Is there a financial instrument to streamline investing with HO with vendor finance?

Hi guys - Was just wondering if there was some sort of system where people purchase an investment property from the home owner with vendor finance- and then the tenant continues to occupy it?

I'm not entirely sure how it would work, but I'm guessing with a bunch of baby boomers retiring soon (and not having the same inheritance-mentality of their previous generations) I wonder if that creates and opportunity to couple budding investors with homeowners themselves circumventing the middleman (bank).

Without really thinking about it, I guess the way it would work is it would be some sort of reverse mortgage with a large initial deposit (say, 20%) - Then both parties would come to an agreed interest rate and market rent - then a loan would be set out over a particular period of time (with no ability to put money in offets/make extra repayments etc - The previous owner could budget to live in that property for X period of time knowing they could still occupy)...

I guess in the end it allows property investors to purchase solid homes with neutral/negative/positive equity (depending on the arrangement both parties made) - while both parties getting ostensibly better market and interest rates. Meanwhile, from an investors point of view, they know they have a long term tenant likely to look after the home... (damage would come out of the remaining home equity a, so you would probably have very few maintenance issues)

Does this sort of arrangement currently happen, or does it have any gaping flaws?

D
 
Yes it happens.

you would be hard pressed to do it so the rent covers the repayments. The purchaser (you) would be paying a premium on the price and about 2% above bank rates.
 
thats the previous experience I've seen with vendor finance... much higher rates. The property premium probably makes more sense - where are those deals organised usually?
 
thats the previous experience I've seen with vendor finance... much higher rates. The property premium probably makes more sense - where are those deals organised usually?

Private arrangement between a buyer and a seller. Its up to your negotiation expertise!
 
Hmm... It's not streamlined... I'm sure some smart cookie could probably make money acting as a middlemen in such arrangements, taking a small % of the rate as a management-esque fee. I reckon you could sell that idea to retirees, but even more so investors...

Also, I reckon there could be a market in person-to-person mortgages as well.. Long term deposits at a very attractive rate... the agent would check credit ratings etc, and arrange innitial deals
 
Hmm... It's not streamlined... I'm sure some smart cookie could probably make money acting as a middlemen in such arrangements, taking a small % of the rate as a management-esque fee. I reckon you could sell that idea to retirees, but even more so investors...

Also, I reckon there could be a market in person-to-person mortgages as well.. Long term deposits at a very attractive rate... the agent would check credit ratings etc, and arrange innitial deals

Just make sure these people have the appropriate licenses in place
 
We have a 'system' we call 'Sell & Stay'. It not an easy situation to systemise effectively as each case is so different. And yes, we have the appropriate licences ;-)

Cheers, Paul
 
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