Absolutely NO response to my last post, maybe I wasnt clear…
I can get a house (and land package) for a tenant buyer to purchase in 7 years. Price is $230k in a largeish country town currentley booming with a population of around 17,000.
Tenant will rent at around the price of the mortgage plus another $80.00 or so per week. I can get 100% finance to build no problem. The plan is that in 7years the tenant will have sufficient equity to obtain a loan and purchase the proprety. This system is a little different to what is talked about in Steve’s book and as I am new I just wanted to know what other investors think.
This is the second time I have asked the forum so maybe someone can have a think and send their opinion. Thanks.Hi Gracey,
I’m a little bit confused with the numbers, you say the tenant will pay the mortgage plus $80 extra.
I did the sums $230,000 6.57%Int 25yr is $359 per week repayment.
If you can get someone to pay this plus $80p/w = $439p/w……… well go for it.
Is this what you meant??
How do you get someone to pay that much??
I live in Sydney, Inner West and pay only $450 p/w for a 3bed house that would probably go for $800k+!!!!
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][][][]G’day Gracie…
Have you factored in a likely interest rate rise?My thoughts are up .5% next month…nice Xmas present…so 7% app. Even at interest only it’s
$16,000pa + $4000 extra from tenant is $20k pa
$400pw for a regional town is a bit rich.
Another 1% on top of 7% means your tenant is paying $435 pw and all this is only covering your interest…up to a realistic 8%. 7 Years ? could be 10% by then.Several questions…(1)Can the tenant afford this and save the Equity he needs to purchase in 7 years ?
Are you going to sell to him/her at $230,000 in 7 years? If so why bother with the deal? Or are you factoring in say a 5% compounding rate from now until then ? If so your sale price needs to be $325,000. So your tenant has to pay a minimum of $435 pw and save another $275pw to save the required deposit…$700pw??
Looks like a lose/lose deal to me.
Cheers
BillBill O’Mara
Real Estate,Mortgages,Share Market Strategies.
[email protected]
Absolutely NO response to my last post, maybe I wasnt clear…
I can get a house (and land package) for a tenant buyer to purchase in 7 years. Price is $230k in a largeish country town currentley booming with a population of around 17,000.
Tenant will rent at around the price of the mortgage plus another $80.00 or so per week. I can get 100% finance to build no problem. The plan is that in 7years the tenant will have sufficient equity to obtain a loan and purchase the proprety. This system is a little different to what is talked about in Steve’s book and as I am new I just wanted to know what other investors think.
This is the second time I have asked the forum so maybe someone can have a think and send their opinion. Thanks.Thanks for feedback…
I think that final calculations are a work in progress but it has been explained to me this way:
If the tenant buyer is going to purchase the house anyway, in 7 years, then they are happy to pay the interest payments on the loan. They also pay a further $80.00 or so towards the deposit and end up with $30,000 or so in equity. This is the positive geared element The purchase price is agreed upon at the begining and I am not sure whether 5% would be used, I suspect it would be a little lower. The tenant is definitely in a position to repay the loan as they have very good income, but fall into the 20% of purchasers that dont qualify using traditional lenders. I dont know everything about how it works and I guess it does sound a little hairy, but do you still have the same opinion given extra information. I am in a position to source these deals and come across people all the time.
Gracey
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