Forum Replies Created
- Originally posted by nathan210:
hi everyone, just a querie about leaving money in a purchase deal:
1)If i was to purchase an IP by asking the vendor to leave in 20% of the price, meaning i would only be borrowing 80% from the bank to satisfy their guidelines, then asking the vendor to allow me to “borrow” 20% from them with a fixed interest rate over say 5 years, but to be paid as a lump sum at the end of the 5 year term, then would the banks allow this & would i have to notify them of the situation?
I bought my first house borrowing only the 80% and the bank was satisfied with my application. Having said that, I don’t remember what questions were asked, if any, about where the rest of the funds were comming from. Presumably I made stuff up. It was many years ago.
Rakky ;P
Ok, I started this thread with the idea that I had read about doing a lease option with a vendor and then onselling with my own LO.I have this afternoon put down on paper a scenario and so I will put it to you learned bunch. It is probably very simplistic and I am sure you will have suggestions and facts pertaining to it, but do me a favour and read it all thru and try to comment thoughtfuly as I am really trying to understand this.
You locate a property owner who will LO to you on the following terms –
The LO allows for another party to be assigned your option. (which will be your client in the end)
The agreed valuation at the time the LO commences is 160,000.
The agreed option price is 185,000
The rent they currently achieve is 160pw, you offer them 190pw. Of that extra $30pw, $15pw of it will be put against any future sale of the property.
You pay to them a call option of 2,000. This will also be credited against any future sale.
The date the call must be made by is 3 years.You locate a person who would like to take on an LO (for all the reasons bla bla). The terms are –
Their weekly rent will be 220pw.
$15 credited towards future purchase.
The agreed option purchase price is 200,000.
They pay you a call option of 2,000.
This will also go towards purchase.
The date the call must be made by is 3 years.At the end of the 3 years, your client excersizes thier option and it looks like this for you –
OUT
Call option fee to 1st vendor 2,000
Rent 28,000
deposit for purchase 1,000
purchase price 185,000bal 225,133
less rent credits
& call option fee 4,340bal 220793
IN
Call option from client 2,000
Rent 34,320
Purchase price 200,000bal 236,320
less rent credits
& call option fee 4,340bal 231,980
Bottom line 20,320 net profit
As I understand this scenario this afternoon, if the client decides not to excersize their option or finds themselves unable to do so, there is very little in it left.
As another note to this kind of activity, would it attract some kind of GST?
Thankyou.
Rakky ;P
I have been considering this same concept of a balloon payment for those very reasons, increasing the affordability. I am not sure what is required legally, but it sounds like a good option in the right circumstance.
How would you, however, determine when this balloon payment should be made? There is no guarentee that your client could refinance at a certain time in the near future <5 years say, or that they would choose to. They would have to be compelled to do so, by yourself.
I am not sure, but again, in the right situation..
Rakky ;P
Probably the best thing you can know right now is ‘why’. It has taken me more years than I would have liked of piddling around with IP’s to come to that question realisticly.
I have 2 IP’s and neither of them were purchased because I knew ‘why’. As a result, one of them is a burden I am readying to unload, thankfully with a reasonable return and the other I have just realised recently has been an exercise in treading water for the last 2 years which I am also readying to unload with thankfully no harm done. Infact, the two of them have been a learning curve. What do they say — u need to make mistakes so you can learn the lessons.
It has not hurt me, this time and in any case I’ll live. However, understanding ‘why’ will mean the difference between a strategy and just a good reason.
My ‘why’ is that untill recently I have been preparing myself to work in a retail job that bores me stupid for the rest of my life. I am now preparing myself for the alternative.
I think I might be blabbing on a bit, but I hope something of what I mean comes thru.
Rakky ;P
We holidayed in Lakes over Xmas and made some minor inquiries into investing in a holiday home down there. I can’t remember exactly now, but someone quoted us that holiday rental are only let out for an average 11 weeks each year.
Apparently the place is a ghost town anytime other than peak summer.
However, if you can buy and hold, clifftop houses with uninterupted seaviews 180 degrees (and nice homes at that) are around 400,000 and renting for around 1200pw to holidayers in peak.
A fair shortfall, however, I can’t help thinking that as the area is apparently where a number of people are moving to in retirement, and as the years go buy, that those cliff top homes will convert their million dollar views into $$$$
Rakky ;P
I know the kind of deal you would like to put together because I am trying to do it for my GF who is also a single mum, struggling, partner far away.
She currently rents from me and I have recently been looking at the numbers to try to find a deal where she could buy from me – as I would like to sell later this year anyway and am concerned for her.
However, even though the house will sell anyway, there is just no way she can afford it. I am now looking for a more affordable property and perhaps that is what you could look at too.
The deal that you are trying to work would be great for her but are you in property as a benevolent fund? No, none of us are, even though there are times like this when we care greatly.
I am finding this situation with my friend as a great push to be creative and excellent brain food, maybe you will too?
Keep working on it and you’ll know what to do.
Rakky ;P
LMAO![laugh4]
Rakky ;P
Have you had a look at the dept of infrastructure site? Follow the link and click ‘know your area’
http://www.doi.vic.gov.au/doi/internet/research.nsf
Rakky ;P
Yes, I tried to get one over on my son telling him that maccas now gives away free food.
Son – 1
Mum – 0
lol
Rakky ;P
have you had calls about the house that you have not been able to follow up and therefore missed the opportunities?
Rakky ;P
Originally posted by elves:Anyway, There was a tshirt put out some time ago, I think by someone who was unemployed and just went out there and made it. This one said, “know your limits and break them”
There is also a saying that go’s “Name your limitations and they’re yours”
Rakky ;P
From readin Rick Otton’s ‘we buy houses’ site, I gather he is trying to get hold of sellers who need to sell NOW to trade off price with fast timing?
So it is essentially what i have heard as a “spotter”?
How much does a spotter generally charge? Is it a %thing?
A deposit of 20% and a lend of only 80% means you avoid mortgage insurance which is very costly – thousands of dollars infact.
Ok, so do you have an idea how anyone can buy discounted real estate that involves more than just trying to negotiate?
what does bird dogging mean?
To achieve a lower price.
ok, I know it is a silly question but also the only question at the end of the day – for me.
It’s like when I play chess, I can back my opponent into a corner but can’t figure out what to do with him!
I myself would have chosen 18. lol
But would you say that it is totally possible to manage without a kit or an agent?
