Hi Tracy

Without the tenants being in the picture I would have suggested you considered selling your IP with VF but only if that made sense in the overall plan for your portfolio.  I never suggest selling with VF just for the sake of it as, ultimately it's the real estate you own that builds your real wealth.  As the tenants have 10 months to run, if you come to the conclusion that this property isn't a good "keeper" then I'd consider marketing it with VF in about 8 months time.

The situation with your current PPOR, again, isn't straight forward.  Do you need most of the money from this property to build your new PPOR?  If you do then selling with an Instalment Contract may not be the way to go as, with a vendor finance sale, you trade off time to get fixed capital gain and positive monthly cash flow.  If you have sufficient capital then you'll have to decide if your current PPOR is a "keeper" or would it be suitable to sell with VF, within the overall plan of growing your portfolio.

It is unlikely that you will be regarded as providing credit "in the course of a business" if you sell one property with an Instalment Contract, whether or not it's conducted in a JV.  After that, it's my opinion that you will need an ACL (JV or not).  However this question, in relation to the new National Credit Code, has yet to be tested in court.  Of course, take your own legal advice on this issue.

Cheers,  Paul

Hi shoooshoo

If you are the investor, you have the underlying loan at the lower interest rate, i.e. whatever you can get a traditional home loan for these days.  But like buying a property to rent out, you still face the risk that there will be carrying costs between you completing the purchase of the property and getting a tenant or a vendor finance (VF) buyer.

We mitigate this risk by setting up a long settlement for the property and negotiating access between exchange and completion, to show the property to prospective buyers.  Also, the pool of prospective VF buyers is almost invisible to the traditional real estate market place and is larger than most people realise.  Recently we've noticed we're selling in about 80 days (longer than normal) and figures for traditional sales in the market are showing as about 170 days on the market before sale.

Cheers,  Paul

Hi shoooshoo

In most cases yes, people will buy with vendor finance (VF), knowing that they're paying a premium because they can't get a traditional home loan.  It's been estimated that approximately 20% of the Aussie population can't get a traditional home loan and, in our experience, they're not too happy about being locked out of home ownership.  A smaller percentage just don't like banks 

The two most popular VF strategies are Lease/Options (Rent To Owns) and Instalment Contracts (IC).  In both cases the Title of the property stays in the original owner's name until the VF buyer exercises the Option (in a Lease/Option) or pays out the loan in an IC.  In either case, if the buyer defaults prior to exercising the Option or paying out the loan, the two sets of legal paperwork are terminated and the original buyer gets the property back.

This is a bit of a general overview of the default process but that's what we've ultimately experienced.

Cheers,  Paul

Hi shoooshoo

I'm with xdrew, i.e. think outside the box.  In the last two weeks we've had 9 people ask us for help selling their properties with Vendor Finance.  With traditional sales in a lot of areas moving at a snails pace right now, it's become much easier to get properties on vendor finance.

Also, regarding your second property, if it were me, I'd consider selling it with vendor finance.  Doing this would allow me to fix my capital gain on the property and generate good positive monthly cash flow.  Thereby improving the income side of my assets & liabilities.

Cheers,  Paul

Hi Wonderwoman

I noticed that was your first post here.  Welcome to the forum and I hope you enjoy your time here.

The situation you have with your property in Townsville may be helped by what we call our negative2positive process.  In short, if you have the time, you sell the property with vendor finance with the aim of getting a premium price and generating positive monthly cash flow.  More detailed information is available at  http://www.negative2positive.com.au

You'll notice above I mention, "if you have the time".  If you can get the money you need from the property by selling it traditionally now, then that's the way I'd normally go, i.e. it gets me all my money now.  If the traditional sale path won't get me the money I need and I have some time to trade off, I'll look at selling with vendor finance.

Cheers,  Paul

Hi Nick

One way to turn your property from negative to positive cash flow is to use what we call our negative2positive process.  In short it involves selling your property with vendor finance.  Using this technique you sell the property for a premium price and generate excellent monthly positive cash flow, while the new buyers are paying it off.

All strategies have their pluses and minuses.  With vendor finance you do lock-in, i.e. fix, your capital gain and generate positive cash flow but ultimately you have disposed of the asset.  The way we overcome this minus, is to buy another one and do it again.

More information on the negative2positive idea is available at  http://www.negative2positive.com.au

Cheers,  Paul

Hi Kerry

The Gold Coast meeting details are at:
http://www.vendorfinance.asn.au/meetings-and-membership.html

Cheers,  Paul

Hi Terry

In relation to s149 and those documents required by section 52A (2) (a) of the Act, I believe "Part 4 Options for purchase of residential property", of the Conveyancing (Sale of Land) Regulation 2010, allows the various required documents to be attached at the date of the Option.

As you mentioned, the Contract does not come into being until it is exchanged.  As it's a new Contract at that point, I believe the vendor would be required to supply the documents required by section 52A (2) (a) of the Act with the contract, i.e. a new up to date set.

Yes, we too have had people miss the last available "exercise date".  Scary but unlike the restaurant owner we've always let our buyers buy their home.  Can you imagine how quickly the media cameras would be on our door step if we didn't 

Cheers,  Paul

Hi Kerry

To provide a tenant/buyer with a lease/option you need to have:
1.  A lease that gives you the right to sub lease and
2.  An option for longer than the option you plan to provide.
Therefore completing a one page call option will not supply you with all you need.

I'd suggest you secure the property with an appropriate lease/option.  Your solicitor will be able to write up the paperwork so that you only start paying when you have a new buyer in place.  You can then take out your costs from the incoming buyer's deposit (up front option fee).

We don't do back to back lease/options anymore but, if you haven't done one of these before, I'd suggest you find an experienced VF'er in your area and offer them a share of the profit to help you through the process by way of a joint venture.  Do however check how many back to back lease/options this experienced VF'er has done before you form the JV.

They are not easy and about 50% of them fall over.

Cheers,  Paul

Hi Kerry

I've couldn't agree more with Terry.  We've been running our Vendor Finance business since 2003.  I listened to a well known educator and once did my own paperwork for a VF transaction.  As murphy's law would have it, it stuffed up and cost a lot in lawyer's fees to fix.  It happened early in our VF business and I haven't tried to do legal paperwork myself since.  What I do do though, is get the purchaser to pay for the drawing up of the paperwork.

Do what you do best, i.e. put together transactions and use your specialist professionals to make sure the paperwork has the best chance of working for you the way you want it to.

Cheers,  Paul