Hi Paul,
You're a wealth of information- thanks so much. I agree that it's an ask to get both a deposit and high rent because effectively they should have a share of the purchase.Thanks also for the heads up about the sub-leasing.
Rusty
Hi Rusty
Yes, the main challenge with your plan is the $110K deposit. It would be unusual to get it but I'd still go to the Agent an let him or her know that you'll go with the idea if the buyers can come up with $110K. You can work out the rest if they can get past this basic requirement.
Cheers, Paul
Paul Dobson | Vendor Finance Institute
http://www.vendorfinanceinstitute.com.au
Email Me | Phone MeAn alternative way to finance your home.
Sure, thanks,
If they did put down a deposit (say 20% for argument sake) does that mean that they would have a 20% ownership? Is so how is stamp duty managed?Hi Rusty
As we are talking about a Lease/Option here, there is no ownership transfer of any kind until the tenant buyers "exercise" the Option and buy the property. Therefore Stamp Duty is not payable until after the "exercise" of the Option, when the actual sale takes place.
Cheers, Paul
Paul Dobson | Vendor Finance Institute
http://www.vendorfinanceinstitute.com.au
Email Me | Phone MeAn alternative way to finance your home.
Righto, so when an option fee is paid, how much is realistic? I'm surprised the buyer has no legal stake in the property after paying the option fee (which I had been calling a deposit). Given the large amount of money I'm talking, I'm sure the buyer would want some security in knowing the money is purchasing something.
Would it be possible for the buyer to pay a deposit and have a very long settlement (3-5 years) or would this not be legal? Also if a deposit is paid is there any way the vendor can access it instead of keeping it in trust? Then they could rent the property from us after paying the deposit and pay the balance on settlement down the track.
Alternatively, they could pay the deposit and buy a 20% stake in the property and buy the rest out within 5 years but then our rental income, depreciation etc would have to be spit wouldn't it?
Hi Rusty
Now you're talking about an Instalment Contract (sometimes called a Wrap). All you mention is possible but, before we start structuring your transaction, I'd suggest you do a little study
Have a look at:
https://www.propertyinvesting.com/strategies/wraps
https://www.propertyinvesting.com/str…/lease-options
http://www.negative2positive.com.au/index.php?option=com_content&view=article&id=50&Itemid=75
http://www.vendorfinancelawyer.com.au/
http://www.vendorfinance.asn.au/ The Vendor Finance Association of AustraliaCheers, Paul
Paul Dobson | Vendor Finance Institute
http://www.vendorfinanceinstitute.com.au
Email Me | Phone MeAn alternative way to finance your home.
Hi Paul
It appears you are The Man
when it comes to VF's and L/O's. Im looking to purchase my ppor through vf. Would you mind giving me a few tips on what to look for (regarding terms and conditions) and also what to be weary of and any potential pitfalls. Appreciate any help you can offer.
Hi Vivy
I tend to prefer Instalment Contracts over Rent To Owns (Lease/Options). The government regards an Instalment Contract as a real sale and pay the FHOG to eligible buyers. However the FHOG isn't available for Lease/Options.
Lease/Options also tend to have much shorter terms, Often anywhere from 1 to 3 years. This means you have to be in a position to get a traditional home loan before the Option term expires and when the Option expires you no longer have the right to purchase the property at the price both parties agreed upon.
Ask if the person selling you a property with an Instalment Contact has an Australian Credit Licence (ACL) or a Credit Representative number. An ACL is not required when a Lease/Option is involved.
Ensure you get independent legal advice from a vendor finance savvy solicitor before you authorise the legal paperwork (do not be talked out of this).
Look closely at the term of any Instalment Contract that's offered. Some vendor financiers are offering only 5 year terms with balloon payments at the end of these terms. We offer our Instalment Contracts for 30 years. Sure we increase the interest rate over the first few years, to encourage you to refinance but, in the end, you still have a 30 year term.
If you buy with an Instalment Contract, ask how the resulting loan is managed, i.e. check out that the VF'er has a process in place to ensure your loan is administered in accordance with the National Credit Code.
Cheers, Paul
Paul Dobson | Vendor Finance Institute
http://www.vendorfinanceinstitute.com.au
Email Me | Phone MeAn alternative way to finance your home.
Hi Paul,
I have had a conversation with a girl in Melb who has some negatively geared properties. I have spoken to her about wrapping and have organised a meeting to discuss if I can do a JV with her to onsell these properties on vendors terms to create positive cashflow.
What questions should I be asking in this meeting? What are the most important things for me to know to see how lucrative this deal can be? How are the profits of a JV typically divided? How do you put together this JV arrangement?
What do I do if these properties are already tenanted?Hi Stacey
That's a serious number of questions you've asked there. The answers to which has only taken us 9 years to learn
Around 50% of our core business is doing what your describing in your post. Our website on this process should give you answers to a lot of the questions you've asked. It's at http://www.negative2positive.com.auA few web resources that may help in your search for information are:
https://www.propertyinvesting.com/strategies/wraps
https://www.propertyinvesting.com/str…/lease-options
http://www.jvpropertypartners.com.au…d=50&Itemid=75
http://www.vendorfinancelawyer.com.au/
http://www.vendorfinance.asn.au/ The Vendor Finance Association of AustraliaOnce you have researched and read as much as you can, it's worth considering whether you go it alone or possibly use this first transaction as a learning experience, via a joint venture with an experienced vendor financier.
Cheers, Paul
Paul Dobson | Vendor Finance Institute
http://www.vendorfinanceinstitute.com.au
Email Me | Phone MeAn alternative way to finance your home.
when it comes to VF's and L/O's. 
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