Hi Terence

In what capacity would you like to involve your Father?  Appointor, Guarantor, Trustee, Beneficiary, etc?  If it's as a Beneficiary then I don't believe he has to be an Australian Citizen.  However, as always, check with your accountant/solicitor.

Cheers,  Paul

Hi Matt

A bunch of vendor financed properties are listed at:
http://www.renttoownhome.com.au

I have no affliation with the site, other than listing our properties there from time to time.

Cheers,  Paul

Hi Christian & Grant

Christian, we are based in Port Stephens, NSW.  However, at the moment we are working on transactions in Nambucca Heads, NSW and Morwell in Vic.  We're also just been asked about Townsville, Qld and the ACT.  We don't limit ourselves to a specific area.

Grant, from a risk mininisation point of view, we believe it's important for our JV Partners to have their names on the title of the property.  Therefore our JV Partners need to qualify for their own loan, i.e. they borrow through the traditional residential lending market.

Cheers,  Paul

Hi Christian

We charge our new buyers $980 to have the Instalment Contract drawn up and sent to their solicitor.  Yes an Instalment Contract can be exchanged with an existing mortgage in place on the property.

Cheers,  Paul

Hi Rhenry

I've responded to this post in the Creative Investing sub forum.

Cheers,  Paul

Hi Rhenry

We have done a lot of Lease/Options in our Vendor Finance business but, over time, have drifted back to Instalment Contracts as our favoured vendor finance technique.  This preference mainly revolves around the extra security an Instalment Contract gives a buyer, e.g. the government regard it as a real sale because they pay the FHOG to eligible first home buyers, buying their home this way.  Land Tax also disappears when you use an Instalment Contract, as the Government regard you as having disposed of the property.

For the property you mentioned, I'd probably sell it with an Instalment Contract, along the following lines:
Sell Price – $150,000
Minimum Deposit – $15,000 (FHOG may be used as part payment)
Term – 30 years
Interest Rate – 7.5% variable (initially)

Resulting Buyers Payment –  $217.83 plus approximately $40 per week for Rates & Insurance.

This would mean that your cash flow would be $943.94 per month.  Plus approximately $173.33 to pay the Rates & Insurance on the Buyers behalf (they are responsible for these costs and all maintenance costs).

I'm guessing that you're paying approximately $534 per month for your existing mortgage so, in this scenario you could expect positive cash flow of approximately  $409 per month.

This transaction would give you three point of income.  The $15,000 deposit up front.  The $409 monthly positive cash flow. The back-end profit, i.e. the difference between what you bought it for and what you sold it for, less what the buyer has paid off, between when they moved in and when they sell it or refinance it.
 
We have found that buyers feel more secure knowing that a real Contract of Sale is being used.  We also like the fact that, because no Lease is involved, we are not bound by the Residential Tenancy Act.  Also, with an Instalment Contract we tend to get purchasers with a "buyer's mentality", whereas with Lease/Options we're still confronted with a "tenant's mentality".  Vastly different in our experience.

Cheers,  Paul

Hi Max

Three off the top of my head are:
http://www.owner.com.au
http://www.yourestate.com.au
http://www.diysell.com.au

If you are prepared to leave some money in the sale, by making some vendor finance available, the following site might help:
http://www.renttoownhome.com.au

Cheers,  Paul

Hi Allison

I'm thinking more along the lines of House Call but I notice you mention that the commercial property "would also cover it's own expenses" and, I guessing this situation would make to feel more comfortable with the extra debt.

It is possible to find residential property that not only covers expenses but also puts money in your pocket each month.  This would leave you in a position where the new IP would not only pay for itself but the extra cash flow would help you with the $225,000 debt on your PPOR.

Cheers,  Paul

Hi BB

Welcome to the forum.  Hope you enjoy your time here.

Another idea would be to redraw the equity out of your current Home near Bundy, as a deposit for an investment property in SEQ, e.g. find a SEQ property, use your home equity to put down a 20% deposit and finance the rest of the purchase price with an 80% LVR loan (+ purchase costs).  Then rent the SEQ propertty.  This now leaves you with two properties with capital gain potential.

There are specailists, like Richard and Terry, on this forum who will be able to help you with this strategy.

Cheers,  Paul

Hi Kim

Welcome to the forums.  I'm sure we all hope you enjoy your time here.

As the legal paperwork for Lease/Options and Instalment Contracts is so different, I think it's best to answer your questions under a couple of headings.

Lease/Options

The legal paperwork for a Lease/Option is, as the name implies, a residential lease (as defined in each states Residential Tenancies Act) and a Call Option, i.e. paperwork that gives you the right, but not the obligation, to purchase a property for a fixed price, for a fixed period of time.  If you don't "exercise" the option within the "term" of the option, the option becomes worthless.

I understand that a lot of the usual expenses (and hence deductions) like rates etc that you might have do not apply with these set ups, as they are in fact covered by the person who lives in the property.  All residential leases are controlled by the various state Residential Tenancies Acts.  All these Acts insist that you can't charge tenants rates and insurance, etc.  As you learn more about this technique, you will also hear about "on-going option fees".  These are quite flexible and relate to an on-going cost for the option. 

Does anyone know what sort of tax deductions can be made, other than the interest you pay on your investment mortgage?  Yes, the property remains a rental property until such time as the option is exercised and the property changes hands.  This means the property retains rental property tax deductions until such time as the option is exercised.

With lease options, is the property still considered a rental until the tenant chooses to take up the "option" to buy?  Yes the property is still regarded as a rental, with the Lease governing the rights of you and the tenant.

Can depreciation claims etc still be made by me, as the title holder?  Yes.

While you remain the title holder, can any equity gains in the property be used to obtain more finance?  Yes you can refinance and take out equity but, with a long term option, you'd have to make sure you don't increase your debt above the option's "strike price".

Instalment Contracts

The legal paperwork for an instalment Contract is, a standard Contract of Sale with an Instalment Payment Schedule added (usually about 13 pages).  As with a traditional purchase, contracts are exchanged, but settlement is scheduled e.g. 30 years after exchange or whenever the new purchaser can payout the loan (sell or refinance).  This addition of an Instalment Payment Schedule, effectively turns a standard Contract of Sale into a loan document as well as its normal function as a Contract of Sale.

I understand that a lot of the usual expenses (and hence deductions) like rates etc that you might have do not apply with these set ups, as they are in fact covered by the person who lives in the property.  All council rates, water rates, insurance and maintenance of the property becomes the new buyers responsibility under an Instalment Contract.

Does anyone know what sort of tax deductions can be made, other than the interest you pay on your investment mortgage?  New buyers can access the FHOG with an Instalment Contract (IC).  This isn't possible with a Lease/Option.  If you sell a property with an IC, the Land Tax liability for that property moves from you to the new purchaser and because all our buyers are owner occupiers, the Land Tax liability for that property effectively disappears.  Other taxes concerning depreciation, etc are Federal Govt taxes. As your name is still on the title, I suggest you talk to your accountant about these types of deductions.

With lease options, is the property still considered a rental until the tenant chooses to take up the "option" to buy?  With an Instalment Contract you stay on the actual title and the new purchasers gain what's called Equitable Title.  It is important to get IC specific insurance for these properties.

Can depreciation claims etc still be made by me, as the title holder?  You are still the title holder, so I'd suggest you talk with your accountant about this question.

While you remain the title holder, can any equity gains in the property be used to obtain more finance?  In NSW and Qld, you can refinance a property that's the subject of an IC but the debt must not be increased above the new purchaser's current loan debt.  In Vic, you cannot refinance a property that's the subject of an IC.

I hope that helps but please make sure you don't rely on it, i.e. it's vital to talk these issues through with both your accountant and solicitor. 

Cheers,  Paul