need some imput from my learned friends

[Celeste]

Hi all

Trying to think of some creative ways of shifting my reno's

things I have been pondering

1. rent with option to buy.
2. vendor finance

Has anyone had experience with either of these, if so some hint on how.
and what sort of setups have been used. Anyother ideas....

Thanks in advance

 

[Lofty]

Hi Celeste

Karen and I normally do Joint Ventures (JV's) with people who want to sell there properties because negative gearing isn't "working" for them at that point. Hence the name, "negative2positive".

While this is not your situation, you are contemplating selling your property with Vendor Finance and that's how we normally sell our JV properties.

Depending on our JV partners situation and the situation of the pool of potential buyers, we'll normally use one of three Vendor Finance techniques:
1. A Second Mortgage Carry Back (SMCB). Here you sell the property at market value and carry back a proportion of the sales proceeds in the form of a second mortgage. This technique you can market as "No Deposit".
2. An Installment Sales Contract. Here you sell at market using a standard Contract of Sales that has about 13 extra pages of Special Conditions added to it. These Special Conditions effective turn a standard contract into a 25 or 30 year mortgage. You exchange contracts and, if your buyers pay, as set out in the 13 pages, you settle and they get the title in 25 or 30 years. Of course, we usually refinance them with traditional lenders after two to three years.
3. A Rent To Own. Here you seel your property a market value with two pieces of legal paperwork. A standard Residential Lease and an Option to Buy. Unlike an Installment Sales Contract, a Lease/Option is not deemed to be supplying credit so it's not controlled by the Uniform Consumer Credit Code. However we normally structure the payments for a Rent To Own pretty much the same as an Installment Sales Contract. Your tenant/buyers accrue puesdo equity in the property via "Rent Credits".

I hope this helps.

Cheers, Paul

 

[Celeste]

Hi Lofty

thanks for that, Now I have more questions.

With a rent to buy and rent credits, do you normally credit all the rent or a portion? Is thee a formular you use?

 

[Lofty]

Hi Celeste

We don't have a hard and fast formula but quite often we work out, via a loan amortisation calculator, how much our tennant buyers would pay off a traditional loan over 3 years. We then turn that into a weekly figure and that can become the rent credit you give. However it is very flexible and can be any amount you and your tennant buyers agree on. Good luck.

Cheers, Paul

 

[Ausprop]

I thought rent to buy in WA was problematic as you needed to first get a credit providers licence?

 

[Lofty]

Hi Ausprop

If you use an Instalment Sales Contract, you are deemed to be supplying credit and yes, in WA, you should get a credit providers licence (and make sure you abide by all the provisions of the Uniform Consumer Credit Code).

However, if you use a residential lease and an option (a rent to own) then you aren't seen as supplying credit and don't need a credit providers licence.

Cheers, Paul

 

[Celeste]

Hi Ausprop

If you use an Instalment Sales Contract, you are deemed to be supplying credit and yes, in WA, you should get a credit providers licence (and make sure you abide by all the provisions of the Uniform Consumer Credit Code).

However, if you use a residential lease and an option (a rent to own) then you aren't seen as supplying credit and don't need a credit providers licence.

Cheers, Paul

I am thinking about the latter - rent to buy.

Whilst on the subject, what is the situation of vendor finance?
I was pondering this senario.

Say sale price $300k
buyer gets loan for @250 - 280k
I then carry the extra $20 - 50k as a side loan, they pay me an interest amount each month and then we have a settlement day for the principle.
I lodge a caveat or such on the title or I remain part owner on the title until the $20 - 50k is paid.

Any thoughts on this one.