framework for an interesting JV.

G'day all,

may I tap the brains-trust yet again?

i have a few AMAZING opportunities at my feet.

these are genuine "no money down" deals FOR ME.

the deal is this.

i provide my services for a number of large development sites in exchange for one or two units at wholesale (ie land purchase price plus house cost plus holdings minus developer's profit).

no strings, no catches. my fees for some of these sites would be fairly hefty - but the "deposit" for the purchase would be put up by the developer, and then "gifted" back after settlement. (is that dodgy as far as the ATO is concerned??)

or it can be worked that an independant valuation is set up for the finished product, then i pay the "full amount" and have 25% refunded back after settlement. it would be contractural so the bank can see that 25% is coming back.

does this sound feasible? how will the banks look at it? does it sound like something CBA would look at or is it one of those "walk into bendigo and state your case to the manager" type deals?

if anyone's got any other cool ideas i'd like to hear about them as well.
You could do it as a favourable purchase arrangement. Would need an independent valuation and contract to show the "rebate".

The issue you will have is arguing the FMV for the property exceds the contract price. THis is why a "rebate" allows the FMV to be used as the purchase price and funds to come back to you after settlement.

Let your MB arrange it, they should have the contacts to explain the situation.
best of luck with placing a favourable sale in the current sale without a family involvment...............damn hard

Contract stacking is something to be careful of too, this is something that Henry Kaye's crowd did very well until reality caught up with them. AS has been said by loan finder, if you go down this track you do need to disclose that rebate in any case. What the lender does with it is their business

There will be a way for you to capitalise on these opportunities, just stay the right side of the law.

As far as the ATO is concerned...............smells like barter to me ?

I had a lawyer draft a clause up for this very purpose. it's a simple short clause that is there in the contract for all to see and the banks were fine with it.

the man with the big hat has over 200 properties... do you honestly think any of them were actually paid for? because most punters find it hard to service 1, let alone 200.
BC i have heard of some stuff like this happening here, ie plumbers cover all costs involved with units and in return recieve a unit, i like the concept, as the builder sells a 400k unit that costs him 330k and the plumber does 400k of work for 300 ish, i like it but don't know the legal side of it,
all the banks i speak to have a fit when i mention it.

thanks for the advice so far guys.

i have a few brokers that i can speak to again that can hopefully help me out.

so, mention a "favourable purchase" and "rebate" yeah?

The problem here is identifying who is really carrying the risk in the deal? To me the builder is taking all the risk until construction is complete, whichever way you look at it. You provide no deposit (hurt money) etc until completion. Sounds like the builder doesn't want your fee burden until completion / sale of the development and you don't want to put up a deposit until completion as well. So do it a different way...

The easiest way to do this from a tax angle is for you to pay full retail price for the units (avoiding any stamp duty calculation issues) and the developer / builder pays you your fees. There is generally a good reason for the status quo! This keeps everything simple for the ATO and SRO.

Keep in mind that the basis for charging your fees is the key issue - there is nothing wrong with charging exorbitant fees for your time (I do it all the time! :)).

Just change the basis for charging your fees - make it fixed price, lump sum payable on completion / sale of the development. No problem with making it a very large lump sum (quite defensible anyway considering you are now taking a fair risk in terms of time before you get paid). Your skill set / time is very valuable to a developer and you should charge accordingly - don't feel guilty about it!

Sign up an option to purchase agreement at the same time as your fee agreement if you like so you can either use your significant fees as a deposit or forego that option and use it for another investment at your discretion. If the developer really wants the certainty of a sale and you don't mind you could convert it into a conditional sale agreement with the condition precedent being that the developer has to pay your lump sum fees prior to you putting down a deposit.

This is based on my interpretation of what you guys are trying to do - does it make sense?
nice work! that could work easier as well, just a basic $1 option contract and exercise it with condition of "x" fee payable at settlement.

the status quo works but then a contract would be needed to make sure the monies received = deposit. it also means there's no benefit to either party as i would take 5th in line to ensure they have some sales under their belt but then they're paying me anyway - which hurts their cashflow.

cash is king - unless you're saving someone else's cash - that's a royal flush. banks don't lend against soft fees such as mine - so my fee comes outta their bank accounts.

this way, they move stock, at the right price and they get to eat.
Just make sure there is a time limit on you getting your fees - you don't want their slow building work or lack of sales putting endless delays into you getting paid for your time and potentially using the money for something else.

In other words you get your lump sum either at settlement of x% of the units or one year from completion of your work, whichever is earlier. Otherwise you are completely reliant on them - or they may decide to keep the units and rent them etc...

You should obviously get some legal advice to cover all the "what-ifs", personal guarantees, change of control clauses etc etc, which are critical to any decent JV agreement.
oh yeah i was going to get a lawyer to draft everything up anyway - $400 is cheap insurance.

timeframe - another to add to the list.

thanks a million :)