All Topics / Creative Investing / Onselling
Hi ,
I am just wondering if someone could give me some advice on onselling a property ,
eg Can I purchase a property for say 400k with a 4 month settlement , and onsell it
at the end of those four months , I mean can I sign some sort of contract saying that either
I will purchase it at the end of those 4 months or onsell it to someone , therefore guranteeing
the vendor they will get their money , and if I did onsell it , would I have to pay stamp duty???
Also was wondering if anyone knew where I could get further info on this topic , any advice
would be much apprecited , thanksIf you settle, you pay stamp duty. If you sell after settlement you pay cgt.
Many states no longer allow you to put 'nominee' as the purchaser.
Look into 'put and call' options.
Yes you can do it, in theory, but you will be assess on stamp duty as will the new owner. You may be able to minimise stamp duty by using options
Terryw | Structuring Lawyers Pty Ltd / Loan Structuring Pty Ltd
http://www.Structuring.com.au
Email MeLawyer, Mortgage Broker and Tax Advisor (Sydney based but advising Aust wide) http://www.Structuring.com.au
could you please explain what a put or call option is and how it works ?? thanks
An option is an agreement which give you the right, but not the obligation to purchase a property.
With the purchase you sign a call option agreement. The agreement will state that the owner must sell to you if you wish to buy at a later date. If you don't then you do not need to proceed. There is an option fee, and time limit etc.
The seller may not be too happy with this as there is a chance you will not buy the place. So to keep them happy you can enter into a put option agreement which is virtually the opposite. This agreement will bind you to purchasing the property.
The two options combined will lock you in and the seller in.
I beleive stamp duty is only payable on the option premium which may be as low as you can negoitate.
Terryw | Structuring Lawyers Pty Ltd / Loan Structuring Pty Ltd
http://www.Structuring.com.au
Email MeLawyer, Mortgage Broker and Tax Advisor (Sydney based but advising Aust wide) http://www.Structuring.com.au
ok Terry so does that mean for example if I find a property I wish to buy for ex $400k , I enter into a put option agreement for say $3000 with a 4 month settlement , then I find someone who wants to buy the property for say 430k , does this mean I pay stamp duty on the $3000 , and onsell it to the third party who will then pay stamp duty on 430k , and obviously if I cant sell it I have to purchase it paying full stamp duty on the 400k , is this correct Terry??
Yep, that is about it. You make sure the option is assignable and your assign the option to the new purchaser so you don't have to settle – unless you can't find someone. In NSW I beleive the stamp duty is only on the option amount, $3000 in your eg. Not sure of the other states, but think it may be different in QLD.
Terryw | Structuring Lawyers Pty Ltd / Loan Structuring Pty Ltd
http://www.Structuring.com.au
Email MeLawyer, Mortgage Broker and Tax Advisor (Sydney based but advising Aust wide) http://www.Structuring.com.au
What happens in regard to fees on the loan in the event that you buy the propoerty for $400K and then sell it in say, 3-6 months? Do you have to pay extra fees for paying out the loan in the first 4 years?
Depends. If you use the option method then you are selling before settlement and you won't need a loan. If you need to settle you will need a loan and there will be entry fees and exit fees which vary from lender and between products.
Terryw | Structuring Lawyers Pty Ltd / Loan Structuring Pty Ltd
http://www.Structuring.com.au
Email MeLawyer, Mortgage Broker and Tax Advisor (Sydney based but advising Aust wide) http://www.Structuring.com.au
Terry has hit it on the head.
In Qld there is no Duty charged on the option contract and a method we have used on dozens of properties.
In saying all of this half the battle is finding a Vendor that will accept a Put & Call option over a standard purchase contract.
Richard Taylor | Australia's leading private lender
ok thanks for that guys , Richard wouldnt it be easy to get soemone to agree to this , considering they get an extra 3k , and they are guaranteed they will sell there property anyway??
Not many would understand options. It would also cost them more in terms of time, investigation and legal costs.
Terryw | Structuring Lawyers Pty Ltd / Loan Structuring Pty Ltd
http://www.Structuring.com.au
Email MeLawyer, Mortgage Broker and Tax Advisor (Sydney based but advising Aust wide) http://www.Structuring.com.au
Does anyone know the rules for options in Victoria and a good solicitor I could discuss it with?
It sounds ideal for my current deal which I plan to onsell and won’t be titled for another 18 months.
You could find the stamp duty requirements in the Duties Act, or Stamp Duties Act in Vic. Look on the State revenue office site and you should find something too, but it is probably similar to other states.
I have used options down there and used McDonald & Associates.
Terryw | Structuring Lawyers Pty Ltd / Loan Structuring Pty Ltd
http://www.Structuring.com.au
Email MeLawyer, Mortgage Broker and Tax Advisor (Sydney based but advising Aust wide) http://www.Structuring.com.au
Great thanks Terry, helpful as always.
Terryw wrote:You could find the stamp duty requirements in the Duties Act, or Stamp Duties Act in Vic. Look on the State revenue office site and you should find something too, but it is probably similar to other states.I have used options down there and used McDonald & Associates.
Thanks for the heads up on McDonald & Associates Terry. I googled them and came up with McDonald partners, is it the same solicitor/lawyer? Thanks.
this looks like them. they have had a change of name http://www.mdplaw.com.au/
Terryw | Structuring Lawyers Pty Ltd / Loan Structuring Pty Ltd
http://www.Structuring.com.au
Email MeLawyer, Mortgage Broker and Tax Advisor (Sydney based but advising Aust wide) http://www.Structuring.com.au
Can you merge the 'Options' deal into a Reno of the place your looking to buy, or does the property have to stay in the same condition while the Option is in place ??
Eg:
Both parties agree to sale price with a Put and Call Option written into the contract, buyer also requests early access to the property to complete some basic reno's. Reno's get completed before the property gets put back on the market, all done before the Option needs to be actioned.So if you purchase right, spend wisely on adding more perceived value than actual value, and sell within the Option timeframe, this sounds like a useful way to make quick captical gains…
…what am I missing here, what are the pitfalls of this strategy ??
You could do that if you can find a seller willing. But remember if you cannot settle for any reason you have just renovated someone else's property.
Terryw | Structuring Lawyers Pty Ltd / Loan Structuring Pty Ltd
http://www.Structuring.com.au
Email MeLawyer, Mortgage Broker and Tax Advisor (Sydney based but advising Aust wide) http://www.Structuring.com.au
True…
I suppose to mitigate this risk, I'd make sure it was an Option that guaranteed I'd buy at the end of the period identified in the contract…
I'd see the need to buy happen if there were delays in the reno, or if the sale doesn't come through as quick as intented (both highly possible given the potentially short timeframes of the option)…
There's a property I looked at over the weekend that fits this bill nicely…Is there any content online that explains Put & Hold options in more detail or is this something that you need to engage a lawyer for ??
Cheers,
Darren
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