Afternoon all
Right here is what I fancy doing. I fancy saying to an owner of a particular property: hi there. I might fancy buying your property. But not today. I'd like to purchase the right to buy it for a pre-agreed price on or before a pre-agreed date.
So as an example:
Hi. May I please pay you $5k for the right to buy your property for $600k on or before 31 December 2012. If I decide not to buy it, you get to keep the $5k. If I decide to buy it, you will have to sell it to me for $600k, regardless of its marketvalue at that time.
Can I do this? In other words, pre-agree a price and date? If so, what sort of "option" is this called? How much should the option fee be?
Any other pitfalls I should be wary of?
My question is relevant to a property in VIC.
Thanks all!
Jacqui Middleton | Middleton Buyers Advocates
http://www.middletonbuyersadvocates.com.au
Email Me | Phone MeVIC Buyers' Agents for investors, home buyers & SMSFs.
Hi JacM
Yes you can do it. The legal paperwork you need to accomplish is called a "Call Option".
As you haven't outlined your exit strategy for your plan, I won't comment on your plan as, to me, it's not a plan without an exit strategy. And you definitely need to have your exit strategy in place before you go into the transaction.
As you mention that you're in Victoria you need to make sure that you don't have a lease on the property while you have an Option on the same property. In Victoria, if you have a Lease and Option concurrently on a property, you have to pay Stamp Duty on the strike price of the Option, i.e. not the $5,000 option fee you mentioned but on the $600,000 strike price.
Cheers, Paul
Paul Dobson | Vendor Finance Institute
http://www.vendorfinanceinstitute.com.au
Email Me | Phone MeAn alternative way to finance your home.
hello people of the property world, I'm a new member here and I too have been looking into the different experience people have had with optioning property.
From what I have learned it is best achieved through a JV or on a short term option. is this true, I am interested in knowing people's success stories (if any?). Has all the hard work actually paid off?
Cheers
KatieHi Katie
Welcome to the forum. I'm sure you'll enjoy your time here.
My wife and I started our Vendor Finance residential real estate business in 2003. Some of the tools of this business are Options, Lease/Options, Joint Ventures, Instalment Contracts, etc. Happily for us, I was able to give up my job early in 2009 and we are now both enjoying working in our Vendor Finance business full time.
We'd suggest the main pitfall is believing that it's some form of get rich quick scheme. Happily it's becoming more regulated by the new National Credit Code and this is helping to improve its image.
A few web resources that may help in your search for information about Options and JV's in residential real estate are:
https://www.propertyinvesting.com/strategies/wraps
https://www.propertyinvesting.com/strategies/lease-options
http://www.jvpropertypartners.com.au/index.php?option=com_content&view=article&id=50&Itemid=75
http://www.vendorfinancelawyer.com.au/
http://www.vendorfinance.asn.au/ The Vendor Finance Association of AustraliaCheers, Paul
Paul Dobson | Vendor Finance Institute
http://www.vendorfinanceinstitute.com.au
Email Me | Phone MeAn alternative way to finance your home.
Thankyou heaps Paul
Jacqui Middleton | Middleton Buyers Advocates
http://www.middletonbuyersadvocates.com.au
Email Me | Phone MeVIC Buyers' Agents for investors, home buyers & SMSFs.
Thanks for all your research Paul!
Really insightful resources, that have put me in a clearer state of mind – or at least a point me in the direction of the next step.
I can definitely see the value in these investment strategies. And, hopefully, like you and your wife, they can be successful. Agreed, i have found it interesting in avoiding the sites advertising the "get rich quick" alternatives (a sentence that I think shouldnt really exist – especially in the property world). Options in particular are a long term game it appears.Thanks again, all the best in your venture.
Katie
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