Forums / Property Investing / Creative Investing / options on land purchase

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  • Profile photo of cashpoorcashpoor
    Participant
    @cashpoor
    Join Date: 2004
    Post Count: 22

    Hi all,
    I am looking to use an option to purchase land. What I am wanting to do is take out a option on 15 x $40k blocks of land [$600k].My question is how do I on sell the blocks for say $50k after 12 months without settling the $600k?
    Hope someone can help me.
    Thank you in advance.
    Regards
    Cashpoor

    Profile photo of TerrywTerryw
    Participant
    @terryw
    Join Date: 2001
    Post Count: 16,110

    Just sell the options? ie assign it over to the new purchaser. Even if you have to settle, you would do a simualtaeneous settlement, so you would not need finance.

    Terryw
    Discover Home Loans
    North Sydney
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    Profile photo of cashpoorcashpoor
    Participant
    @cashpoor
    Join Date: 2004
    Post Count: 22

    Dear Terryw,
    Thank you for your reply.The way is clearer now.
    Regards
    Cashpoor

    Profile photo of GeronimoGeronimo
    Member
    @geronimo
    Join Date: 2002
    Post Count: 167

    Hi Cashpoor

    Is 50k a good deal for the buyers of the options?

    If you can’t sell the option, under a Put/Call Option contract you will still be obliged to settle on any blocks that haven’t been onsold so make sure you’re able to.

    Get a really good solicitor on your side to do up the option contracts too.

    Good Luck!

    Brendon


    Acute Mortgage Reductions
    http://www.acutemr.com.au
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    Profile photo of Richard TaylorRichard Taylor
    Participant
    @qlds007
    Join Date: 2003
    Post Count: 11,992

    Cashpoor

    The answer is simple. Use a Put and Call Option and merely exercise the Option.

    if you use 15 separate Option Contracts then you can nominate separate purchasers for each of the indidual blocks. (I assume that they individual title now)

    Cheers Richard
    richard at fhog.com.au
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    Profile photo of aaron12aaron12
    Participant
    @aaron12
    Join Date: 2003
    Post Count: 8

    In the first place, how do you calculate the price of an option?

    Thanks,

    Aaron

    Profile photo of GeronimoGeronimo
    Member
    @geronimo
    Join Date: 2002
    Post Count: 167

    Hi Aaron

    The standard is 1% but you can agree on any amount with the other party. Pretty much as with a standard contract.

    Brendon


    Acute Mortgage Reductions
    http://www.acutemr.com.au
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    Profile photo of techatecha
    Member
    @techa
    Join Date: 2004
    Post Count: 79

    Hmm.

    Ive never seen the terminology for Options and how you could actually use the implications of the teminology with options to purchase a property.

    Put options are options to sell a parcel of share at a pre determined price and time in the future.
    Calls are to buy options at a predetermined price and time in the future.
    You can also write both puts and calls.

    How can you go short a property option?

    Me thinks this terminology is being used incorrectly here!.

    Profile photo of AdministratorAdministrator
    Keymaster
    @piadmin
    Join Date: 2013
    Post Count: 3,225

    Hi John,

    I think what is meant is that instead of immediately entering into a Contract of Sale what will happen is that the owner of the land sells an Option to Buy to the investor whilst the same investor sells an Option to Put to the investor
    (which allows the owner to force the investor to buy the property in the event the investor doesn’t exercise his Option to Buy).

    The ultimate outcome is that using this strategy the situation is just as if the two parties had entered into a Contract of Sale.

    The advantage to the purchaser may be at least twofold :

    1. he doesn’t have to pay the stampduty on the purchase immediately

    and (possibly)

    2. if the Option is held by a fresh company the investor may be able to sell the company and thus achieve that a second lot of stampduty is avoided. (there are some doubts in my mind as it looks to me that this would be a case of evading rather than avoiding to pay stampduty).

    Pisces

    Profile photo of aaron12aaron12
    Participant
    @aaron12
    Join Date: 2003
    Post Count: 8

    Thanks Brendon

    Aaron

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