Join Australia's most dynamic and respected property investment community

Option agreements.

Discussion in 'The Buying & Selling Process' started by Biggsy, 13th Feb, 2016.

  1. Biggsy

    Biggsy Member

    Joined:
    11th Feb, 2016
    Posts:
    5
    Location:
    QLD
    I am looking for some info on setting up option agreements and selling the contract and also who I may be able to contact in Queensland for the legal side of things if someone specializes in them.

    There is a property in my area that I have been keeping an eye on for a few months. It is in a good area of town, no one has done anything with the property since I first seen it.

    From the street it appears to be a fair condition house and could do with a basic cosmetic Reno.

    My thoughts are to try get it on a option contract do the work and sell the contract on before I actually purchase the property.

    I know it has been done before so interested to hear from people that have experience or expert advice on pros and cons.

    Thanks.
     
  2. Terry_w

    Terry_w Solicitor, Finance Broker, CTA Business Member

    Joined:
    18th Jun, 2015
    Posts:
    9,014
    Location:
    Sydney
    RPI here is a qld property lawyer who could be able to assist.
     
    Propertunity likes this.
  3. Propertunity

    Propertunity Exclusive Real Estate Buyers Agent Business Member

    Joined:
    19th Jun, 2015
    Posts:
    1,236
    Location:
    NSW
    Chilliblue likes this.
  4. DaveM

    DaveM Adelaide Buyers Agent & KFC Strategist Business Member

    Joined:
    14th Jun, 2015
    Posts:
    2,106
    Location:
    Sydney & Adelaide
    Is this a double stamp duty in QLD?
     
  5. Terry_w

    Terry_w Solicitor, Finance Broker, CTA Business Member

    Joined:
    18th Jun, 2015
    Posts:
    9,014
    Location:
    Sydney
    Without looking, I believe there are 2 lots of duty, but the duty on the option contract will be small - clarify with your QLD property lawyer
     
  6. RPI

    RPI Property Lawyer, Town Planner Business Member

    Joined:
    19th Jun, 2015
    Posts:
    713
    Location:
    Brisbane
    We do options all the time. Mostly Call options but puts and calls are useful also (eg developer selling vacant land to builder).
    Not double duty, small duty on option depending on how structured and value of option fee.
     
  7. Biggsy

    Biggsy Member

    Joined:
    11th Feb, 2016
    Posts:
    5
    Location:
    QLD
    From what I have found so far I thought this is how tax would be paid.
     
  8. Terry_w

    Terry_w Solicitor, Finance Broker, CTA Business Member

    Joined:
    18th Jun, 2015
    Posts:
    9,014
    Location:
    Sydney
    Only duty in qld like this. The income tax would be on top.
     
  9. JDM

    JDM Well-Known Member

    Joined:
    19th Jan, 2016
    Posts:
    145
    Location:
    London (ex Brisbane)
    You should also consider whether a call option or put and call option is more appropriate.

    Call option = you have an option to buy the property, they can't make you buy the property but you pay a non refundable call option fee for the right to be granted the option (duty will be payable on the option fee).

    Put and call option = you have an option to buy the property and they have an option to make you buy the property. The put option fee in this case is usually a token amount ($1.00 if demanded).

    Your situation is not complex so most property lawyers should be capable. The only thing that throws a spanner in the works is that you are wanting to do renovations before you have exercised an option to buy the property. The documentation will need to deal with this - ie what happens if you get half way through renovations and then stop, what if you cause damage while performing the renovations, what if you don't do the renovations that were agreed, what if the option is never exercised - is there a constructive trust? Do you get reimbursed?
     
  10. CU@THETOP

    CU@THETOP Well-Known Member

    Joined:
    19th Jun, 2015
    Posts:
    227
    Location:
    Brisbane
    Why not sign up for a workshop with the self proclaimed guru of options Mark Rolton? For a few thousand quid he can let you know some of the "secrets" and for a few thousand more he will mentor the process for you.
    Full sarcasm there- I don't recommend Mr Rolton.

    Depending on who currently owns the property you will need to tailor your approach. If oldies own it I suggest a smooth fast talking agent be appointed to get in under the radar. Documents will need to be bulletproof so have them ready to rock and roll

    Option contract will have a sale contract attached with provision for substitution of purchasers to dodge double duty.

    If the current owners have any idea of the property worth then it is unlikely they will enter an option agreement without a substantive non refundable option fee and realistic sale price.

    Let us know how it goes.
     
  11. WayneR

    WayneR New Member

    Joined:
    10th Feb, 2016
    Posts:
    1
    Location:
    Melbourne
    Be upfront with the seller about what you are doing - I had a guy in Brisbane do a lot of these where he'd tell the owner that he wanted the option to renovate and sell the property, and if in 12 months he hadn't sold the property, the owner got back a fully renovated property.

    PROS: Stamp Duty savings; no need for a loan; may have a smaller upfront cash investment than purchasing.
    CONS: watch Option Exercise and Expiry dates like a hawk; check out insurance obligations while you're working on a property under option (i.e. not in your name).