Keeping up LVR?

From: Geoff Whitfield


Hi,

I'm looking at a property which I believe will be slightly cash flow positive while giving a chance of capital growth.

If I proceeded, I would be using up all my equity, and would have to pay out on mortgage insurance.

I've been reading some US material which suggests that in some circumstances, a vendor may agree to taking a loan for 10% deposit, and that loan to be taken care of by the purchaser. The vendor gets to sell the property at asking price (win), and the purchaser gets to avoid the mortgage insurance (win). And if the vendor were to take 20% mortgage instead of 10%, the purchaser would have equity still to buy somewhere else again (bigger win?).

Any thoughts on this? has it been done- or is it legal- here?
 
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Reply: 1
From: Dale Gatherum-Goss


Hi Geoff!

Yes, I sold a property in this way about 8 & 1/2 years ago now. The deal worked very well. I've seen it done on quite a few occasions and understand that there is no problem at all.

Good luck!

Dale
 
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Reply: 1.1
From: Geoff Whitfield


Thanks Dale.

You were selling then, I'm buying. But I'm glad there's precedents out there.

What sweeteners did you (or the buyer) put in? How might one make such a deal sweeter to the vendor? What about legals, etc? What about the other cases you've heard of?

There's certainly advantages out there, but the precedents are limited- according to my limited knowledge.
 
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Reply: 1.1.1
From: Dale Gatherum-Goss


Hi Geoff!

In my case, the purchaser could not secure enough finance to buy the house and were left short. They were emotionally involved with the house by then and just HAD to have it.

So, we offered to amend the contracts to show a lower purchase price so that the bank would finance them for the amount that they could. Additionally, we had a solicitor draw up a private agreement where they agreed to pay me the balance, plus a small "disadvantage" amount.

The deal went through beautifully and as most wrappers seem to expect, the purchasers approached me about 18 months to 2 years later and offered to refinance the whole loan and pay me out.

All of the situations that I have come across, both in business and property, have been along the same lines.

I hope that this helps, and I would encourage you to give it a go.

Dale
 
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Reply: 1.1.1.1
From: Asy .


Geoff,

I agree with Dale, this can be a good way to buy, OR sell a property.

Just to give you an idea of the numbers...
I am offering a similar deal on my property at the moment, I am prepared to wear up to 15% of the purchase price, as a no interest loan to the purchaser for 12 months, at which time they can re-finance.

The idea works thus:
Purchase price: $180,000
Purchaser pays: $150,000
Purch owes me: $ 30,000
Property rents for $240/week

In 12 months the purchaser must refinance the loan, and theoretically capitalise on any capital growth in the property and pay me the $30,000 they owe me.

Obviously I would rather sell the property outright, but I feel that I may find a purchaser faster by 'sweetening the deal'.

I hope this makes sense...
Please feel free to ask further questions :eek:)

asy

There are no problems, only solutions which have not yet been discovered.
 
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