Hi
I want to sale my IP.
under the current market condition, it may sale around $390,000-$400,000
in better market condition, it may sale around $420,000-$430,000I want to sale this property so free up some borrowing capacity and cash.
my loan amount is $340,000, my mortgage rate is 6.50%. I am thinking of vendor finance to sale this property for $420,000. and buyer pays all the rate ( water,council, strata……)
the buyer only have to pay for $5000 up front fee. after 2 years the buyer have to source they own lender.
within 2 year I charge 1% extra ( 7.50%)to my current mortgage rate( 6.50%)hence my cashflow looks like below
Loan Rate IN ( buyer pays me) 410,000 7.50% 30,750 Loan Rate OUT ( I pay my loan) 340,000 6.50% 22,100 cash inflow is $8,650 per year.
Question,
1)if after buyer purchased the property realised that something need to be repair, said roof or fence need to be repaired or toliet is leaking…… Will the buyer have the right to come back to me ask me to fix up all the problems ?2) after 2 year if the buyer still couldn't come up deposit and find another lender what right i have ?
3) how do i pass on council rate, water rate, body corporate…….. to buyer within these 2 years?
4) is there any company help buyer/seller doing admin. work ( such as collecting the mortgage and pay out the mortgage, issue the monthly loan statement to buyers……)
5) is solicitor fee more expensive than normal buy/sale transaction ? if yes, how much more ?
I am sure Paul will post here shortly, but You may need to be licenced to sell under an installment contract.
This won't free up borrowing capacity as you will still be the legal owner and have your loan in place until settlement.
1. depends on the contract
2. depends on the contract. The buyer may need to be compensated if you terminate though.
3. put it in the contract or build it into the price5. Yes it would be for the extra work. $500 to $1000 approx.
Have you considered a lease option?
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
what's the difference between lease option and instalment contract
One is a sale the other is an option to buy
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
scha9799 and Andy, at this point it would be a good idea to get to know the difference between an Instalment Contract (IC) and a Lease/Option (sometimes called a Rent To Own). Have a look at:
https://www.propertyinvesting.com/strategies/wraps
https://www.propertyinvesting.com/strategies/lease-optionsscha9799, everything you're looking for is available with an IC, except the 2 year term. The new National Credit Code (NCC) has a real challenge with a short term followed by what is effectively a balloon payment. However there are ways of writing up an IC for a longer term but, at the same time, inserting various mechanisms into the IC to 'movtivate' the buyer to refinance into a traditional loan within, say, the first 5 years. However all such 'motivating mechanisms' must be taken into account when initially qualifying an IC buyer. If you are not locked into a 2 year term an IC may work.
As Terry mentioned, a 2 year Lease/Option would work, except for you making the tenant/buyer responsible for the council rates, the water rates, the insurance and the maintenance on the property. All State Residential Tenancy Acts won't allow this.
Questions.
1. With an IC the VF buyer will be responsible. With a Lease/Option you will be responsible.
2. You wouldn't write up an IC for 2 years – hence not applicable. For a Lease/Option, after 2 years both the Lease and the Option would expire and, if the tenant/buyer did not 'exercise' the Option they would normally have to vacate.
3. An IC is the only way to pass on these costs but an IC would not 'fit' if you are locked into a 2 year term. With a Lease/Option you can get a two year term but you can't pass on these costs.
4. Yes, http://www.vendorfinancemanagement.com.au (Disclosure – we own VFM)
5. It should cost you approximately $1,200 to $1,400 to get the IC or Lease/Option drawn up but we get the buyer to pay this cost.More information on this concept is available at http://www.negative2positive.com.au (Disclosure – this is also our website)
Cheers, Paul
Paul Dobson | Vendor Finance Institute
http://www.vendorfinanceinstitute.com.au
Email Me | Phone MeAn alternative way to finance your home.
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