Could someone please give me advice on options and swaps? I have only an elementary understanding.
For eg. You put a down payment on a property with the interest of purchasing the property at a later date. During that time of the contract period you can find alternate buyers and make an arbitrage profit.
Is the right? And what else is there needed to know?
Thanks.
Yes you can enter into an option to purchase contract. Find someone else willing to buy and then assign the option to them for a fee. Can save lots of stamp duty by using options.
Have a look in the API magazine. There is a QLD solicitor called Rob Balanda who is selling some books or CDs concerning options.
Terryw
Discover Home Loans
North Sydney
[email protected]Terryw | Structuring Lawyers Pty Ltd / Loan Structuring Pty Ltd
http://www.Structuring.com.au
Email MeLawyer, Mortgage Broker and Tax Advisor (Sydney based but advising Aust wide) http://www.Structuring.com.au
Thanks for your help TerryW.
Are options common in real estate? I hear not many vendors prefer options and there is risk involved in the fact that you might not be able to find a buyer during the contract period.
I don’t think Options are common – especially on residential. They are more common with commercial type deals.
If you can’t sell the option, you will lose the option fee paid or you could just settle on the property.
Terryw
Discover Home Loans
North Sydney
[email protected]Terryw | Structuring Lawyers Pty Ltd / Loan Structuring Pty Ltd
http://www.Structuring.com.au
Email MeLawyer, Mortgage Broker and Tax Advisor (Sydney based but advising Aust wide) http://www.Structuring.com.au
Options are certainly not common and many vendors are unsophisticated investors who will not want to know about them. You will also need to consider being licensed in some States to onsell real estate if it is not your own.
The Mortgage Adviser
http://www.themortgageadviser.com.au
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Essential LinksBut, by having an option over a property, you will have an equitable interest in the property, and can therefore sell it yourself.
Terryw
Discover Home Loans
North Sydney
[email protected]Terryw | Structuring Lawyers Pty Ltd / Loan Structuring Pty Ltd
http://www.Structuring.com.au
Email MeLawyer, Mortgage Broker and Tax Advisor (Sydney based but advising Aust wide) http://www.Structuring.com.au
I don’t think the equitable interest rule applies to all States. Does anyone know the answer to this for sure?
The Mortgage Adviser
http://www.themortgageadviser.com.au
[email protected]
Essential LinksNot sure, but you would be selling the option anyway. The option holder would then take up the option to purchase.
Terryw
Discover Home Loans
North Sydney
[email protected]Terryw | Structuring Lawyers Pty Ltd / Loan Structuring Pty Ltd
http://www.Structuring.com.au
Email MeLawyer, Mortgage Broker and Tax Advisor (Sydney based but advising Aust wide) http://www.Structuring.com.au
Usually you would only buy an option if you expected the property price to go up substantially before settelement – so you could sell for a profit.
This might occur in a very hot market, or if you negotiated early access to the property and did it up before onselling the option.
Because there are many expenses with buying and selling (even an option costs money), you would want to ensure that you would gain a healthy profit in this short amount of time – for if you don’t find a buyer who is willing to settle on exactly the same date then you are stuck with buying the property yourself or forgoing your deposit. It’s a high risk strategy.
To sell an option you really need to have an asssignment and/or nomination clause in it.
You might get hit up for double stamp duty depending on which state you are in.
Greg
Does antbody know what a ‘put and call option’ is and how it relates to property. Stamp duty is now payable on it in WA as if you had a contract of sale. Does an ‘option to puchase’ attract duty over East? or is this the same as a put and call?
CheersApostle
Can anyone help Apostle and I out? How is it different to just a call option? Many thanks gurus!
A ‘Put & Call’ option is often used to shift the capital gains tax liability into a more favourable year.
CGT is based on the contract date – NOT the settlement date. So if I know that my income is going to be high this year and lower next year, then if I can choose I would prefer to pay CGT next year.
Often used in commercial and by developers a ‘Put & Call’ option essentially obliges each party to enter into a contract, possibly when defined conditions are met.
So in my case the option might say the option can not be excersied until after 1st July 2006 – thereby moving my CGT liabilty into the next finacial year.
The advantage is I have certainty NOW that the property is sold. Either myself (the seller) or the buyer can excise the option and force the other party to enter into the contract.
Cheers,
GregHi All
An option is a right but not an obligation to purchase an item.
From reading this post they are not common. for me nearly every deal is the purchase of a option usually a put call option.
They are used where the person who puts up the put call option, doesn’t have to purchase the land but pays for the da to be done then (whats called flick ) the site with the da attached in a good market you can make good money.
In nsw no there is no duty on the flick as the contract is at the land value, the purchaser buys the land and theN pays the flickee the added value.
In this market the flickee are getting burnt as they are in a very soft psoition and are losing money and the land owners are selling with the da attached not good for the flickees.
most are timed usually 1 year but can be 2 and the fee is usually 1% of the value of the land.
will find out soon about wa as I’ll be in perth next friday.here to help
If you want to get involved in some of the projects I’m involved in email to [email protected]
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