FAQ 33 Where can I find out more about Vendor Finance?

Vendor finance is quite a comprehensive subject so we have produced a webinar on this topic.
It can be accessed here

Also the following links will help provide more information

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Both of these would be great places to commence your education.

if you intend to mainstream the use of Vendor Finance then joining the Vendor Finance Association of Australia would be a wise move.

Their website is http://vendorfinance.asn.au

In addition, while viewing the webinar, you may wish to avail yourself of the offer on the purchase of the software. The details for this offer will be made available at the bootcamps.

and the website(just hot off the press) can be visited by clicking on this link:-

http://www.propertyinvestorsystem.com

We have been asked to provide the method for working out the figures for a lease/option deal.

PLEASE NOTE! It is essential that ,whatever figures that you arrive at, the buyer must be able to exercise out at a future date. ( ie a fully workable option) If you create a scheme where the buyer cannot exercise then you may be in breach of consumer law.

This process is simplified using the Property Investor System however it can be manually worked through:
Note that some of the steps require a Principal and Interest calculator

1) Decide the Option Strike price. eg $450,000 eg look at sales in the area and add approx 5% to the highest comparable recent sale.
2) Decide the Option Length eg 5 years
3) Decide the minimum period before the option can be exercised. eg 2 years
4) Decide the \’upfront deposit\’ amount eg $15,000
5) Work out the total annual Council Rates, Water Rates and Insurance and divide by 52 to get the weekly amount. eg $3,100 divided by 52 = approx $60 per week
6) Decide what interest rate uplift you will charge on your interest rate. eg you pay 5% and want an uplift of 1.5% so you charge 6.5%. This is typical and is based on the low doc rate from a bank.

With the above figures perform the calculation

Amount owing after paying deposit = $450,000 minus $15,000 = $435,000
This amount is owing at a rate of 6.5% over 30years (Principal & Interest) THIS IS WHERE YOU NEED THE P & I CALCULATOR . Working this out on my calculator it comes to $635 per week
The total weekly payment will be $635 plus $60 = $695 per week.
A portion of the payments plus the upfront will be paid back to the buyer only if/ when he exercises. The portion paid back will probably be equivalent to the principal portion paid off over the period ( AGAIN THE CALCULATOR WILL WORK THIS OUT)

This website explains more about Vendor Finance

http://www.vendorfinancelawyer.com.au/

Michael and Sara

Ultimate Coaches

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