Hi sonyasal

If you inherit a house that was the PPOR of the deceased, you are deemed to own the asset as of the date or the deceased death.  At that point, it would be CGT to the uncles.  If they sold it immediately, it's unlikely they would pay CGT.

If they planned to keep the asset, not as their PPOR, they would be advised to get a licenced valuers valuation, back dated to the date of death.  From the date of the deceased death, it would then be their asset and CGT would start to accrue.

The ATO say:
"Since 21 August 1996, if you inherit a house that was the ‘main residence’ of the person you inherited it from, you may be able to claim a full CGT exemption for it."

Cheers,  Paul

Hi Jason

As we are getting into the nitty gritty of the specific numbers for your property, it may be easier to give me a cala.

Cheers,  Paul

Hi jaster12

Yes the new Act does have provisions that allow one off credit transactions for individuals such as yourself.  However the "gotcha" is that the setup and on going running of the transaction still has to be as per the requirements of the new National Credit Code (NCC).

I suggest you find a Registered or Licenced ACL holder to undertake the due diligence of potential buyers (and establish the required "paper trail"), ensure the Instalment Contract is structured correctly and can administer the resulting loan in accordance with NCC requirements.  We usually use a short JV agreement when to get this done.

Cheers,  Paul

Hi energy4anarchy

We've used BMT in the past and paid quite a bit more than DEPPRO's $450.  Thanks for the tip

Cheers,  Paul

Hi Karen

People who buy the homes with a vendor finance Instalment Contract are very happy with this requirement.  With an Instalment Contract, contracts are exchanged but settlement doesn't take place for anything from 5 to 30 years.  Of course, in the meantime, the buyer has to pay instalments to the seller but Stamp Duty is still only payable within 3 months of settlement.  Needless to say, vendor financiers are pretty familiar with this Victorian ruling.

In NSW Stamp Duty is payable 90 after "exchange" and in Qld, 30 days after "exchange'.

I'd suggest the only thing holding you back from paying 3 months after settlement may be your lender.  If they are happy to settle without Stamp Duty being paid then I can't see anything to hold you back.

Cheers,  Paul

Hi starbaby

I've got to agree with Terry.  I just can't see a way to get this to work and, even if you could, there's no software currently available to allow the seller to administer the arrangement.

Cheers,  Paul

Hi PaperChaser

I've got to agree with sonyasal and like you, we believe our long term wealth is measured by the amout of equity we have in property. To accomplish this we use both +cf and -cf.

Our +cf properties are properties we buy and on-sell with vendor finance and our -cf properties are the properties we plan to hold forever Our +cf properties maintain our lifestyle and support the -cf on our long term buy and holds.

We've bought and sold heaps of our +cf properties but not sold any of our buy and holds. They're our long term wealth. The +cf properties, for us, are just a cash flow business, just like any other business you might own.

Using vendor finance to help our portfolio building works for us.

Cheers, Paul

Hi number 8

The Wrapee: Is the Stamp duty concession for First home owners still available?  Yes, in all states that have a stamp duty concession for first home owners, this concession is also available for first home owners buying their home with an Instalment Contract (IC).

I'm guessing that just about all vendor financiers require the deposit to be paid prior to the buyer taking possession.  However, some may allow a portion of the deposit to be paid off with extra catch-up payments over the first ?? months of the IC.

In NSW, if the buyer is not eligible for the FHOG, the stamp duty is due 90 days after exchange of contracts.  In Vic, stamp duty is not payable until the sale is completed, i.e. when the IC is completed, i.e. paid out.  Qld is pretty much the same as NSW but, I think, the stamp duty is payable 30 days after exchange there. Not sure about WA, TAS, ACT & NT.

Cheers,  Paul

Hi

One of the great things about vendor finance in real estate is that it can be done so many different ways, e.g. some people may structure the on-selling Instalment Contract for the long term, to enjoy the interest rate differential over the long term and some may structure the on-sell to encourage their new buyers to refinance into a traditional home loan in, say, 2 to 4 years, so they can access their backend profit.

Most of my answers are the same as Richards.  Those that aren't, just show the flexibility vendor financiers have in setting up their business.  

1. How much are the vendors repayments above the interest rate applied to your money borrowed (is it more than a P&I repayment). i.e. what sort of margin is the monthly cash flow based on?  We lock the new buyers interest rate to our underlying loan, i.e. if our interest rate moves, the new buyers rate moves.  However we also structure our transactions to encourage our new buyers to refinance approximately 2 to 4 years down the road.  This is done by increasing the new buyers interest rate for a number of years, commencing in year 3.  However, if you are using this structure you must check the new buyers serviceability at these higher interest rates and you must be careful not to increase your interest rates to a level that may expose you to a claim of unconscionable lending.  We keep our rates to within 2.5% of the big 4's standard variable.

2. Who pays the stamp duty? As Richard says. In Qld and NSW the state governments regard the property as having been disposed of at exchange of contracts.  In Vic, the government doesn't require stamp duty to be paid until completion (settlement).  This makes Instalment Contracts (IC) in Victoria quite attractive, in that the new buyers don't have to pay stamp duty until completion, i.e. when they pay out the IC.

3. Do you charge LMI (and what is the banks view of this arrangement). Or is this more or less something the banks do not want / need to know? As Richard says.

4. Are the deposits received above and beyond the purchase price? i.e. clear profit? As Richard says.

5. This may tie in with the question above, the end profit, is this price negotiated on the present days value or is it taken on the value of the real estate on completion of the contract?  An IC is simply a standard Contract of Sale with an Instalment Payment Schedule added.  It therefore follows that the price you are selling the property for, to the new buyers, is established at exchange of the IC.

6. I noted somewhere you increase interest rates throughout this period of the contract, has this been established up front and is it in your best interest to keep these projects turning over? i.e. increase rates to a high level?  See the answer to question1.  This increase in interest rates is laid out in the "Schedule of Items" in the Instalment Payment Schedule, within the contract.  We also insist that all our new buyers get independent legal advice prior to authorising the contract. 

7. How is the FHOG achieved when the vendor is on the title and pays the stamp duty? Is this akin to building a granny flat out the back of Mum and Dad's home and applying for the FHOG?  As Richard says.  Upon exchange of contracts, state governments regard a sale as having taken place.  Therefore they pay the FHOG. 

8. Can this deal be done if you have 100% borrowed money? Similar to Q3 above? But is it profitable at a high LVR?  As Richard says.  The higher the LVR the higher the cash on cash return.

Cheers,  Paul