Deposit Builder - a new vendor finance strategy

[PropertyFreedom]

Thanks Paul,

I can appreciate that they are immediately entering into a contract rather then just a 'lease' but I have always made sure I have carefully chosen the applicant that I believe will finance out. That has a buyers' mentality rather then the 'victim tenant' mentality.
I guess they can use any gov grant applicable immediately in this case as well.

Is there any other reason other then it is a more secure 'sale'?

Cheers

 

[Lofty]

Sorry I wasn't clear. Like you, I make my decision based on the buyers' best interests, not on whether it's a more secure sale or not.

There are pluses and minuses for both techniques. As you mentioned, the Deposit Builder may give you access to any government grants that are around but, in every State except Vic, Stamp Duty is payable soon after 'exchange'. Not so with Lease/Options (except in Vic).

Cheers, Paul

 

[marks]

In regards to Qld
I remember a thread (but not sure this forum) is you don't won't to give occupancy under the RTA act. It then exposes you to those provision in the act that could be "tenant friendly".
Ie. Repairs & maintenance. They could get you to fix issues with the house.
Notice periods & process if you need to evict them.
Hardship provisions where they could delay paying rent, alter payment plans or break the lease altogether.

Rob Balanda talks about this and using a "license to occupy" instead. See point #8.
http://www.clausesmadesimple.com/v3/index.php/sample-clauses

 

[marks]

Quick question on this.

Why would you present this rather than a mortgage carry back arrangement.
ie. Vendor takes a delayed deposit or installment deposit over x years, and places a 2nd mortgage on the property until cleared.

What situation would make one better than the other?
The one I can see if the buyer has two loans to service in the beginning.

Cheers.

 

[Lofty]

In Qld a Licence To Occupy can only be used for a maximum of 28 days. If you want to give possession for a longer period, as a result of a delayed settlement, a residential tenancy must be used.

You may chose to use this technique if you have strong buyers and don't want to give the the option not to complete, e.g. a Lease/Option gives the buyer the option not to exercise. Also short term Instalment Contracts tend to run into trouble with ASIC regarding 'balloon payments' at the end of the 'short' term.

In the end it's just another vendor finance tool and it's up to you to pick the most appropriate tool for the property/buyer situation you're presented with.

Cheers, Paul