Rent-To-Buy

[jweg]

HELLLLLLLPPPP!

After very slow market - we decided to see if there was interest in rent-to-buy as a way of getting a decent price & return on our IP in a country mining town.

Got a big response -- over 100 asking for information pack. We have one serious buyer - who is keen to go ahead.

We are at the point now of getting a solicitor to draft up contract of sale or option to buy....

Advice needed on how to protect ourselves as owner/landlord. Ideas so far:

Tenant/Purchaser to pay all outgoings: rates, consumer accounts, building insurance, and any general or capital maintenance items or improvements.

How do we set up an exit strategy?? i.e.- one where we can't lose & buyer has everything to gain by going ahead with purchase.

What is a fair exit strategy for the purchaser??

Payment structure set up for purchaser to pay 20% deposit within 3 years and then obtain home loan.

Question - what happens if valuation doesn't stack up in 3 yrs time? i.e.- in ours, buyer would need to borrow 196K (in 3 yrs) on a property currently Val'd around 220K. In effect they are gambling (via a higher purchase price) that Capital Val improves in 3 yrs -- what if it doesn't?

Has anyone sold like this before??? Would be ever so grateful if we could read contract documents or agreement documents ppl have used in the past.

Success Stories???? Nightmare stories??? Please share any info you can - we have about 2 week window of opportunity - we feel it could be a really good outcome for us - if it works smoothly!

 

[Rolf Latham]

my 2 bobs worth is that it can be hard for the purchaser to refinance you in x years time

many lenders will not refi private debt.

We have done a few and its not easy.

for a start youd want to make sure the end Loan to value ratio was 80 % or less

t
arolf

 

[Lofty]

Hi jweg

We help people sell their properties with vendor finance using our negative2positive process. Most of the time the sale is structured using an Instalment Contract or a Lease/Option (Rent To Own). You may want to do this yourself but you should still get some helpful information at our website www.negative2positive.com.au

Cheers, Paul

 

[matto_]

My understanding is that the vendor is insulated through the buyer/renter paying a deposit (along with the monthly rent). Hence if the prospective buyer skips town - you get to keep the deposit paid.

 

[Lofty]

Hi Matt

That's true but you also need to know how to handle the situation where the buyer/tenant buyer stops paying and doesn't skip town. In this situation you need to be familiar with your State's residential tenancy legislation, for Lease/Options and you need to be familiar with the Hardship and Default provisions of the National Credit Code, for Instalment Contracts. Sounds pretty daunting but we've actually found that knowing how to operate within the requirements of these Acts gives us a pretty reasonable path to follow when things go wrong.

From our experience, the main cause of things going wrong, is the vendor financier not qualifying their buyers correctly and this gets harder and harder to do as your holding costs increase ;-)

Cheers, Paul