rent to buy

[owen d]

Hi there everyone,
I am currently renting a property that I feel has huge potential.
As I am not currently in a position to purchase the property myself and not wanting to sponge of my father for the deposit I have asked him to purchase it and rent it to me for a period of 12 months at $165 pw.At the end of this period he would then return the total amount $8580 to me being that this would form part of my deposit.
My question is this,
Has anybody had any experience in a situation such as this and what would be the best way to go about doing this so that in the end it is a win win situation.

thankyou for taking time to read my question and I welcome any advise or comments that you may wish to make.

owen d

 

[Rolf Latham]

Hi Owen

Nice of your dad to forgo commercial rent. If he is in a position to purchase then maybe it would be more coste effective for him to give you a 10 k deposit.

What we sometimes do is that after a year or two you an refinance the place and give the deposit back. Once you have paid a mortgage for a while its easy to get refinance in most cases.

Ta

Rolf

 

[hils]

Yes I have heard of this being done. Some local ads in the paper invite people from low income brackets to use this system as one way of securing their deposit. They are usually on a five year contract with a guaranteed price increase of 9% PA. That means the price of the house will be guaranteed to increase 9% each year for five years and then all the extra rent they have paid (perhaps $30 a week) is put together to form the deposit at the end of the contract period. It is supposed to be a forced saving for those who would not normally be able to do it. If they decided they did not want to continue at various stages of the contract they would be able to get a percentage of the extra rental payments back. I don't know exactly how the paperwork was dont though, you may need legal advice for this one. It seems like a good way to guarantee the capital on your property, particularly if it is not in a good growth area.
Seek advice because the rent you pay dad will have to be declared as his income and he will have to pay tax on it. Make sure you get receipts and all paperwork is done correctly. You will still have to pay fees for transferring the titles across. Be careful.
Hils