Vendor Finance

Hi jhk31,

My partner Jack and myself have a similar story to Paul and Karen. We too started our vendor finance property business in 2003 – the worse possible time when the market was at its peak! However, we hung in there and we have been both full-time for some years now providing vendor financed houses to many happy homebuyers.

These people don't qualify for a bank loan because they have credit issues (but still have good incomes) or simply don't have enough deposit! They are vendor financed into their homes by our Joint Venture Partners who are in a position to buy houses.

It produces positive cash flow for our JV Partners (and us) and a home for these homebuyers. They can see the big picture of owning their home, being free from landlords and knowing that they'll be refinancing out to a bank in a few years time.

So yes – it's good but, as Paul said, it's not a "get rich quick" scheme. We have many happy JV partners and homebuyers.
Though, like life, issues do come up.

It is a long term business that is fruitful and satisfying because it's a win-win-win situation for everyone involved.

Cheers,
Tamar

Hi ottg

a.  Most of the properties we sell are purchased by our Joint Venture partners, i.e. they're bought with the intent of on selling them with Vendor Finance.
b.  The trusting relationships build up over a period of time talking together and always being available to answer their many questions.  It's also important to have as many testimonials as possible and to encourage people to ring and talk with the people who gave the testimonials.
c.  We normally sell the properties ourselves as we normally have two or three and sometimes more people wanting to buy the properties.  We don't usually reno, subdivide or develop.
d.  When we started, we were lucky, i.e. we had some equity in our PPOR that we were able to use to buy the intial properties that we then on sold.  Obviously that equity didn't last forever but, by the time it ran out, people had noticed what we were doing and wanted to get involved.
e.  We bought a Vendor Finance Manual at the end of 2002, while we were living in the Middle East as expats.  We then took a leap of faith and moved back to OZ in early 2003 to get started.  We ended up doing our first transaction later that year.

1.  Get some good Vendor Finance (VF) education
2.  Do not think of VF as a get rich quick scheme
3.  Join the Vendor Finance Association of Australia  ( http://www.vendorfinance.asn.au )
4.  Ensure you understand the requirements of the Consumer Credit Code.

Cheers,  Paul

If you already have an investment property I assume VF is still an option as a way of on-selling it?

Hi fredo

As Tamar says, yes you can use vendor finance to sell existing investment properties you own.  We call this our negative2positive program.  Sandra, in the "Testimonials" area of our website, is a negative2positive client. 
 
It's also important to note that different States have different rules regarding what you can and can't do with the mortgage you have on the property you're selling with an Instalment Contract (IC).  NSW will only allow you to refinance up to the new buyers debt level, i.e. you cannot refinance the property above what the new buyer currently owes you for the property.  In Victoria, once you enter into an IC for the sale of the property, you cannot increase the debt level of your mortgage on that property, until the sale has completed, i.e. until the new buyers have refinanced or sold the property.
 
Cheers,  Paul