CF+ property with little money down

[tep846]

Hi guys,

I went to this seminar, where the speaker bought cash flow property with 80% loan + 20% vendor finance, which sounds very attractive especially for people who don't have much deposit and low income.

Anyone done that?

In terms of mortgage, will lenders give loan on regional property with yields 10%+? Can low income earners, or maybe unemployed get the loan (as the rent will cover the repayment)? Does buying property with high yields increase borrowing capacity?

 

[Mick C]

Not all bank will lend against a vendor financed deal...so sounds all good, easy and fairy when you go to these talk but there's a bit more too it than
20% from vendor and 80% from the bank and 0% from you.

 

[Terry_w]

Hi guys,

I went to this seminar, where the speaker bought cash flow property with 80% loan + 20% vendor finance, which sounds very attractive especially for people who don't have much deposit and low income.

Anyone done that?

In terms of mortgage, will lenders give loan on regional property with yields 10%+? Can low income earners, or maybe unemployed get the loan (as the rent will cover the repayment)? Does buying property with high yields increase borrowing capacity?

Sounds good in theory

Hope you didn't pay for the seminar

 

[D.T.]

Hi guys,

I went to this seminar, where the speaker bought cash flow property with 80% loan + 20% vendor finance, which sounds very attractive especially for people who don't have much deposit and low income.

Did the vendor put an encumbrance on the property? How did he get the bank to allow this? Otherwise, whats forcing you to pay the 20% back, ever?

In terms of mortgage, will lenders give loan on regional property with yields 10%+? Can low income earners, or maybe unemployed get the loan (as the rent will cover the repayment)? Does buying property with high yields increase borrowing capacity?

In their serviceability calcs, most of them limit yields to a certain percentage , say 7. And then, only use 80% of the rent towards your borrowing capacity.

Low income earners / unemployed wouldn't be able to get a loan, how would they prove they could repay it?

A deal I'm doing at the moment, is where I got a discount on the property, bought it with 80% loan, then will top it up to 90% afterwards, thereby extracting out equity equal to that that was put in in the first place. I'll do a write up this once it's done.

 

[A Jeremy]

seminar = sales pitch

 

[knightm]

Hi guys,

I went to this seminar, where the speaker bought cash flow property with 80% loan + 20% vendor finance, which sounds very attractive especially for people who don't have much deposit and low income.

Anyone done that?

In terms of mortgage, will lenders give loan on regional property with yields 10%+? Can low income earners, or maybe unemployed get the loan (as the rent will cover the repayment)? Does buying property with high yields increase borrowing capacity?

Is it possible? Probably.
Is it easy? No
Cash flow? Most likely for the seminar promoter he is making much more in seminar fees than ever did doing these kinds of deals.

Using up all your bargaining chips during negotiation on getting vendor finance means NOT getting a great price, or other terms you need, or getting access to the best deals as most vendors will walk away. It might work in a dead market where desperate vendors will take anything to offload I guess. The bank loan is the other issue as has been mentioned. It smells like subprime, and our lenders aren't to keen on, which is why our country stayed afloat in the GFC.

If you really want to use a creative strategy like this, go for it, your determination will not be stopped by anyone here saying its tough. My advice is get a job, maybe 2, start saving, get a 90-95% lend for your first property, choose an affordable area, do your research. Its not impossible to get started on low income. Many here did it. Check out this thread.

 

[tep846]

Sounds good in theory

Hope you didn't pay for the seminar

It was a free one. I like getting the idea from those people and finding the reality from somersoft before I action on it.

Did the vendor put an encumbrance on the property? How did he get the bank to allow this? Otherwise, whats forcing you to pay the 20% back, ever?

Firstly she asked to negotiate the price down to 80% of the asking price. Vendor agreed because he was desperate to sell. Once he agreed, she then offerred the full asking price, with the condition the 20% will be paid back on installment. The contract was made as she has paid the 20% as the deposit. The vendor agreed to get 80% of the asking price anyway so the 20% repayment was a bonus for the vendor.

In their serviceability calcs, most of them limit yields to a certain percentage , say 7. And then, only use 80% of the rent towards your borrowing capacity.

Low income earners / unemployed wouldn't be able to get a loan, how would they prove they could repay it?

80% of 7% is 5.6%....still above the interest rate. What's the interest rate they use on the servicability calculator?

A deal I'm doing at the moment, is where I got a discount on the property, bought it with 80% loan, then will top it up to 90% afterwards, thereby extracting out equity equal to that that was put in in the first place. I'll do a write up this once it's done.

Can't you get 80% loan of the market price from the start? I was thinking if I can't do the above method, I might find a discounted property too and get 80% loan of the market value so that I don't need to pay much deposit. Can it be done?

 

[Scott No Mates]

Did the spruiker offer you a rental guarantee as well?

 

[Rolf Latham]

finance wise, its doable if you have good income , with a at least one lender of the 100s that are out there.............

ta
rolf

 

[Macca]

It was a free one. I like getting the idea from those people and finding the reality from somersoft before I action on it.



Firstly she asked to negotiate the price down to 80% of the asking price. Vendor agreed because he was desperate to sell. Once he agreed, she then offerred the full asking price, with the condition the 20% will be paid back on installment. The contract was made as she has paid the 20% as the deposit. The vendor agreed to get 80% of the asking price anyway so the 20% repayment was a bonus for the vendor.




80% of 7% is 5.6%....still above the interest rate. What's the interest rate they use on the servicability calculator?




Can't you get 80% loan of the market price from the start? I was thinking if I can't do the above method, I might find a discounted property too and get 80% loan of the market value so that I don't need to pay much deposit. Can it be done?

So if the house was listed for $300k, you negotiate down to pay $240k, you then agree to pay a total of $300k for a house you have just proved is worth $240k.

No thanks

 

[Scott No Mates]

If you negotiate a deal down by 25% work out a second mortgage rather than vf.

 

[D.T.]

If you negotiate a deal down by 25% work out a second mortgage rather than vf.

Or just buy it the normal way and do equity top up afterwards?

 

[Scott No Mates]

Responding to the OP, DT - I'd be using other means too (But I'm not a bottom feeder, not my market).

 

[The Y-man]

Tep,

How much margin will there be between the interest payments and NET rental income (net of maintenance, rates, etc etc)

How much vacancy can you hold through?

The Y-man

 

[The Y-man]

The contract was made as she has paid the 20% as the deposit. The vendor agreed to get 80% of the asking price anyway so the 20% repayment was a bonus for the vendor.

What happens if you don't pay? The poor sucker ends up with a contract receipt for money he didn't get but might have to pay CGT on the full amount!!

The Y-man