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 ?