I have been thinking about this for long time, but not 100% sure how to execute correctly and profit from this strategy.I have a IP with granny flat at the back yard.rough figure in and out cash as below
Rent income front houes $345
Rent income back house $260
Loan interest rate 7%
Loan yearly repayment $23,800
Yearly maintenance $5,000Net yearly cashflow $1,450
However, I don't really like this maintence cost ! so I thought that i can be below with vendor finance
Money OUT
Loan amount $340,000
Rate 7%
Repayment $23,800Money IN
Loan amount $390,000
Rate 8.5%
Repayment $33,150Net yearly cashflow $9,350
the IP has front and back house, I want to approach both tenant to see if they want to buy the whole house ( front and back). Question:
1)What sort of legal documents do I have to use ?
2)what if one of them want to buy and after 3 years they stop paying me loan which I provide to them, what right do I have ?
3)can I transfer all the rate to them(council, water,…etc..) ?
4)what possible thing can go wrong ?
5)How do I approach them to purchase my IP?
6)currently front house tenant is getting rent assistance from government will this rent assistance stop if they buy IP from me ?
7)due to front house tenant is getting rent assistance from government, does it mean they are a bit higher risk to default the loan ? ( they are current paying me rent on time all the time )I assume that the granny flat is on the same title as the house? If so both tenants will need to buy the wholre property jointly. Or maybe you are approaching each separately about buying the whole place??
1. A contract for the sale of land.
2. They would have already entered into an agreement to buy and exchanged contracts. If they did not follow through and settle then they may lose what they have put in. But this could be challenged in a court as it may be inequitable.
3. Maybe
4. The biggest thing that can go wrong is that they stop paying you and you have to 'evict'.
5. Maybe work out some figures and then go to see them.
6. yes
7. Possibly means they are on a low income which may mean you need to assess whether they can afford to buy the property.Also you must think about how much you are potentially losing. What if the property increases in value. You won't benefit but the tenants will so you are essentially giving up future capital gains to save some minor expenses now.
You also have to look at if you need a credit licence to be able to offer credit.
Might also want to consider 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
Hi scha9799
As per our phone conversation and Terry's and my response at:
https://www.propertyinvesting.com/forums/property-investing/creative-investing/4344467
I'd suggest you have a good read of Terry's response above and the links given in the url above.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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