Vendor financing- does it work in a hot market?

[redbox]

We have just started trying our hand at vendoring financing in the Melbourne inner city market and have found it difficult due to the market being hot.

We have been offering on apartments in blue chip suburbs at > $30K over asking price, on the condition that the vendor leave 20% behind which we will repay in 2 years. But so far no luck

Has anyone else had any successful and if so, can you please share how you managed to secure the deal?

 

[tobe]

With the way the market is performing lately $30k over the advertised price is probably less than what it actually sells for. we went to an auction in our street that quoted 720-790, and sold for $950k. I think you need to find a distressed seller, and have a sympathetic/knowledgable estate agent. To find a distressed seller in Melbourne at the moment, you will have to look in the outer suburbs I reckon.

 

[Ruby]

To find a distressed seller in Melbourne at the moment, you will have to look in the outer suburbs I reckon.

Yeap......

http://www.news.com.au/heraldsun/story/0,21985,21921907-661,00.html

 

[redbox]

Thanks we are probably targetting the wrong market/area for vendor financing

 

[Lofty]

Hi Redbox

We'd agree with your last post. We have found a best wrapping success in what you might call "lower middle class" areas, i.e. solid working class areas.

We also suggest that you not be tempted by what we called "war zones". They may be cheap but they're definitely not worth the heartache. Good luck.

Cheers, Paul

 

[Tim Hart]

Vendor finance will work in any market. Its all about how many offers you have to put in and finding the right buyers. Rather than offering 30k above market value why not offer their asking price and pay them 10-20% interest on the second mortgage. For a retiring couple who are looking to just invest the money or put it in the bank this will be a great option for them. I actually think that offering $30k above market will make people suspicous regardless of what your offering.

You said all your offers have been rejected. How many did you put in? For me I know that to get a good deal by blinding putting in offers on properties where I don;t know the circumstances of the vendor I need to put in 20 offers to get 1 deal. Now that may seem like a lot but if I'm making 50k per deal them I'm making 2.5k for every offer I put in. Not bad eh?

Let us know how you go

Tim Hart

 

[Qlds007]

Having done 1 or 2 installment contract deals myself I agree that wrapping can work in any particular market however i think it is all about how you approach the deal.

If you buy a property and then run off trying to find a buyer then i think you will struggle in a rising market however if you assess the wrappee and allow them to bring the houses to you after they have negotiated the deal and found they dont qualify for finance you will have a better success rate.

In all of the properties that we hold in our portfolio we have never purchased a house outright and then tried to find someone to buy it from us.

10 year of wrapping experience teach you a lot however the basics never change.