All Topics / Help Needed! / Rent to Own

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  • Profile photo of eclz4eclz4
    Member
    @eclz4
    Join Date: 2012
    Post Count: 4

    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

    Profile photo of Paul DobsonPaul Dobson
    Participant
    @pauldobson
    Join Date: 2003
    Post Count: 1,196

    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 Me

    An alternative way to finance your home.

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