Security by owner after bank finance

[DaveP]

I am looking at purchasing a house and business combined. The Owner is prepared to leave in about $100K for 3 yrs whilst the bank finances the rest abt $550K. The current owner has requested some form of security for his money...

Has anyone got some suggestions...?
Would a caveat suffice..?

 

[Rolf Latham]

Hiya

A caveat will prevent further dealings usually, but in my non legal opinion does not carry the same weight as a second mortgage.

The second mortgage would allow the mortgagee to recover funds by forcing a sale of the property, with permission of the 1st mortgagee.

Ta

Rolf

 

[geoffw]

Without knowing the details- it sounds as if you've done very well. You can borrow from the bank at 80%, and only have to contribute a small amount (plus acquisition expenses) to get some great leverage.

Well done!

And if it's (at minimum) cashflow neutral- even better.

I'd certainl;y be seeking the advice of a legal professioanl who could advise you as to caveats, seconds mortgages etc. I thonk the end results may be worth while.

 

[Tony]

Hi Guys,
Am i right in suggesting that the caveat is for the dwellings only & not the business component?
While i agree with Rolf, the a second mortgage would be preferable for the vendor, i would ONLY offer a CAVEAT.
I would push for them to take over the business & property & payout the lender in case of your defaulting. Especially if you made regular payment (say monthly) to reduce the $100,000 they advanced you. Suppose it all boils down to, who wants to complete the deal the most? If you do then you may have to comply to there wishes, otherwise play hardball.

Dave out of curosity, what sort of business is it? Sounds like the Management rights to some sort of complex in sunny QLD/northern NSW.

Good-luck
Tony.

 

[DaveP]

Busines Type

Tony its a produce type Business....

 

[Tony]

Hi DaveP,
Good luck & hope you manage to complete the transaction. While i cannot assist you with finance, i do know someone who will attempt get you 100% finance. He does charge for his services & he can get you a normal bank loan for the dwelling & private funding for the rest. No, i do not work for him & no i don't collect a fee.

Regards Tony