a combination of both.

If you do end up selling your your PPR with VF, it may be worthwhile getting a WA VF'er to help you with a negative2positive.

Cheers,  Paul

Here's a bit more information on the mature age borrower, from a recent Vendor Finance Institute newsletter:

Mature Age Borrowers
Since the inception of the new National Credit Code, specifically it's Responsible Lending provisions, you may have noticed traditional lenders knocking back applications from mature age borrowers.

This obviously caused an impressive reaction, as recently ASIC came out with some revised guidance regarding this challenge.  From my reading of this guidance, the Responsible Lending provisions have now been modified somewhat, so that mature borrowers can be accommodated on an individual basis.

The following link will take you to information on this issue:
http://www.asic.gov.au/asic/asic.nsf/byheadline/11-67AD+ASIC+updates+guidance+on+responsible+lending+obligations?openDocument

One of the Examples mentioned by ASIC caught my eye and somehow I think it'll be used a lot. It went:

Example 7: Future plans to sell the principal residence and down size.  A female consumer applying for a 25-year principal and interest home loan to purchase a new home is currently employed and can demonstrate capacity to meet repayments under the proposed loan?  However, she is 55 years old and intends to retire at age 65, with a post-retirement income insufficient to meet repayment obligations without substantial hardship. As it is likely the consumer could only meet her financial obligations post retirement by selling the home, it appears at first view that the presumption in s118(3) applies and, as a result, the loan would be unsuitable.

The lender’s inquiries about her requirements and objectives, however, reveal that she has planned for her future change in financial circumstances and, at the point that she can no longer comfortably afford repayments, intends to sell the home and downsize. She does not wish to purchase a smaller home until this time, however, and also considers the home she is currently purchasing has greater potential to appreciate in value in the years before she has to sell it. Given her expressed intent, if her likely equity position will be such that she can readily pay the outstanding balance of the loan at the time of the planned sale, it is reasonable to assess the loan as ‘not unsuitable’.

Cheers, Paul

Couldn't agree more with Jason.  We started the lazy way   That is, we had equity in our home and used that to buy some properties that we then on-sold with VF.  Of course, you eventually run out of money and that's when you really learn how to run a VF business   One of our great learning points as we went along was realising just how flexible joint venture agreements can be.

Cheers,  Paul

Hi Tracy

The answer to your first question has heaps of "if's" and "maybe's" involved, so this answer has to be pretty general.  First up, if you are buying a property with VF for investment purposes, don't buy from a VF'er as they have already built their profit into the sale.  Buy in their market, i.e. buy with VF from "standard" sellers.  Not easy when you first start out but I guess that's the case for almost everything new you try.

We use VF to build our buy and hold portfolio and maintain our lifestyle.  On the portfolio building side of things we buy (or control) a number of properties and on-sell them with VF to create positive cash flow.  We then use that positive cash flow to support our long term buy and holds.

In relation to Dave & Julie Siacci I've got to declare that we're personal friends.  We started out in VF at the same time.  With that declared, I think they're great at what they do 

Cheers,  Paul

Hi free

In the current slow market we have found it easy to buy at a deep discount, with our purchase costs paid by the vendor and with terms from the vendor.  Recently we've bought properties using the following techniques:

• The property started at $299,000.  We bought it for $235,000 and, at the settlement table, the vendor gave us a $5,000 cheque made out to the Office of State Revenue to help pay our Stamp duty costs.
• The property started at $365,000. We bought it for $320,000.  At settlement we paid the vendor $256,000 (80%) and they carried back $64,000 (20%) over 5 years with no interest.  We pay the vendor $420 per month but it comes off the principal, i.e. we will make a balloon payment of $37,000 in 5 years.  We still had to pay Stamp Duty and Legals
• A home owner suffering serious mortgage stress (default) came to us facing a mortgagee auction.  They had $260,000 equity in the property and were very worried that they'd lose all their equity during the mortgagee sale process.  We have entered into a JV with them, to save their equity and have sold the property with an Instalment Contract with good fixed capital gain and positive monthly cash flow.

When negotiating on property we recognise there are two areas that are flexible, i.e. price and terms.  We usually work on the basis that, if you can get a good deal on one of these points, it's then quite difficult to get movement in the other, i.e. if we get great terms, we understand we won't get much movement on price and vice versa.

Keep thinking outside the box

Cheers,  Paul