Family seeking Rent to Buy investor for home in Perth

When you say would any investors take this? Are you saying that a 100% return on capital over 3 years and a 2% yield over this period is unattractive? Is so I would be very keen to understand what you are comparing this too?

 

Yes understand, but the transactions cost (stamp duty, purchase costs etc.) could all be included in the deal. For example, I have considered models where I would pay the stamp duty and purchase costs upfront so there would be no costs to the investor apart from the deposit, no ongoing costs to the investor for the property over the lease term, premium on the rental and certainty on exit price.

Understand what you are saying about no upside to the deal if 'prices doubled' over the next 3 years, however I would argue who is taking the bigger risk. In this current economic environment, what is going to drive property growth to those levels?

I suppose my proposition would be better suited to an investor with maybe a larger property portfolio where they are looking for less risk in the next deal as they already have a lot of exposure or an investor that is less speculative and just looking for a good solid fixed term investment.

Agree that that is not for everybody, but I am confident it would suit some investor profiles.

 

Yes, the property would be in the investors name (or equivalent structure) until I purchased the property, hence it would be funded in the same way you would fund any other investment property.

 

I agree your points about financial risks are all valid, but these are the same risks whether it was me renting the house or somebody i.e. lost job etc. The choice of house would be agreed based on the meirts of the property and the areas I specified are desirable coastal neighbourhoods well known locally as solid investment areas.

 

Would refer to discuss specifics directly with investor that may be interested, but purchase price range would be around $900K-$1Million. Rental, exit price, costs, structure etc all negotiable.

 

All depends how the deal is structured. There are ways to cover these risks.

 

Please update here when you have secure the deal.
Share all the details except - name, street, bank accounts.

Because your ideal sounds intriguing as a pipe dream.
I would love to be proven wrong, so will many people who have posted here.

 

For a long term investor, the returns are in the back end. Say you put in 20% deposit + 5% stamp duty. The stamp duty is a sunk cost that is offset against the 20% appreciation. For a long term hold, this is mitigated by property price increases and time. Over 3 years and a 20% appreciation, not so much.

If I buy a place for 1m, 200k deposit + 50k stamp duty. The real payoff is in the later years. In the 24th year when the property gains 300 odd k to reach 4m. I might keep it forever and leave it to my estate.

Say I make 2% net rent a year for 3 years + 200k at the back end. That's 260k, taxed, on an investment of 250k. But factoring in the risks of you not holding up your end and tying up a lot of borrowing power that I could buy somewhere else where my returns are not capped and can grow untaxed.

What you are looking for is a medium term property investor with that much borrowing capacity who is willing to tie it up for 3 years without the long term payoff. But these are very hard to find.

But thats just opinion. If you find someone to take this deal, would be very interested in how it works out.

 

I have done more Rent to Buys and SMSF Rent to Buys this year than i did in 2000 when we started First Home Owners Group (and we did one or two back then).

On most cases we require 20% deposit and the purchase costs, stamp duty etc be paid into our Solicitors Trust Account prior to us entering into a contract to purchase. Unlike many others we dont hold our own stock or insist that the buyer must buy a new home in order to obtain the First Home Owners Grant.

Course has a lot has changed since then and not just the fact that the investor may need to hold an ACL or the fact that it is now illegal in VIC (under 750K metro) as well as SA. As always there are sensible ways around such legislation in these States.

Cheers


Richard