options

[gecho1]

have just read a little bit about options in one of the threads.
Does anyone know where i can research this in detail.

i am a carpenter with experience in all aspects of renovations.
Would an option to purchase a property at a set price still allow you to renovate before settlement, in the hope of increasing the equity of the property, to then be used as a deposit?
Hope i'm making sense!

Best case scenario you purchase a property, with technically no money down.
Worst case you can't close the deal. In this case could you limit your loss by splitting the profit that you make after the property sells.

This way, either the vendor gets their agreed contract price or if you can't finance by settlment, the property will be far more attractive and potentialy sell for more. Could this extra profit be split by both parties?

Any info on this would be very much appreciated as i have the guts and detirmination to get out of this rat race, however lack of funds enables me to get creative.

regards

Gecho

 

[geoffw]

Gecho,

It might be possible to do this by buying (perhaps to agreed price) with a long settlement period- and with full access to the property before settlement. For example,see the thread from Jas- http://www.somersoft.com/forums/showthread.php?s=&threadid=8029

 

[Les]

G'day Gecho,

Your "Location" shows as "Vic-Qld" - can you explain?

Where are you based? Are you planning on moving to Qld? Where would you be able to do such a renovation (Vic or Qld)?

Regards,

 

[gecho1]

hey Les,
thanks for reply.
I am currently based in Melbourne, however looking to move to Brisbane by year end.
Would be happy to do this in either of these two states.
If you have any suggestions or info it would be very much appreciated as i believe this deal is possible to put together if i have all the info required.

regards

gecho

 

[see_change]

Generally people would you use a delayed settlement for this purpose.

If you were the vendor , would you want someone going in and altering you property if they had no obligation to buy it??!!

Options are usually used when someone wants to get a Development Application approved prior to committing.

I'm currently thinking of offering to buy an option on a property which has been on the market for about three months( havn't donean option before ) . The property is sl overpriced, but I figure if I offer an option of two years for the full price, the vendor may be interested. I can give them very valid reasons why I want to do it that way , while still seeming to be a committed buyer ( I am ... I think ). It's a property that I'm not sure if it's going to move at the end of this current cycle , or during the next one.

If they're interested , I have two years to see if the market is going to move , well 18 months to see it move , and six to get plans ready . ( it's a block of land ).

See change

 

[Jas]

I'm with see_change, there needs to be something in it for the vendor.

Jas

 

[gecho1]

thanks for the response guys.
I ahve given this some thought and still believe that there would be something in it for the vendor.
If he sells/leases the option for say $200,000 and i am able to renovate the property and have it revalued at for arguments sake $250,000 having spent $10,000. If i was not able to close the deal, would the vendor not be at least $20,000 better off than at the start?

regards

Gecho

 

[geoffw]

I've thought that a vendor who is not selling a PPOR might be motivated by the CGT payable on a property. The vendor would be due to pay a certain amount in the next year or two, and would have to keep cash aside. If that cash was earning 8% (for instance), it might be much more attractive than the paltry amount the bank is paying.

He would have a caveat on the property so that it could not be sold under him, and, as you say, the property "may" be in better condition than when he sold it- though if you had just gutted the interior, ir may not.

 

[Aceyducey]

You may wish to investigate the stamp duty implications. Depending on how the option is set up and where you do it you can be liable for double stamp duty.

And if for some reason you cannot complete the renovation & sell prior to the option lapsing you need to consider what the costs would be to either return the property to pre-option condition or otherwise compensate the seller.

Cheers,

Aceyducey

 

[brains]

Gecho,
You can ask your solicitor to put whatever you like in the contract.
Wether the vendor accepts it is another matter.

 

[gecho1]

Thanks for the input guys.
have to do more homework or look further into JV.

Regards

Gecho

 

[pmcintosh]

Hi Gecho

How would this scenario work for you:

Person A buys property in his name.
You do the reno at your cost.
Person A sells property for "vastly" more than they bought it for but cost him nothing for the reno.
Side agreement between you and Person A to split the profit on the sale with adjustment being made for CGT implications and stamp duty for Person A.

Win Win for both parties.
You dont outlay any money for the purchase, your labour is free and you benefit from half the proceeds on sale.

Seems like a good JV partnership to me - combines money partner with "expertise" partner.

PM