Forums / Property Investing / Creative Investing / Assignment of contracts?

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  • Profile photo of Nu2ozNu2oz
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    @nu2oz
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    Is it legal to assign over an interest in a property to another investor in Australia?

    Profile photo of RPIRPI
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    @rpi
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    State based systems are different.  Need state and also more info

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    Profile photo of Nu2ozNu2oz
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    Probably one of the following:

    Victoria, NSW or ACT.

    Thanks

    Profile photo of TerrywTerryw
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    It would be legal but there are many implications. There is a whole branch of law concerning the assignment of various interests in property. What are you trying to do?

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    Profile photo of Nu2ozNu2oz
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    Thanks for your reply Terry,

    The idea is to look for distressed property and then assign it to an investor for a fee.

    This is called wholesaling in the USA, and I'm interested to know if it can be done (legally) in Australia ?

    Profile photo of wilko1wilko1
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    Just find the property and have the Investor pay you a spotters fee if they are successful in purchasing any property that you introduce them to. Might find though in some states you have to be a registered real estate agent to act like this. (course can be completed in a couple months of external study)

    Profile photo of Richard TaylorRichard Taylor
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    Alternatively you could look at taking an option on the property and then look to sell the option 

    Of course if they are distressed properties it is unlikely that you will be able to get the Vendor to agree to such a contract and also in some States Stamp Duty will be payable.

    Becoming a fully compliant Buyers Agent might take more than a few months as Wilko mentioned but you might be able to work under someone else's licence initially .

     Cheers

    Yours in Finance

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    Profile photo of TerrywTerryw
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    Nu2oz wrote:
    Thanks for your reply Terry,

    The idea is to look for distressed property and then assign it to an investor for a fee.

    This is called wholesaling in the USA, and I'm interested to know if it can be done (legally) in Australia ?

    Could be done in theory, but would be difficult in practice. What are you assigning? Legal lnterest = stamp duty and CGT, equitable interest would also be a dutiable transaction (i am guessing) and a CGT event. Any loans would need to be redone as it would be a breach of the terms of the loan agreement. Lender’s permission would need to be sought.

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    Profile photo of Nu2ozNu2oz
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    Thanks for the replies, and I see there is more to this than first meets the eye. Please bear with me, with the following idea's, I'm pretty much just trying to find out what I can or can't do legally, and the implications.

    The idea is to find a "distressed" property, and get it under contract (me as the buyer and/or assignee) with a deposit only payable when the contract goes unconditional (Terry, I guess this is what you referred to as a "legal Interest"?).

    Next find a buyer(investor) for the property – someone who has the funds to buy it and do a reno and hold/rent it (possibly)

    I'd be assigning the Sale & Purchase contract over to them (they would be the Assignee).

    My fee would be shown in an "assignment" contract, which the buyer would sign (or maybe it would be referred to as a "Finder's Fee").

    I'd get paid when the contract goes unconditional and a deposit has to be paid by the buyer – so it would be the investors funds which pay the deposit.

    1. Is this scenario possible in Australia?

    2. Great point about stamp duty Terry – is it applicable in this situation?

    3. Also good point about CGT – would it be applicable to any fee payable to me by the investor/buyer?

    The idea of putting an option in place has crossed my mind, but again I'm unsure how this would work with regard to Stamp Duty and CGT?

    I'm trying to find out if:

    a. There's a way to circumnavigate the stamp duty aspect – legally (ie: if I'm not owning the property at any stage, but only controlling it, would I be liable to pay SD/CGT?)

    b. I'm able to charge a fee for simply finding and assigning a property to a buyer without the requirement to hold a Real Estate Agent license?

    Thanks

    Profile photo of TerrywTerryw
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    1. yes

    2. yes

    3. no, income tax

    Options would be better, but also CGT or income tax on the assignment and stamp duty on the value of the option – recent changes or soon changes in NSW so you may have to pay stamp duty on value of the property.

    a. not really

    b. not in nsw

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    Profile photo of Nu2ozNu2oz
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    Time to do a bit more research/reading I think!

    No doubt I’ll be back with further questions, but once again, I appreciate your time and the information you’ve provided.
    All information from posters here has been very helpful, thanks for the input folks.

    Profile photo of JBCJBC
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    Stamp duty’s not necessarily payable at the date of settlement. In Tas it’s payable within 3 months of settlement. You could check on that for the areas you’ll be operating. Also, you don’t have to be the one that pays it – as long as it’s paid the State Revenue Office doesn’t care. So you could agree that the final buyer pays it. However, I guess there would have to be enough profit in the deal to allow for this. Also, if Terry is talking about being hit twice with stamp duty then this would be something to avoid.

    • This reply was modified 4 years, 5 months ago by Profile photo of JBC JBC.
    Profile photo of Property TraderProperty Trader
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    Hi Nu2oz,

    When I started 15 years ago we use to assign contracts (on about 20 deals) … however it is difficult these days. We currently use call options (on about 100 property deals) as it allows you to secure the property and prevents any funny business occurring with onselling it (the rights to purchase) either from the seller or potential buyers cutting you out of the deal. Remember in these types of deals you are the middle man in the deal.

    Tip: If you get a significant discount on a property then secure it with a normal contract.

    All the best.

    Jason Moore

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    Profile photo of CrisCris
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    Hi Nu2oz,
    When I started 15 years ago we use to assign contracts (on about 20 deals) … however it is difficult these days. We currently use call options (on about 100 property deals) as it allows you to secure the property and prevents any funny business occurring with onselling it (the rights to purchase) either from the seller or potential buyers cutting you out of the deal. Remember in these types of deals you are the middle man in the deal.
    Tip: If you get a significant discount on a property then secure it with a normal contract.
    All the best.
    Jason Moore

    hi Jason,

    i have 2 questions for you

    1, u said it is difficult these days of assigning contracts, why is that? i m new to this area and have no experience
    2, do u know any good lawyers or tax accountants based in Melbourne who are specialized in the lease option field? i want to work with the experienced ones…

    Many thanks in advance

    Cris

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