Hi All,
Here’s my dilema.
The facts:
-The asking price is $119K, to which we’re going to offer $90-100K.
-The vendors are building a new home, to be completed in 10months and want to continue living in property till then.The options:
– Long settlement (10mths) @ a lower price (asking price minus the rent they’d pay over that 10mths)
– Short settlement @ asking price but with vendor renting for the next 10mths @140pw.Regardless we are not going over $100K but I am still not quite sure which option to go with.
Do we take advantage of the long settlement, hoping that capital growth might occur over that time, or do we take a short settlement with a guaranteed tenant for 10mths?Any thoughts would be greatly appreciated.
Thanks.
Lizzie
Hi Lizzie
Sounds like you’re leaning towards a win/lose situation here?????
Could I suggest talking with the vendor a little more to find out if there is anything more that you can do to help them???
Whoever buys the place is obviously doing the vendor a favour because they then have the capital they need to build their house so an early settlement may be favourable to the vendor.
How about enquiring with the vendor to see how much they owe on the property and if they would be willing to leave some money in the deal initially, say 20% of purchase price in return for a period of free rent.
Maybe if the vendor is prepared to accept a low offer you could give them six months rent free in the house and then revert to market rents after that.
There are lots of ways you can shape this deal so that it’s win/win for both of you.
Good luck.
Take care
Dave [
]I agree…
It seems you are relatively happy with either outcome, so why not offer the vendor a multi-choice offer and then let them decided what’s best for them.
Stuart of http://www.guerrillarealestate.com.au is a master of this…
Pete
…Beware of the dreamtakers…
Hi Lizzie – There are some tax issues too, dont forget.
Under option 1 (lower purchase price due to the rent) you will have a larger capital gain should you later decide to sell the property. This is because the initial purchase price (the cost base) is lower – unless you are somehow able to carefully word the contract to specify the reduction is due to rent.
However, on the income side of the equation – the current owners will not be paying you rent (as its been factored into the purchase price) so this will save you income tax, BUT you also may not be able to claim a deduction for depreciation if there is any.
I would say option 2 (short settlement, with the vendors renting from you) is best. But talk to them again as well – as if it is the best option for them to build too then you have clearly come up with the win/win solution.
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