Forums / Property Investing / Creative Investing / Lease option questions

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  • Profile photo of HancockHancock
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    @benhancock
    Join Date: 2016
    Post Count: 4

    hi all, I recently read a book on lease options but because it was written in the uk I’m not sure how some things apply to aus and n.s.w is particular.

    for example they said they would find someone who cant keep up their mortgage repayments and to avoid defaulting the equity they already have they offer the home owner a lease option with a exercise price under market value then once they have the option they find a buyer and sell at real property market value while exercising their agreement giving the original home owner funds to re pay the mortgage and profiting from whatever capital growth incurred while finding a buyer and however much under market value they got in the deal

    my questions are how does this work is aus? are their regulations to prevent such deals is n.s.w.? and what licences would be needed?
    I read I need to enter into an option agreement and contract of sale with a pre determined strike price but how do I sell at a higher price and exercise the original deal at the same time?

    Thank you very much in advance for any replies

    Regards
    -Ben

    • This topic was modified 2 years, 6 months ago by Profile photo of Hancock Hancock.
    Profile photo of TomTom
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    @thebeardedbroker
    Join Date: 2016
    Post Count: 10

    Tricky I’m sure.

    I think Nahn Nguyen does this sort of stuff although I’m not 100% sure. A friend of mine is a client of Nahn’s and speaks very highly of him.

    My advice, keep it simple particularly if you’re a novice. Unnecessary complications complicate matters unnecessarily.

    This is general advice only.

    • This reply was modified 2 years, 6 months ago by Profile photo of Tom Tom.

    Tom | Voyage Wealth
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    Profile photo of TerrywTerryw
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    @terryw
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    You are buying an option on someone else’s property. They, the owners, are then finding a buyer to sell the property to. The buy would pay the owners a fee and because you have an option on the property the owners would have to pay you a fee to prevent you excerising your option.

    It could work in NSW. No licence would be needed by you or by the owners for this.

    The biggest impediment would be stamp duty.

    Terryw | Structuring Lawyers / Loan Structuring Pty Ltd
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    Profile photo of HancockHancock
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    @benhancock
    Join Date: 2016
    Post Count: 4

    thank you for the replies,

    so if were to enter into an option agreement I couldn’t seek out buyers myself?

    and hypothetically could I enter into a long term agreement where I also manage the property and move in, and structure the deal where a % of my “rent” pays a premium to the original owner and a % goes towards the original strike price set on the deal, kind of like a rent to buy type of deal with myself?

    Profile photo of TerrywTerryw
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    @terryw
    Join Date: 2001
    Post Count: 16,110

    If you enter an option agreement you would have an interest in the property and could seek out buyers of it.

    Yes you could do that.

    Terryw | Structuring Lawyers / Loan Structuring Pty Ltd
    http://propertytaxbook.com.au/
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    Profile photo of DeanneDeanne
    Participant
    @deanned
    Join Date: 2016
    Post Count: 7

    You definately can onsell your option at a higher price. A Lease Option is exactly that – a Rent to Buy.

    You can do a Sandwich Lease Option, where you take an option on a property and then give an option to someone else on the same property at a higher price. You ‘sit’ in the middle of the deal, hence the name ‘sandwich’ I guess.

    And you can also put the deal together for yourself (and live in the house etc).

    • This reply was modified 2 years, 5 months ago by Profile photo of Deanne Deanne.

    Deanne | Creative Property Academy
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    Profile photo of Paul DobsonPaul Dobson
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    @pauldobson
    Join Date: 2003
    Post Count: 1,196

    Hi Ben

    I have no argument regarding the information given in the posts above. However, when it comes to the “consumer marketplace” things become quite grey. Rulings in courts and tribunals seem to rely much less on what’s written in the legal paperwork, as against what is fair to the consumer.

    For an indication on how various consumer advocate groups feel about vendor finance, especially Lease/Options (Rent To Buys), have a read of:
    http://consumeraction.org.au/fringe-dwellings-vendor-finance-rent-buy-housing-black-market-report/

    Even some sections of the vendor finance industry believe major changes to the regulation of residential Lease/Options are required. See:
    https://dl.dropboxusercontent.com/u/4221546/Finance%20Brokers%20Association%20of%20Australia.pdf

    And regarding Options in NSW, I believe it’s imperative that you have read of:
    https://www.linkedin.com/pulse/how-property-owners-can-walk-away-from-sale-options-right-cordato

    Cheers, Paul

    Paul Dobson | Vendor Finance Institute
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    An alternative way to finance your home.

    Profile photo of HancockHancock
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    @benhancock
    Join Date: 2016
    Post Count: 4

    hi thanks again for your replies.

    Deanne, could you please explain the process of how to on sell your option at a higher price?

    Paul, you have definitely opened my eyes to the legalities involved, I’m very grateful you took the time to send me those links.

    Does anyone know of someone who is well versed in structuring lease option contracts in N.S.W.?

    Profile photo of TerrywTerryw
    Participant
    @terryw
    Join Date: 2001
    Post Count: 16,110

    in NSW try Tony Cordato (lawyer)

    Terryw | Structuring Lawyers / Loan Structuring Pty Ltd
    http://propertytaxbook.com.au/
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    Profile photo of Paul DobsonPaul Dobson
    Participant
    @pauldobson
    Join Date: 2003
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    Hi Ben

    As Terry says, Tony Cordato is the man:
    Cordato Partners
    Level 5
    49 York Street
    Sydney 2000 (near Wynyard Station)
    Ph (02) 8297 5600

    The following may also be worth a read:
    https://vendorfinanceinstitute.com.au/should-all-home-buyers-get-national-credit-code-protection/

    Cheers, Paul

    Paul Dobson | Vendor Finance Institute
    http://www.vendorfinanceinstitute.com.au
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    An alternative way to finance your home.

    Profile photo of DeanneDeanne
    Participant
    @deanned
    Join Date: 2016
    Post Count: 7

    Hi Ben,

    Agreed, definately Tony Cordato. He is the lawyer I use in NSW.

    For a balanced view on all things vendor finance, also check out Tony’s website: http://www.vendorfinancelawyer.com.au

    Cheers, Deanne

    Deanne | Creative Property Academy
    http://creativepropertyacademy.com.au
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