Hi Katie

Welcome to the forum.  I'm sure you'll enjoy your time here.

My wife and I started our Vendor Finance residential real estate business in 2003.  Some of the tools of this business are Options, Lease/Options, Joint Ventures, Instalment Contracts, etc.  Happily for us, I was able to give up my job early in 2009 and we are now both enjoying working in our Vendor Finance business full time.

We'd suggest the main pitfall is believing that it's some form of get rich quick scheme.  Happily it's becoming more regulated by the new National Credit Code and this is helping to improve its image.

A few web resources that may help in your search for information about Options and JV's in residential real estate are:
https://www.propertyinvesting.com/strategies/wraps
https://www.propertyinvesting.com/strategies/lease-options
http://www.jvpropertypartners.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 flare_windmill

Welcome to the Forum. We all hope you enjoy your time here.

Yes, you pretty much got it spot on.  However have a chat with one of the excellent brokers in this sub forum and you'll get a few other options to think about, e.g will you go for a line of credit or a facility with a 100% offset.  I'm sure they also suggest setting up a "split" facility on your current loan (if possible).  You've come to the right place 

Cheers,  Paul

Hi rishi78

I think Tony, in NSW, charges about $450.  Not sure about Lewis.

Cheers,  Paul 

Hi Dale

In Qld Stamp Duty is only payable on the Option Price. Of course, once you exercise the Option and settle the purchase, then Stamp Duty on the full purchase (strike) price is payable.

As always, please check with your solicitor.

Cheers,  Paul

Hi MrsC

I'm not sure what State you're in but Tony Cordato of Cordato Partners Lawyers has a Joint Venture Agreement that covers all the points Terry mentioned above.  His phone number is 02 8297 5600.

Cheers,  Paul

Hi Ironlady

Terry is correct in what he says.  It's also interesting to note that your mortgage documents probably also preclude you from renting your property, without getting your lender's authority.  And guess how many other Aussie's are breaching their mortgage documents by doing certain renovations to the property without lender authority.

The banks seem to be in two minds about their feelings towards vendor finance.  I know a number of vendor financiers that have got multi million dollar lines of credit from two of the "4 majors" to run their residential real estate, vendor finance businesses.  And these lines of credit were given in the full knowledge that the properties bought with these LOC's were going to be on-sold with Instalment Contracts.

Ultimately it's your decision and following are some information sources for the two most popular vendor finance strategies:

1.  Instalment Contracts:
http://www.vendorfinancelawyer.com.au/instalment_contracts.htm
https://www.propertyinvesting.com/strategies/wraps

2.  Lease/Options:    
http://www.vendorfinancelawyer.com.au/rent_to_own.htm
https://www.propertyinvesting.com/strategies/lease-options

A great general overview of vendor finance in Australia is available at:
http://www.vendorfinancelawyer.com.au/vendor_finance_intro.htm

As you mention leasing the property, it may be worthwhile thinking about selling the property with a Lease/Option.  As it's a commercial property, you won't be under the control of the Residential Tenancy Act for the "Lease" part of it (a real bonus).  Selling your commercail property with a Lease/Option has the real potential to get you a premium rent that should give you excellent positive cash flow.

Cheers,  Paul

Hi speedlaw

Sometimes it's possible to turn what is currently a "dog" into a income generating asset.  By a "dog" I mean a property with little to no capital gain and seriously negatively geared.

For situations like this we use our "negative2positive" process, i.e. we sell it for a premium price with Vendor (Seller) Financing.  If I had this property, I'd probably on-sell in with a vendor finance Instalment Contract for well over your $227,500 purchase price and structure the transaction so that it generated around $400 per month positive cash flow.

This would have the effect of moving the property from the Liabilities side of your A&L to the Assets side.

Cheers,  Paul

Hi Jeff

If you haven't done any vendor finance transactions yet and therefore don't really know if vendor finance is for you, I wouldn't race off and apply for my ACL at this point.

There are a number of ways you can do a few vendor finance transactions without having to have your own ACL (see above).  My suggestion would be to investigate the ways you can get ACL coverage for your first few VF transactions and then, if VF is for you, go for your own ACL.

Cheers,  Paul

Hi dreamlandprojects

May I suggest you have a look at my most recent post at:
https://www.propertyinvesting.com/forums/property-investing/creative-investing/4333293
to overcome your misconception that you'd have to apply for an Australian Credit Licence.

Also, and this is only my opinion and you should check it with your accountant, it's interesting to note that GST in the case you mention is triggered by a transfer of title.  Transfer of title is not effected until "completion" of an Instalment Contract and therefore it's only at this point that GST would be triggered.

It may be worthwhile talking to a professional that really understands the various vendor finance strategies, including their various advantages and disadvantages in the taxation area.

Cheers,  Paul

Hi All

In an earlier post above I mentioned our Information Sheet.  I'll add it below as it may help.  It does mention a course to be run by VFI at the end of it.  Hopefully it's not excessive advertising

                   Vendor Financiers and the Australian Credit Licence

Registration for the Australian Credit Licence 

Registration for the Australian Credit Licence (ACL) closed on 30 June 2010.  The Registration process allowed current Vendor Financiers to continue to operate their Vendor Finance business until 31 December 2010.

Businesses that Registered prior to 30 June, then have from 1 July 2010 to 31 December 2010 to make a full Application for the ACL.

Do I need an ACL? 

The new National Credit Act requires anybody who is “in the business of” providing consumer credit or consumer credit advice, to hold an ACL 

1. You do not need an ACL if you only plan to utilise Lease/Options.

2. If you plan to regularly use Instalment Contracts and/or Second Mortgages in your vendor finance (VF) business, you need to be an ACL holder or an accredited Representative of an ACL holder. 

3. Even if you only plan to use an Instalment Contract and/or Second Mortgage once or twice a year, it is advisable to get ACL coverage for your Instalment Contracts and/or Second Mortgages, as the new National Credit Code does not clearly define the meaning of “in the business of …”.

If You Registered

If you Registered before 30 June 2010 you may continue your vendor finance business under this Registration until 31 December 2010.  This gives you from 1 July 2010 until 31 December 2010 to apply for and gain an ACL, or alternatively, become an accredited Representative of an ACL holder.

While operating your VF business under the authority of a Registration you must ensure you operate within the rules and guidelines of the new National Credit Code (NCC).

If You Did Not Register 

Registering for an ACL is no longer available.  If you didn’t Register for an ACL before 30 June 2010 and you wish to operate a vendor finance business that needs ACL coverage, you have three options:
1. Become an accredited Representative of an ACL holder or ACL Registrant.  (An ACL Registrant will have to gain an ACL to operate their business, after 31 December 2010.) 

2. Enter into a Joint Venture with an ACL Holder or ACL Registrant for a specific transaction that requires ACL coverage.
3. Apply for an ACL from ASIC.  You should ensure that any transactions requiring ACL coverage are not undertaken until you gain your ACL or have ACL coverage via points 1 and 2 above.

Not “in the business of …”
Nothing in the new National Credit Act requires you to hold an ACL to provide credit for the sale of your own property(s).  However all sections of such a transaction must be structured in accordance with the requirements of the new NCC. 

This includes the pre sale checks you must carryout, ensuring the Contract documentation complies with the new NCC and that the on going administration of the resulting loan complies with the new Code.

While an ACL may not be mandatory in this situation, it may leave you open to non compliance with the new Act, if you do not get advice and assistance from an ACL holder or Registrant.

ACL Courses
Vendor Finance Institute Pty Ltd will soon commence courses to assist Vendor Financiers gain their ACL .  The “ACL Application Course” will run for four days and is designed to have you ready for a full ACL application upon its completion. 

The aim of the Course is for you to complete a Certificate IV in Financial Services and have sufficient tools, policies and manuals in place, at Course completion, to allow you to complete the ACL application.

Cheers, Paul