Hi Natalie

Right now, without thinking about it too much, I can think of 3 vendor finance strategies to buy the place and one delayed settlement process.

Yes try the local council to get the contact details of the owner.  The property manager is just managing your residential tennancy.  You are always at liberty to approach any owner directly.

Let me ask you a question.  Would you let somebody into your property, who wants to do renos for no money down, i.e. no deposit?  Probably not but, depending on how the transation is structured, the deposit required could be quite reasonable.

Another way of describing Vendor Finance is Owner Finance.  We aren't the owner and will neither act as the bank or charge you weekly payments.  Your weekly payments would be paid to the Vendor, or the company they hire to administer their loan to you.

We may however assist to put a transaction together that works for you and the owner (if they are interested).
 
We have negotiated transactions where repairs and renos have been allowed.

Right now, back to my original suggestion.  That is, find out if the owners are interested.  Without that we have nothing 

Cheers,  Paul

Hi Natalie and thanks Luke.  I agree with Luke.  Step 1, ask the owners if they're interested in selling the property.  If they say yes, let them know that you're interested in buying th eproperty and what price do they think they'd want?  This is possibly the price you'll have to pay for this type of transaction so, if it's acceptable to you, let them know that you don't all all the money right now and would they be ok with a delayed settlement?  If they seem interested and ask you how long you would need to delay, say 3 years.

At that point, it's time to leave them thinking about it.  If you get this far, give me a call.

Cheers,  Paul

Hi Geoff

Welcome to the forum.  I hope you enjoy your stay 

The second chapter of our booklet goes, "Buying properties and on-selling them with Vendor Finance is a great business model.  However, eventually we were unable to buy enough properties to meet buyer demand. This “challenge” was overcome by people noticing our success and wanting to get involved."

I quote this to show a basic principal of sales and, let's be fair, if you are wanting to work with JV Partners and/or Money Partners you're going to have to sell your plan.  The first part of the "sales cycle" can't be missed.  It's "rapport" and if you don't have a good relationship with someone, they're never going to buy your plan.

Remember, only 2% of sales are made on the first contact.  3% are made on the second contact, 5% on the third contact, 10% on the fourth contact and 80% of sales are made on the fifth to twelfth contact.

Also, if you push something at someone, they'll back away.  Don't be the person/plan people back away from.

We've made a business of working with JV Partners and Money Partners.  Start small, be very reputable and people will notice what you're doing.

Cheers,  Paul

Hi Johann

I've got to agree with birchcorp and Barry.  It's been property that's got my wife and I out of the "job" grind.

We work our investment strategy on the basis that it will be the equity we own in property that will be our real wealth in the future.  However we've been sceptical about the whole negative gearing "push" over the recent past.  Although it does seem that a large proportion of heavily negatively geared properties have had good capital growth.  And, as a general rule for us, the positively geared properties seemed to be in low capital growth areas out in whoop whoop.

We ended up stumbling upon vendor finance.  This has allowed us to buy and sell properties with vendor finance and create great cash flow to support our (usually) negatively geared buy & holds, in areas we think have good capital growth prospects over the longer term.

This strategy has worked for us as we're not keen renovators or developers, which are other strategies you can use to generate cash flow.  In fact we've been lucky enough to structure our vendor finance business so that it now supports our lifestyle.

Cheers,  Paul

Hi Blind67

We work our investment strategy on the basis that it will be the equity we own in property that will be our real wealth in the future.  However, like you, we've been sceptical about the whole negative gearing "push" over the recent past.  Although it does seem that a large proportion of heavily negatively geared properties have had good capital growth.  And, as a general rule for us, the positively geared properties seemed to be in low capital growth areas out in whoop whoop.

We ended up stumbling upon vendor finance.  This has allowed us to buy and sell properties with vendor finance and create great cash flow to support our (usually) negatively geared buy & holds, in areas we think have good capital growth prospects over the longer term.

This strategy has worked for us as we're not keen renovators or developers, which are other strategies you can use to generate cash flow.

Cheers,  Paul

Hi Cath

I originally thought that you may be able to use the Tenants In Common method of buying the property with your Dad.  However with the information you've supplied with in your post above, you may also need a simple Joint Venture Agreement as well.

I know Richard is very familiar with this type of situation and I suggest you give him a call.

Cheers,  Paul

Hi Munglord

When you begin looking at vendor finance (VF) stategies it's a good idea to get a clear idea of how the most popular VF strategies work:

1.  An Instalment Contract (sometimes called a Wrap).  This is a real contract of sale with a delayed settlement (sometimes up to 30 years), during which time the buyer is given a licence to occupy, if they pay so much per month/fortnight/week, at a particular variable interest rate, etc etc, i.e. the Contact of Sale is also used as a credit contract.

2.  A Lease/Option (sometimes called a Rent To Own).  Here you take out a Residential Lease on a property and, at the same timw, take out a Call Option on the property.  These two documents give you the right to occupy the property (Lease) and the right (but not the obligation) to buy the property (Option), for a fixed amount, for a fixed period of time.  If you don't buy within the specified time, the Option disappears.

Sometimes people do what are called Back-to-Back Lease Options.  Another name for the same thing is a Sandwich Lease Option.  In very basic terms the Sandwich L/O is where you take control of a property with a L/O and within this L/O you retain the right to sub lease.  You then on sell the property with another L/O, obviously with a strike date set before your L/O runs out.

Since we started in VF in 2003 we have used the L/O strategies many times.  However we don't find them as secure as the Instalment Contract, so we tend to stay away from L/O's these days.

3.  Deposit Finance (sometimes called a Second Mortgage Carry Back).  Here the buyer of a property gets a traditional first mortgage and the vendor (seller) supplies the deposit, in the form of a loan to the buyer.

Out of the three strategies above, I'd guess that the seminar presenter was talking about the Sandwich Lease Option.  We have seen lots of these transactions work but we've also seen some hit trouble.  Mainly because half of the transaction is a Residential Lease and this means you're exposed to all the joys of the Residential Tennancy Tribunals.

If you are considering using the Back-to-Back L/O I'd suggest you become very well educated on what's involved.

Cheers,  Paul

Hi Maurice

Lewis O'brien is very experienced with Option agreements.  His contact details are:

Lewis O’Brien & Associates
Suite 113 
89 High Street 
Kew   Victoria   3101
phone: 03 9888 6388
 
Cheers,  Paul

Hi Terry

I guess that's what makes law so interesting, i.e. the variety of opinion    I recently received this opinion from another solicitor in answer to my question regarding Instalment Contracts and the issue of "assignment".

"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