Vendor Finance

Passive Income Stragtey

This is a case study of a vendor finance strategy we used to generate passive income in our property portfolio over a two-year period, starting with $5,000 in working capital. We have proven results that property investors can use themselves.
 

What are Vendor finance contracts or vendor terms contracts?
 

Vendor finance contracts, also known as vendor terms contracts, are agreements where the seller (vendor) provides financing to the buyer to help them purchase the property, rather than the buyer securing a loan from a bank or traditional lender. This type of arrangement is often used when a buyer cannot obtain full financing through a bank but still wants to buy the property.

It is a confusing title that pops up around the property circles occasionally and is a very grey area.

It is basically a sales contract with “special terms” inserted into the body that complies with State legislation and the Consumer Credit Act.

The “Special Terms“ the details are the purchaser's obligations to make payments of paying off the property:
 

• Deposit amount weekly or monthly amount
• Annual costs
• Interest charges
• Default or arrears

Every state has different laws, and it is important to check the laws pertaining to each state. ACL licences ( Australian credit licences) may be required if interest is being charged. Currently, 2020 Vic and SA laws prohibit term contracts, while QLD, NSW, and WA laws are legal.

Pros:

• High cashflow from minimal cash outlays with passive income
• Client pays councils rates and outgoings.
• Low default risk ( vendor retains title in office).
• Increases larger demand for property purchases and opens up a larger market.
• Deposits can cover acquisition costs if purchased at a very low price.
• Unpaid rates auctions are great for this strategy.

Cons:

• Must be highly organised and responsible to the purchaser.
• Solicitor preparing paperwork can be expensive to set up.
• Exchange of contracts can only be achieved by yourself.
• ( solicitors don't like them)
• If the client stops paying, you will have to resell the land.

“From little things, big things grow.”

Completed deals/case studies

Listed below are actual deals with marketing content. We compiled a small sample number of deals we have completed using this strategy to make passive income for over six years.
 

Case study 1: Website category unpaid rates/sheriff auctions

‘Walgett NSW Shire council unpaid rates auction 2015.”
 

Purchase cost: $1,000. Sold $12,000 ( market value) Notes:
Purchaser's Deposit paid for the initial cost of the block of land.
$70 a week income from zero capital outlay over 3 years.
 

(Advertisement)
2000 m/2 $70 a week payment plan
 

54-56 CHURCH STREET, COLLARENEBRI
Double block 2000 m/2 or half an acre in town. It represents great value for money, just reduced from $15,000, saving $3,000.
All services are available: Power, water, and sewer, with a few scattered trees.
Zoned village for building, flat land.
Hold for long-term investment, camp, weekender from Sydney, extra storage, get into the property market now, no bank qualifying;
$1,000 Deposit
No interest, no credit charges, no upfront legal, $70 a week
 

Case study 2: Website category unpaid rates/sheriff auctions

Walgett NSW Shire Council unpaid rates auction 2015.”
 

Purchase cost: $2,000. Sold $12,000 ( market value)
Notes: Purchaser's Deposit paid for 50% of the block of land.
$60 a week income from $1,000 capital outlay over 3 years.
 

(Advertisement)
Vendor finance 1000 m/2 $60 a week

29 ALBERT STREET, COLLARENEBRI
Phone enquiry code for this property: 3329

The land is a 1000 m/2 zoned village. Building entitlement, power, water, and sewer are all available and ready to go.
Collarenberi is a small regional country NSW town of approximately 300 people. 3-4 hours north west of Dubbo.
Flat land with no easements. It's a great opportunity to get into the property market.

$1,000 deposit
$60 a week.
No interest or credit charges or upfront legals.
No bank qualifying.
Pensioners, low-income earners, bankrupts are all welcome

Case study 3: Website category double blocks/ multiple lots

Rosebery Vic x 7 Multiple crown lots purchased as a whole 2015.”
 

Purchase cost: $15,000 ($2,142 for each block).
Sold $49,000 ($7,000 per block)
Notes: Purchaser's Deposit paid for 50% of the block of land.
$280 a week income from $8,000 capital outlay over 3 years.

(Advertisement)
2000 m/2 $40 a week payment plan
 

LOT 9 LASCELLES STREET, ROSEBERY
Phone enquiry code for this property: 3905
 

Just over 1/2 acre of land, flat, power available. Zoned farming, so no building entitlement.
2 road frontage to Henty way and Laceless st, Rosebery.
Sheds are permissible under 100 m/2. (farm use only).
 

It's great for weekend use to get away from the rat race of Melbourne. It's a four-hour drive and one hour to Horsham.

Uses (STCA): Camping, shed, storage, livestock, agriculture, pursuits i.e: Olive farm, protea farm, lavender farm, nature hobby pursuits.

Over 7 lots to choose !!!

$1,000 Deposit. $40 a week. No interest.No bank qualifying. Great opportunity to get started into the property market and build equity from Day 1 !!! "Who can't afford $40 a week".