Real DealOllie Hooper : Director
The Vendor Finance Experts
Background• Vendor Finance Business for 7 years• Mortgage Broker, Money Quest Finance
Licences, Memberships & Qualifications:– PAMDA Full Real Estate Agent Licence # 3551818– Australian Credit Licence # 389898– Mortgage & Finance Association of Australia (MFAA) Full Member #
690068– Credit Ombudsman Service Limited (COSL) Full Member #
M0009123 – Certificate IV Financial Services FNS40804 – Diploma Financial Services FNS50504
2 BIG Problems in Today’s Market
Problem # 1. Negative Gearing …• The landscape HAS changed• GONE are the days of rampant growth• Buy, Hold & “Hope” is NOT working anymore• What other long term investment can succeed when less
money comes in than goes out on a month-to-month basis?
Staggering 70% of Landlords claim a
rental loss!!- ATO
Problem # 2. Finance is Tough…
• Not enough deposit – GONE• No genuine savings – GONE• Credit Defaults – GONE • Low Doc Lending – Max LVR 80%• Lenders Mortgage Insurance (LMI)
Is Expensive
The Bottom Line ….
• Negative geared rental properties are now a BAD investment in most cases
• Buyers that can afford a bank loan can’t get a bank loan
What is the Solution ??
Vendor Finance … It’s Powerful!
What is Vendor Finance?
What is Vendor Finance ?
A conduit for buyers and sellers to transact without being dependent on bank finance.
Benefits:- Fast- Flexible- Beneficial to both parties- True Win / Win
Real Deal Location: Redbank Plains, BRISBANE
Scenario• Owner contacted me via this group in April
2012
• Any guesses what the problem was …???
Monthly NumbersDebt: $225,000
Int Rate: 6.85%
Payment: $1,474
Water: $33
Rates: $126
Insurance: $50
Total Costs: $1,683 * Maintenance & Vacancy not included
Rent Income: $290 p/w
Less Agent Fee’s: 9%
Total Income: $1,144
Total Shortfall: -$539 pcm
Landlords Options1. Do nothing, wait & “hope” for rent increase,
keep paying the shortfall
2. Put on the market & sell (conventional way)
3. Remarket with Vendor Finance to; a. stop the “bleeding”
b. maximize the profit on the property
Current Market Position
• Comparable Sales: $240k - $265k• Ave Days on Market for Suburb: 156• “Hopeful” Sell Price for Cash Sale: $250k• Less REIQ Commission: $7,370• Holding Costs: $2,695• Net Sale Proceeds: $239,935
Cash at Settlement: $14,935($239,935 - $225,000)
Re-Marketed with Vendor Finance
Buyer Found June 2012
Income ( $76,000 Gross Annual) Employment: (PAYG Coles, 4.5 years ) Credit: (1 x paid default; $771 Origin Electricity
finalized Apr 2009) Consumer debt: (None) Savings: ($10,000)
Issue: Lack of Deposit + Paid Default Rejected CBA
SOLD – July 2011• SOLD – Installment Sales Contract • Price $270,000 $265,000 (vs $239k 4 cash)• Deposit $6,000• Loan Amount $259,000• Interest rate 8.35% • Payment $1,964 pcm (vs $1,256 rent)
+ Water, Rates, Insurance & Maintenance
Monthly Cash Flow Turn Around
After:
I.C. Income: $1,964
Less Mngt Fee: $235
Less Costs: $1,474*
Total Cash Flow: $255* Loan only. Buyer pays for water,
insurance, rates & maintenance
Before:
Rent Income: $1,256
Less Mngt Fee: $112
Less Costs: $1,683*
Total Shortfall: $539* Loan + water + insurance + rates.
No maintenance & vacancy included
Total Monthly Turn Around = $794
Leverage !
TVFE Fee’s
• Lower of standard REIQ commission or upfront deposit collected on sale
• Ongoing management 12%
• Cash out - Nil
Follow Up “Hot Seat” Event
Tuesday 7th August 2012
Tingalpa
6:30 pm
$20.00 Donation to ‘Mothers Milk Bank’
Bring your property details, put me on the spot!
Thank you & Questions ?