Sandwich leasing of houses for removal?

[Peter Parker]

Though not my cup of tea, I had this thought of a way to derive income from property that you control (not own), in order to get cashflow.

Here's how it might work:

1. Farmer Joe advertises a spare house on the farm for removal in the Trading Post (etc)

2. You do a deal with the farmer. Instead of removing it, you buy the house (building only) for a nominal amount (no more than a few thousand) and sign a lease with the farmer for the land the house sits on. This lease could be long-term and be fairly cheap (say $1000pa)

3a. You appoint a PM to manage the property as an ordinary rental

3b. Or you manage the property as an ordinary rental

4. If the tenant pays you $100pw rent, and your outgoings are $50pw (the farmer's lease, insurance, maintenance and management) then you've got $50pw cashflow.

This scheme sounds most suited for an (otherwise) not employed person in a country town who is able to do their own management themselves.

It also has some of the problems of rural CF+ investing (ie if the HWS breaks you're behind for weeks) and there is no capital gain as you don't own the land.

Has anyone done something like this?

Peter

 

[dcarr]

Well, look at it this way - because it's not a typical IP, think of it as a part time job you have to buy your way into. So you have to figure :

- how much would you originally buy the house for?
- What risks are you exposed to (cost of HWS, termites, vandalism)
- how much time and effort per year will managing the property take?

The last is unpredictable - you're managing a whole lot more relationships, with yourself, the tenant, and the landowner. What happens if the farmer decides he wants to clear the land after all?

If this still makes it worth to the investor the $2500 a year or whatever the numbers come to, then go for it.

cheers,
Daniel

 

[sailor]

What happens if the farmer wants to sell up? Is the lease part of his deal?

 

[geoffw]

Before anybody asks, the title of the thread does NOT refer to my business

 

[jrc]

Most farmers want to know who's on their land and wouldn't be happy with you putting a third party on

 

[beech]

See no reason why you couldnt Spiderman.

Its all in the paperwork after all.

You would have a sub let clause in your agreement which the farmer would know about.

So theres only one way to find out if the farmer is interested.
Give him a call.

 

[Jaffasoft]

This type of system has been in place in Mildura for over 100 years. The Chaffey Brothers founders of the township in the early days allocated a number of blocks throughout the business district to be leased. This raises funds for the local Schools, hence the name 'College Lease'. The lease runs for 50 years and is subject to review each five years.

They are exactly what you are talking about you lease the land and own the building and therefore can build whatever you want on the land STCA and rent it etc. No Stamp Duty payable for the transaction in Mildura.

Is common occurrence in Mildura every now and again a 'College Leased' house comes up for sale so is a system that is used, works and is tried and true.