I want to buy property to do "rent to own" where do i start??

Ando wrote:

Hi guys,have had a look around and cant seem to find info on what i need to do to get this up and going? I would like to purchase a property and rent it out as “rent to own”.

Happy to help! :-)

Ando wrote:

Do i need to have any type of license etc?

I’m no lawyer but my understanding is that the answer depends on how many of those you intend to make? If it’s just 1-2 p/a, don’t think you should have an issue, but best consult with a lawyer, yeah

Ando wrote:

can i do the property management myself (rent collection, inspections etc)

Sure, why not?

Ando wrote:

and are there special contract pro-formas/terms my solicitor will need to draw the agreement – hoping to have everything organised before seeing him so it saves me money!

Yes, on top of the standard rent agreement and sales agreement, you will need to have an option (rent to buy) agreement. We got ours from a template online (paid under $100 for it I believe?)

Ando wrote:

Has anyone experienced good growth/return with these?

Yes, we did! :-)

Ando wrote:

my husband and i have been throwing the idea around of starting with a set price and increasing it by 5% each year so that the occupier has the option to purchase at anytime, but most of the tenants we will be aiming for will need to clear their credit history so it will be at the 3 or 5 year mark.

5% p/a is a nice appreciation and you do have a nice idea. We did ours around that price but they have to exercise it within 3 years. If they do it sooner, it’s the same price so our profits are locked-in. Do you have potential buyers already?

Ando wrote:

I would appreciate all and any help and directions to resources – the most i find when i “google” is SCAM or others offering property for sale via rent to buy. thanks in advance have an awesome day!

Happy to answer your queries. The more I answer, the more I learn (because someone, somewhere, somehow always corrects at least part of my answers ;-)

Hope this helps?

Cheers,
Ethan

Hello Ando

As you are looking at doing rent to own/lease options there is no licensing requirement for you to sell your own property in this fashion.
Licensing is only required if you look at using credit contracts and getting that licence is virtually impossible, or if you are looking at selling properties you do not own without having a sufficient financial interest.One is called an Australian Credit Licence and the other that you may need is a Real Estate Agent Licence.

As you will be doing lease options, as mentioned above, you will need paperwork that is made up of a standard residential lease and an option to purchase for your client. I would not use any kind of pro forma paperwork for this purpose and would use a solicitor knows what they are doing (has done many lease options before). There are certain types requirements that you need to meet with the paperwork to keep you “out of hot water”.

Also, as mentioned, a contract of sale needs to be attached to your lease option. But if you use the right solicitor you don’t need to concern yourself with those types of issues as they will put together paperwork in the correct fashion to suit each individual transaction as you do them. We have done a great deal of vendor finance transactions in the form of lease options, instalment contracts, joint ventures, deposit finance etc and we see the legal paperwork as a quasi-insurance policy and pay for a new one each property/each client. Properly formatted and correctly worded paperwork will save your ass many times over.

You can manage it yourself as it is your property. There are a number of ways to collect your funds from the client, the best way by far is the use a business like Integra Pay/Links Pay to direct debit the funds from the client bank account on a weekly basis. We have found that if you leave making the payment up to the client, quite often you will not receive it and it causes more headaches and is worth. If you want to get it managed there are a couple of companies that specialise in managing lease option and instalment contract properties. You can contact one of these companies by email at [email protected]. They manage a couple of hundred vendor finance contracts across the country.

When you are setting up your lease option you need to set your price upfront. Setting moving goalposts will cause a great deal of headaches for your client and if they choose to go for legal advice on the contract as a disgruntled person you will find yourself neck deep in “you know what” as the laws surrounding these transactions are vague but are very consumer driven.

Considerations around how you set up your underlying loan (fixed or non-fixed and for a period of time) and also the term of the lease option itself for your client a very important and need to take into account things such as their viability to achieve getting a bank loan within the option period.What payment are you going to charge and how do you structure that payment regime so that is both their for your client and profitable for yourself. Have you deal with interest rate rise/drop and also ongoing cost such as rates and insurance.
It is easy to say I just want to do lease options or instalment contracts but there is a lot more to it than people think and if you mess it up and are a little bit unlucky with the client you choose then you will have a very negative experience and it doesn’t need to be like that.

If you set up your lease option is correctly (or as good as can be done) the returns a very good. It is way better than renting a property and is definitely far more profitable than just selling a property through an agent.
It is very important that you get it right as the legal climate (being very consumer orientated) will not work in your favour. There is a great deal of information on my blog at http://www.siaccisystem.com.au.

This is getting a bit long so I had better stop now. I really do like creative vendor terms sales so I can ramble on the rages about them.

David siacci

• This reply was modified 8 years, 2 months ago by  David Siacci.

Lisa how are you getting around the ACL requirements ?

Cheers

Yours in Finance

Hi Ando

Are ok no you don’t need an ACL for a simple Lease option.

Must admit most buyers we put into homes want a fully blown instalment contract hence we utilise our licence.

Find it gives them a lot more flexibility.

Cheers

Yours in Finance

with an instalment contract because its a credit contract does that mean the vendor financier can write on the tenant – buyers credit report etc “missed payments” / defaults? or is that only aloud for mainstream banks?

Cheers, Huilo

interesting, how much does it cost to subscribe to veda?

cheers,

1. be patient to wait, Lets the Information come to You, never look for property for sell

2. House for sale and repair it than sell again is nice to have a profit

3. for overseas investment, never buy property because of the seller came from same country

hope that can help

Hi Ando,

I would like to ask what happened?
I am looking at providing lease option/vendor finance to help other get in the market, and make a profit for myself.

I have to admit I am confused by your posts as it seems;
*You were buying a house to then lease option to someone else
*It settled Feb 2nd
*Feb 25th you were trying to get equity out of the house in which you just settled?
(personally I think this is to soon as there has been no/little growth since purchase price)

Maybe I have missed something or maybe a fellow reader has followed this story better.
As I am considering this kind of creative option, I would assume that once I have a tenant to lease option, I could not/should not be accessing equity during the option term?
Or did you not have a tenant to lease option the property to?

Keen to hear the story and why it went so wrong for you in Feb and hearing the outcome today in Nov.

Regards,