I chose to rent a place. Where I live the ppty yields are very low, and there is high strata fees. Growth has also been low. When I started rented the place about 7 years ago, I considered buying there, but instead bought a similar priced proeprty in a different area. This has since tripled in value, while the place i am renting has only increased slightly.

I am probably saving about $20,000+ per year in renting, plus can claim additional tax deductions on hte investment property, plus I can claim one property as my main residence for CGT purposes at the same time.

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That article is about no deposit home loans. For these you need to be squeaky clean with your credit report and have stable work history etc.

I think many people after vendor finance are the credit impaired, or people that otherwise don’t meet the normal lending criteria.

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Hi HB

If they pulled out, they would not get any reimbursement. They are taking a risk by paying a bit more rent, but ending up (hopefully) buying the property below market rates.

Incidently, I wouldn’t do this again.

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Just make sure you get insurances that cover you. Otherwise, if he is doing something illegal, and something happens, you may not be covered?

What is the capital growth potential? Is it is a good area?

What happens if this guy goes down. could you rent it out yourself at a similar amount? Or how much would you have to drop it, if you couldn’t rent the rooms separately?

What LVR will your bank lend? Probably standard, as you will be just renting it to one person, not operating a boarding house.

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HB, Just imagine if he borrowed 99%, ie 4% off the vendor and 95% off the banks. This would make the % return much higher because of the reduced amount started with. A high COC return doesn’t necessarily mean it would be a good investment.

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Oh, yes that would be the case.

If serviceability limits have been hit, (or if you have changed jobs etc) you may not qualify for the increase – they would probably require updated payslips etc.

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HB

Not sure if I found a loophole or not, but many many years ago I had advice that any lease over 5 years in length could be classed as commercial and the RTA would not apply (in Vic). This is probably wrong. If they take me to court, they may win.

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A trust does not give you any advantages in borrowing – in some cases it is harder to borrow using a trust. Lenders will take guarrantees from the trustees so no history of the trust is needed. A brand new one is ok.

A company is safer, as in some cases a trustee can be sued. If it was a $2 company, then this is safer than yourself.

It costs more to set up and more annually, so you much weigh up the cost vs risk.

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Fixed rates can be costly to exit. This may cause problems if you sell the property, or if you want to change banks etc.

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