I’m currently reading a book by Mark Bouris (Wizard Home Loan Fame) titled Wealth Wizard. On page 70 he goes on to describe the Lender’s deposit thresholds and requirements on borrowed funds for property. All seemed pretty usual until I read the end of the second paragraph. I quote;
“”There are organizations prepared to leverage you into an investment property with 5% or even 0% equity, but these lenders are usually offering vendor finance (the seller is also the lender) and their terms and costs can be very high and filled with loopholes and traps. Fortunately, legislation is weeding out many of these lenders.””
But he goes on even further in the next paragraph, which to me is just so hypocritical. Let me quote once more;
“”Using a personal loan as a deposit, as I did for my first house, isn’t possible today – but as Meriton were providing vendor finance, they weren’t concerned””.
Anyone read the book??Eric,
I haven’t read the book, BUT I do question the independence of the advice given.
I mean, what else is someone who profits from selling finance going to say about potential competition?
Finally, I sleep at night without moral issues with wrapping because I always seek to create win-win outcomes.
Bye,
Steve McKnight
Steve McKnight | PropertyInvesting.com Pty Ltd | CEO
https://www.propertyinvesting.comSuccess comes from doing things differently
I might be misunderstanding the question but in canada we use vendor financing alot.It’s a great way to get into investment property if you don’t have alot of capital on hand . keeping in mind that the property must still remain cash flow positive even after all the vendor terms are met.The tenant is the one whom is paying down the loan.
hope i’m not off track
canadian daveHey there Canadian Dave,
Would you mind explaining how you use vendor financing in the way you talked about here. It would be great to here how you people over there are doing things ?
Enjoy
AD[:0)]Hi:Andrew
In canada the banks like to see min. 15% down on rental property I like to put down 25% because it saves me alot of money on extra fees and increases my cash flow.The example is based on 100,000 dollar house for sale.
price–100,000
1st mortgage — 75,000 payment at 4.5% over 25 years = 95.40 weekly
you have convinced the vendor to carry the 2nd mortgage of 27,000 at 12%yearly, interest only payments for two years at which time the 27,000 becomes due.So 27,000×12%=3240/52=62.30 weekly payment.now you have other costs to factor in.insurance 400.00 yearly = 7.69 weekly
land taxes 1000.00 yearly = 19.23 weekly . maintainance cost 5% of yearly rent 12000×5%=600/52=11.54 weekly and vacancy rate 5% of yearly rent 12000×5%=600/52=11.54.So it should look like this.
price=100,000 cost
75,000=95.40 1st mortgage 4.5% 25 years
27,000=62.30 2nd mortgage 12% yearly interest only payments
400.00= 7.69 insurance
1000 =19.23 land taxes
600.00=11.53 5% maintainance
600.00=11.53 5% vacancy rate
207.68 weekly total
How will you pay the 27,000 cash to the vendor after the two year term comes do, by taking the equity from the home or ask for another two year term he will be glad to at 12% interest. The banks won’t give him that on his money and if you follow the market you know anybody would jump at 12% right now.You just bought a house with no money down.I rent my houses for 1000.00 a month and the tenant pays the utilities or 230.77 weekly so that would make me cash flow positive by 23.09 a week .sorry for being so long winded my next answer will be shorter.P.S. The extra 2000 dollars from the vendor was to cover closing costs.
canadian dave signing off.
Edited by – [email protected] on 10/06/2002 05:30:54 AM
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