Hi there, newbie here and after some advice, if anyone can help, I would be most grateful. I have found a house that I’m trying to buy. It is going to auction in a few weeks, but the vendor is open to offers prior. I am in the throes of using a broker to see what kind of loan I can get. My situation is I have an investment property that is worth about $300 +, with about $100 equity and my PPOR is worth about $180k with around $30k equity. The broker has been working on $280k for the new property and it doesn’t look like I can get there – maybe around $250k. I am pretty keen on this new property and was only looking at a third loan to give me time to sell the $300k house. (Too much debt for me to have 3 properties). I want to put an offer in within the next few days (just waiting for my tax return to be finalised). This is what I am thinking. I present two offers with different situations.
1 I offer $300k with up to a 6 month settlement and I will rent the house from the owners at the market rate. Estate agents think my house should sell reasonably quickly, especially at the moment, and I figure I have some room to drop the price if I have to.
2 I offer $300k and ask the vendor to loan me the shortfall, which I think would be around $60 k for up to a year. I read about this in property investor magazine. I would offer them 10% interest, capitalised on the loan at the end of the term (so in effect they get $306000 as the purchase price). They will hold a registered second mortgage on the house that I am trying to buy and as soon as my house has sold I give them their loan back + whatever interest is payable. Again, I offer to rent their house while I am trying to sell.
All subject to finance. Broker is organising a valuation and as long as the house is safe and sound, I won’t be looking for discounts from a building inspection.
So, is this a good idea? Overly generous? I’m really keen on this place. It is a holiday house and has mostly been empty, the owner using it a couple of times a year for a holiday. The agent says they want to sell, as they are not using it anymore, but if all they get is low offers, they will keep it and try again later. She has just sold another house of theirs (they live interstate), so they potentially have the funds to give me a loan. That house was going to auction too, but they accepted an offer prior. Agent says they are not selling out of desperation or because they have bought elsewhere. I went to the first open house today and there was no other interest apparent. It has only been on the market for a week. The agent is giving no indication of price. I know the area quite well and what has sold in the past few years and I think $300k in this market is a reasonable offer. The council valuation from 2 years ago was $350k for land and house, $320k for land. The house is, well, very small and very, very basic, but liveable. Most people would probably knock it down – (waterfront land). So I think $300k would be an acceptable price. I am so very inexperienced with this, so any thoughts or advice would be gratefully received…
1 I offer $300k with up to a 6 month settlement and I will rent the house from the owners at the market rate. Estate agents think my house should sell reasonably quickly, especially at the moment, and I figure I have some room to drop the price if I have to.
2 I offer $300k and ask the vendor to loan me the shortfall, which I think would be around $60 k for up to a year. I read about this in property investor magazine. I would offer them 10% interest, capitalised on the loan at the end of the term (so in effect they get $306000 as the purchase price). They will hold a registered second mortgage on the house that I am trying to buy and as soon as my house has sold I give them their loan back + whatever interest is payable. Again, I offer to rent their house while I am trying to sell.
All subject to finance. Broker is organising a valuation and as long as the house is safe and sound, I won’t be looking for discounts from a building inspection.
So, is this a good idea? Overly generous? I’m really keen on this place. It is a holiday house and has mostly been empty, the owner using it a couple of times a year for a holiday. The agent says they want to sell, as they are not using it anymore, but if all they get is low offers, they will keep it and try again later. She has just sold another house of theirs (they live interstate), so they potentially have the funds to give me a loan. That house was going to auction too, but they accepted an offer prior. Agent says they are not selling out of desperation or because they have bought elsewhere. I went to the first open house today and there was no other interest apparent. It has only been on the market for a week. The agent is giving no indication of price. I know the area quite well and what has sold in the past few years and I think $300k in this market is a reasonable offer. The council valuation from 2 years ago was $350k for land and house, $320k for land. The house is, well, very small and very, very basic, but liveable. Most people would probably knock it down – (waterfront land). So I think $300k would be an acceptable price. I am so very inexperienced with this, so any thoughts or advice would be gratefully received…
