All Topics / Help Needed! / Rent to Own
Hi,
I currently have a PPOR which I purchased back in September 2012 from my parents who moved overseas.
I am looking at getting engaged and purchasing a larger PPOR with my partner sometime in late 2013.
The plan was originally to renovate it and sell it sometime before I purchase the new PPOR and for my brother (who lives with me) to rent somewhere. However, I have been talking with my brother who is interested in purchasing the property using a 'rent to own' agreement. He does not have (or have a very little deposit) and his credit rating is not the best so I would rule out him buying it through the conventional means. I do not mind going through with this arrangement if it will help him out in the long term and get him started to property ownership. I have been browsing on this and other forums and have found a little information on this but nothing substantial.
My brother is keen on setting this up in March so I will be seeing a solicitor a little before that time. Would this be done through a solicitor or a broker? In the meantime, I have a few questions and wanted to see if anyone have a little bit of info into rent to buy options.
* Will the property still be mine (well the banks) and will I be able treat it as an IP for tax deductibility purposes? Property has offset account and has never redrawn so I don't think there should be any issues. It is also not crossed with any other properties.
* If it is a rent to own arrangement, I figure I still need him to sign a rental agreement and get a bond? I think I will go through a real estate agent for this as it is more legitimate and I don't have to worry about chasing a family member for rent (less emotions involved). I will obviously lose some $$ on agent fees but think this is the correct thing to do.
* I obviously do not intend to make a profit from this but would not want to be short changed from this exercise either. I have a 15% deposit in the property and will be taking the money out of the offset. What methods are commonly used to ensure that I have the 15% deposit back (he does not have the $ to pay me upfront) eventually. I also want him to buy it off me in 5 years time through a conventional loan for the same $ I purchased it for last year. He has a decent income but just not a good saver and have a default.
Any experiences with this would be appreciated. Also, I am not sure if my solicitor is familiar with rent to own agreements so if anyone have any suggestions, I would also appreciate them via PM.
Thanks
Hi eclz4
All you mentioned in your post is possible. Just FYI, if it were me I definitely wouldn't do it. It's been our golden rule since we got into vendor finance in 2003 that we don't deal with family and we have had a lot of requests. It's saved our butts in a couple of cases too.
Obviously it's your decision and if you let me know what State you're in, I can recommend a vendor finance savvy solicitor.
Cheers, Paul
PS. If you do decide to go ahead at least check his credit report and if his defaults are showing as unpaid, I would run away even faster
Paul Dobson | Vendor Finance Institute
http://www.vendorfinanceinstitute.com.au
Email Me | Phone MeAn alternative way to finance your home.
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