Rent To Buy: Bootcamp Highlight Notes

These notes were taken whilst listening to a webinar from Rick Otton who was discussing the highlights from one of his bootcamp seminars.

• Webinar is being recorded (TODO: get the recorded version)
  
• Life is limitless!!!
• The only limits in life are those that you set yourself...anything is possible - if you haven't done it yet, you just haven't found the processes' and/or tools.
• Rick consults with "powers to be" (implying government officials etc) in regards to "what is happening" and continues to state that the Census has an option: "are you purchasing your property by: a) ... b) ... or c) A Rent To Buy Scheme
• Indicating that this is becoming so popular that it is bound to be the way forward...

• INSTALLMENT SALE aka TERMS CONTRACTS aka VENDOR FINANCE
• Allowing the sale of a product via installments
• nb: "The Block" the TV show was bought using an installment contract or 'vendor financing'
• Has delayed settlement and a monthly payment schedule between settlement date and exchange
• A lot of students will just use this method and nothing else
•  
• HANDY MAN SPECIAL
• Most people would love to do the Reno themselves (design the way they want)
• Happy to pay full price
• As long as you make it easy to purchase the property in the first place
• Buyers has emotion and energy invested in teh property

With these two strategies you're relaly just a stepping stone into the mainstream banking system..."don't look at me like a bank...but rather, look at me as the ladder to get you into the banking system"

Allows people to get their credit back in order.

Can show lender their ability to make payments on time.

LEASE OPTIONS - RENT TO BUY (not Vendor Finance as it's not a Finance contract)
Can if they want to, buy the property but they dont have to!
They don't pay stamp duty or legal fees.
Easy paper work
Residential lease and the option.
The option gives them the right but not obligation to buy
Give money up front, this goes to the property purchase
They could even transfer that into another property down the track if they want something else

Three Documents Required to do this strategy
1. Option to buy
2. Residential Tenancy Agreement (can buy these at a newsagent)
3. Contract for sale

If looking for solicitor (to draw up these agreements)
Use a commercial solitior as they have more experience with these documents

BACK TO BACK LEASE OPTION
Lesae option with the seller
Lease option with the buyer
aka sell the option you got from the seller to the buyer
You are now transacting the right to buy the property...
They don't attract any taxes or stamp duties until ownership
Mcdonalds starting doing all these lease option.
Lease option for land
Lease option to the franchise owner
Made money on arbitrage between the options. More detail in the book: "beneath the archers"
Buy a house for $1 this way!
Lunar Park went for a $1
Volvo went for a $1

Nobody wants their Debt Bit, everybody wants their Cash bit!

Sometimes won't always get it for $1 sometimes $1,2,3,4,5K

AJV Assistant Seller
JV with the Seller
Go to the market and split the profits 50/50
Assumptive Joint Venture (with a person that is in a property)
1 person brought the money to the table and the other person does all the transacting ( make the transaction seamless)

Deposit Finance
Recognise that the buyers don't have deposit
Buyer borrows as much, vendor lends them the deposit.
You buy property. Ultimate buyer buys property, and gives you monthly installments for the deposit. you then take the mortgage to the next property and continue the cycle...

Some Now Some Later
Make offers to RE Agents - give some now and bit more later
Agent: "how much can you give now?"
Give large sum of money to vendor to begin with - normally comes out of the mortgage
Vendor may get it later with interest (eg 5 yrs time with interest all in one payment at end or with monthly interest installments) sometimes needs stepped interest rate. Depends on what you need to do to bring the whole thing together.
By the time you need to give the rest of the money to the vendor, you've on sold the property to the next person.

Getting Started
Choose your areas.
Just go and start speaking to everyone in the game:
Solicitors, Accountants, Real Estate Agents, Buyers Agents
Internet: Google Videos for the strategies
Let it become a part of you...think it, feel it, breath it, live it!
Start small:
1. Call 3-5 agents
2. Let the agent know what you're trying to do

Which strategy if you have no money
Back to Back
AJV
Installment Contract (then get an investor to come in with the $ and then give the investor 50% of the profits)

What to do if you have Negatively Geared Property
Rent2Buy
Change from Rent to Rent-2-Own
Current tenant may not want to change (they'll be paying a lot more than they're used to)
Give the current tenant a share of the $ as an incentive to help sell the property to prospective new tenants
Installment Contract

What if you have Fear/Lack of confidence

Why Buy When The Market Is Down

I've been trying to keep an ear to the ground, listening to experts regarding what affect the recent Share market crash will have on the Australian Property market.

The general consensus seems to be: don't fret, in fact investors come back to property when shares don't perform.

And: this is a good time to buy - when consumer confidence is rattled as it opens up unique buying opportunities to the savvy investor!

BUT: what does that actually mean?

WHY is this a good time?

HOW does this translate into opportunity for the 'savvy' investor???

Finding A Deal: Question 2 - Transport?

The area you choose to focus on should have easy access to public transport

How Do I Find Out If Public Transport Is Easily Accessible?

• Check the council website for the area
• Google for 'area name' transport map
• Find the name of the company running the transport in that area and visit their website
• Once you have all the maps (bus/tram/train) save them somewhere safe - you should include them in any Business Plan that you are showing to potential investors

Finding A Deal: Question 1 - Employment Area?

We hear that it is important to ensure that the area you are focussing on offers close proximity to an 'employment center'.

Well, what is an employment center?

• Where the money is made
• ???

How close should my area be to a definitive employment center?

• ???

How do i find out if my area is close to an employment center?

• Start with the Area Council website. 
• Have a look at their zoning map; look for industrial and commercial zones within your chosen area
• ???

Finding A Deal - My 3 Areas

My three areas that i'll be focussing on are:

1. Parramatta
The size of Parramatta is approximately 6 km².  It has 18 parks covering nearly 23% of the total area.  There are 8 schools and 5 childcare centres located in Parramatta.
The population of Parramatta in 2001 was 17,236 people.  
By 2006 the population was 16,721 showing a population decline of 3% in the area during that time. 
The predominant age group in Parramatta is 20 - 29 years.  
 
Households in Parramatta are primarily sole parent and are likely to be repaying between $800.00 - $1000.00 per month on mortgage repayments. In general, people in Parramatta work in a non-specific occupation. In 2001, 31% of the homes in Parramatta were owner-occupied compared with 33% in 2006. 
Currently the median sale price of houses in the area is $648,750.

STRUCTURE: 
Couples with children (20%)
Childless Couples (22%)
Group Households (8%)
Lone Households (21%)
Single Parents (26%)


HOUSEHOLD OCCUPANCY (2006)
Renting (63%)
Owns Outright (13%)
Purchaser (19%)
Other (5%)

MyRPData Full Report

2. Newcastle
The size of Newcastle is approximately 1 km².  It has 7 parks covering nearly 11% of the total area.  There are 2 schools located in Newcastle.  
The population of Newcastle in 2001 was 2,414 people.  
By 2006 the population was 1,918 showing a population decline of 21% in the area during that time. 
The predominant age group in Newcastle is 20 - 29 years.  
 
Households in Newcastle are primarily sole parent and are likely to be repaying over $2000.00 per month on mortgage repayments. In general, people in Newcastle work in a professional occupation. In 2001, 38% of the homes in Newcastle were owner-occupied compared with 43% in 2006. 
Currently the median sale price of houses in the area is $495,000.

STRUCTURE: 
Couples with children (8%)
Childless Couples (27%)
Group Households (3%)
Lone Households (24%)
Single Parents (37%)


HOUSEHOLD OCCUPANCY (2006)
Renting (55%)
Owns Outright (21%)
Purchaser (22%)
Other (2%)

MyRPData Full Report

3. Blacktown
The size of Blacktown is approximately 16 km².  It has 52 parks covering nearly 8% of the total area.  There are 16 schools and 11 childcare centres located in Blacktown.  
The population of Blacktown in 2001 was 36,676 people.  
By 2006 the population was 39,586 showing a population growth of 8% in the area during that time. 
The predominant age group in Blacktown is 20 - 29 years.  
 
Households in Blacktown are primarily couples with children and are likely to be repaying between $800.00 - $1000.00 per month on mortgage repayments. In general, people in Blacktown work in a non-specific occupation. In 2001, 65% of the homes in Blacktown were owner-occupied compared with 63% in 2006. 
Currently the median sale price of houses in the area is $380,000.

STRUCTURE: 
Couples with children (35%)
Childless Couples (23%)
Group Households (14%)
Lone Households (6%)
Single Parents (20%)


HOUSEHOLD OCCUPANCY (2006)
Renting (33%)
Owns Outright (30%)
Purchaser (33%)
Other (4%)

From Wikipedia:

Blacktown is located 34 kilometres west of the Sydney central business district and is the administrative centre of the local government area of City of Blacktown. Blacktown is the largest of any suburb or township in New South Wales and is one of the most multicultural places in Sydney.

MyRPData Full Report - ABS 2006 Blacktown Census

Rent To Buy Real Estate: Question 1

These are the questions i have about the idea of Renting To Buy Real Estate:

1. If the motivation for 'The Buyer' is to get into the market without the Banks for the purpose of 'Refinancing' down the track...what are they going to be Refinancing?

 - I assume that the vendor holds onto the Title throughout the term of this transaction, so what is there available for the 'The Buyer' to ReFinance on???

- Perhaps the answer lies here:

says St George will accept rent as a form of savings for a home deposit if there is evidence of a minimum of 12 months continuous, satisfactory rental history and the property is leased through a licensed property manager.