Forum Replies Created
Hi JBC,
If it helps I posted a contract length calculator here.
It relies on some broad and slightly outdated assumptions but it will show how critical growth is to contract length and to your margin. The ebook on that page has a whole chapter on contract length that deals with the optimistic assumptions your buyer will be making in relation to LMI, LVR, whether to ask for a carry back in advance, location restrictions, renovations, and the often promised and never delivered lump sum payments that your buyer might be expecting to make during their contract period.
<moderator – delete advertising>
Cheers,
Phil
mattsta wrote:hey all – just to get back on the topic of using VF to buy an investment property…So, what if I find sellers (not vendor financiers/VF businesses) and I calculate that I my instalment contract payments are LESS or EQUAL TO the potential rental income that I could accumulate by renting out the property to someone else. As a purchaser, could I offer an instalment contract to a seller, and then rent out the place to someone else (and then make a profit on the difference)?
Would I need a special clause in the instalment contract which stipulated that I am allowed to rent out the place to tenant? Or is it implied that I can do this since I will have possessionary/equitable title?
Hi Mattsta,
Typically your vendor finance contract will let you rent it out with consent from the vendor, but your insurance company probably won't let you.
Even the Alliance wrap specific policies do not cover the vendor terms buyer being a landlord and last time I asked they wanted the vendor to be the only landlord and to use a regular landlord policy. A second insurer (a couple of years ago) also insisted that the landlord tenant relationship only exist between the vendor and the purchaser's tenant, which in either case would probably mean a contract rewrite.
That insurer would also only do it on a case by case basis so potentially an expensive new contract might be only good for one deal.
A more practical solution might be a joint venture or assumptive joint venture where you control the property rather than buy it on an instalment contract, then rent it out yourself. I haven't explored the insurance implications of this, so in my answer is a question to one of the joint venture guys here – Who is the landlord under an AJV and has anyone had a successful claim?
Cheers,
Phil
Thanks for the feedback guys. I’ll do whatever comes along first.
Hi Darren Bear, Here's an alternative – I'll do it with 18 shareholders if you want with a simple non-JV structure and exit strategy. 55k each, 20 houses in Melbourne by May and you won't have to sign for the loans or do any work. Wrap the lot, keep any take-backs for rentals and put the +CF back into the loans.
