Hi All,
I have recently come accross a scenario Involving property options and would like some feedback as to the idea.
What has been proposed is that I've been able to obtain a property under option where the seller is wanting $290k for the property. This particular property is worth $350k.
Here is the idea:
I am wondering whether I can advertise the property as "No funds for Stamp duty or Deposit needed"
What I am proposing to do is sell the property to a buyer for $350k, What they would need to do is obtain bank finance for $315k (90% of sale price) which would take care of the seller's price aswell as the stamp duty.
I was then thinking of taking out a second mortgage on the title and having the buyer pay me back the extra amount (or the deposit) of 35k in weekly instalments over 5yrs (roughly $135 per week)
Can anyone please tell me what flaws they can find this scenario, as it looks like a win-win in all. the seller gets their price, the buyer gets a property with no money down and I get a cashflow of $135 per week for the next 5 yrs.
There are a couple of things I am stumped on straight away:
– Can I use the sale price of $350k to calculate stamp duty?
– Can the buyer use the amount of $350k to borrow against?
– What costs would I incur as the option holder?
– Is this possible under otpion??I am meeting with my accountant and property lawyer in the next coming weeks and will update accordingly, If anyone else has any feedback or critisism please post a reply.
Look forward to the replies!!
– Lokki
bump
Couple of answers
There are a couple of things I am stumped on straight away:
– Can I use the sale price of $350k to calculate stamp duty?
No your buyer will be signing a purchse contract for $290K with the balance payable to you for the Option contract unless you actually settle on the property and then onsell it to him.– Can the buyer use the amount of $350k to borrow against?
If you have a Contract with your Buyer (based on the fact you have settled on the property) for $350K and the lender values the property at this price then Yes in theory. In practise the valuer will be aware of the lower valuation figure and the lender will lender against purchase price or valuation whichever is the lower.
– What costs would I incur as the option holder? All depends on what you negotiate with the original seller and whether you settle or now.
– Is this possible under otpion?? Anything is possible as long as the original seller agrees to sign a Put & Call Option contract. His Solicitor may advise him to the Contrary.Richard Taylor | Australia's leading private lender
Thanks for the input Richard,
In response to the first question:
Am I able to use the purchase price of $350k on the contract of sale, with a condition that $290k is paid to the seller and the remainder paid to myself??I have spoken to a property lawyer and he is checking out the legalities of that now. If I am able to, that means that I should be able to calculate the stamp duty etc on $350k and the scenario should work, as well as only having one duties charge.
Does anyone know how options work in regards to duties?? As the lawyer I contacted said that double duties would be paid in a normal "buy under option and sell for a profit" scenario…
I've read some interesting material from Mark Rolton and Sean Summerville regarding this, and it would seem to me that they escape this double duties cost…
Any info would be great.
Thanks again!
Lokki
I have done or two Call option contracts to say the least and the only way to use the figure of $350K on the purchase contract is either to:
1) Settle yourself on the deal where Stamp Duty will definately be payable.
2) Nominate your buyer as the purchaser and then rely on him to pay your Option fee. Of course when he realises that you are only paying $290K he may well buck at the idea of paying you the difference.Also in that scenario you would need to disclose to his financier that there were 2 contracts and they would only lend against the $290K. How would your buyer demonstrate his deposit to the Bank ? Funds to complete and in most cases evidence of savings are now required by all lenders.
Richard Taylor | Australia's leading private lender
Hi Richard,
Noted on the contracts, I'm gonna have a deeper look into it and post some more info.
Do you know how double duty works at all in just a regular options deal??
Also, the bank is fine with the finance as long as it can account for the full purchase, I actually work for CBA, so as long as there is proof that the deposit can be accounted for, then it is fine.
Thank you for your feedback, I appreciate the critique. of anyone else has any more info or material regarding property options please let me know. would love some books etc on these.
– Lokki
Guys,
From my Knowledge Double Duties are payable but not by you,,Double duties as in You pay duties for Onselling and the buyer you sell to pays Duties Obviously,,I have advice that this is correct in Most states I have dealt…..
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