Vendor Finance - I Hate Banks.com.au

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There are many people in Australia who do not meet the banks’ and other institutions lending guidelines. Some of the main categories of such people are:

Self-employed people
Persons with only casual employment
Recent arrivals to Australia
People with an insufficient deposit saved or an irregular savings history
Persons with no credit history
Persons with defaults or bankruptcy on their credit reports

One growing alternative for such persons is to purchase their home using "vendor financing". On 16-Sep-2002, channel 7’s Today Tonight program ran a story on this growing trend entitled "The home loan for battlers". It featured Sydney based investor Rick Otton who has been selling houses using the vendor finance method for over 10 years.

What is Vendor Financing

Vendor financed properties are also referred to as "wraps". Typically, an investor will purchase a house with a conventional home loan. This investor will then on sell this house to a home buyer on vendor finance terms, which effectively creates a contract between the home buyer and himself. The interest rate paid by the home buyer to the investor will typically be 2% or so higher than that paid by the investor for the original home loan, so the home buyer’s interest payments effectively "wrap" those of the investor. The investor usually makes a margin on the sale price in addition to the margin on the interest rate.

The benefit to the purchaser is that it allows them to buy a home when otherwise they were unable to. The purchaser typically refinances using traditional lending a few years down the track once they have enough equity or repayment history to do so. Using this system is therefore a win-win for both parties involved.

Rick Otton has on-sold over 300 homes on this basis, and claims that in the past year he has achieved an average profit of $27,000 per house. This is a method of investing in property where you make "positive cashflow" from day one.

Most people have a huge untapped asset under their own feet: their own home. By simply using a small portion of the equity in your home to cover the deposit on an initial second property purchase, you can be on track to generating substantial extra income through this system. It’s an opportunity that’s available to everyone who either:

owns their own home or is paying it off; or
who has some cash set aside for an initial property deposit

Even if you have neither of these, Rick can show you how to find money partners, or how to use vendor funds, to secure your initial properties. Many of Rick's students are successfully doing this by securing joint venture partners - you supply your time and expertise (which Rick can teach you) and your JV partner supplies the money.

But the fact is, few people in Australia know about this system and how to do it.

Rick has put together an educational resource called the "Wrap Pack" via which he has been able to successfully teach an increasing number of Australians his system of positive cashflow real estate investing. Many of his students are now highly successful in their own right and making substantial cashflow.

Rick's system teaches (amongst other things):

How to turn negative cashflow investment properties into positive
How you can make this system work for you... so you no longer need to work
How to develop a long-term passive cashflow
How to buy properties at a discount
If you're selling property, how to tap into a huge pool of potential purchasers
Provides an alternative to holding onto a vacant property whilst you wait for a conventional purchaser or tenant

Click here to navigate to Rick's website if you'd like to learn more about Rick's system.