All Topics / The Treasure Chest / Rent/Buy option

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  • Profile photo of FergusGartlanFergusGartlan
    Member
    @fergusgartlan
    Join Date: 2002
    Post Count: 7

    Hi,
    I have a question regarding the Rent/Buy option which some wrappers have been offering
    I’ve been asked if I can provide this type of service as my prospect would lose their rent assistance if they “bought” a house from me.
    Now my understanding of this, and how it works, is that the client enters into a rent/buy contract with me to rent the house and have an option to buy it if and when they can.
    The idea being that they pay say $120 per week rent and possibly $20 per week more towards a deposit.
    That way they can still get their rent assistance to help them pay the rent, but the down side is that they cannot get the FHOG as they are not “buying” a house.

    Have I got this right?
    Can anyone clarify this for me.

    Regards,
    Fergus

    Profile photo of Steve McKnightSteve McKnight
    Keymaster
    @stevemcknight
    Join Date: 2001
    Post Count: 1,750

    Fergus,

    Perhaps some legal advice on this matter is worthwhile, however in the meantime my thoughts are that if you provide a residential lease which also includes a no obligation option to buy at a later date would not cancel your client’s entitlement to continue to receive the welfare payment.

    However, vendor finance (when a formal contract for purchase is signed) would mean that the benefit is lost as your client no longer rents, rather they own.

    Extending the discussion, you can generally receive the FHOG for a wrap, but not a lease-option, for the ownership distinction outlined above.

    Regards,

    Steve McKnight

    Steve McKnight | PropertyInvesting.com Pty Ltd | CEO
    https://www.propertyinvesting.com

    Success comes from doing things differently

    Profile photo of CoreyCorey
    Participant
    @corey
    Join Date: 2001
    Post Count: 1

    For more info on lease options
    have a look here
    http://www.creativerealestateinvesting.com.au

    Profile photo of TheBTheB
    Member
    @theb
    Join Date: 2002
    Post Count: 135

    Fergus

    We have used this technique as a tool for helping out folks who really need to have the extra dollars to pay for their rent (or purchase).

    For a number of reasons we originally started out wrap deals with a one year lease with option to buy. Where we lived, at that time the FHOG was not available. Using the lease came from an idea of our solicitor’s, in response to our desire to make sure that people buying from us would still be able to get the FHOG if it became available where we lived (because they had no interest in the property).

    We were a little surprised when one of our tenants “rocked on down” to the appropriate govt agency and was told that she would receive rental assistance ! We checked the printed guidelines ourselves and it certainly appeared that it was ok.

    So, with many of these clients we have elected to write them a new lease every year with a reduced option price as they progressively pay off their home.

    It works (as Steve said) on the premise that the tenant has the option but not the compulsion to purchase the property. The downside of course is that they can not register for FHOG if they are under a lease.

    So, I think of it as another screwdriver to put on your property investing toolbelt to use in appropriate situations. [:)]

    BTW, I purchased the e-book from the site Corey mentions in his post. It is really interesting and has some good info on lease options. Definately “a good read”, but no substitute for a good solicitor and your own common sense !

    cheers

    Bruce

    ps: This is a prime example of how helping someone out has unexpected and helpful results for you. This appears to be a universal law…..[;)]

    Edited by – [email protected] on 19/06/2002 12:31:47 AM

    Profile photo of RichardRadcliffeRichardRadcliffe
    Member
    @richardradcliffe
    Join Date: 2002
    Post Count: 2

    hi Fergus,
    i like to do lease options in perth as our consumer cerdit code makes wraps a bit differcult , any way , the option to purchase and the lease are treated as 2 seperate items , and any rent credit you give should be noted on the option not the lease.also they should still get rent ass as they only have the option to buy not the obligation , they should also get the fhog if they applied when there ready to buy because up to that stage they have only been renting. cheers Richard

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