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“Serious” investors nosing back into property market

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  • brettc
    replied
    Originally posted by Tucker View Post
    You go on about what if the market turns Joe public will be bitter and have a nasty reaction towards investors etc. Were they nasty the last up turn of the cycle or the one before that or the one before that.
    Some say investors are being immoral well what about the property I bought (and others) 5 years ago that has doubled now, going by some of your posts me purchasing this was immoral because I bought it and made money but the vendor loss 100% capital growth. This means I should have to give it back, in fact everyone should have to give their property back because the original vendor didn't realise it was going to increase in value in the long term and so has been ripped off.
    You are being silly. The issue I had was specific to the long settlement at today's price for next to nothing down. And to be honest, I don't really even have a problem with that.... it just struck me as an interesting interpretation of win-win.

    As already conceded, I don't know the facts, and Dean is confident with what he has done.

    But don't go painting me as some anti pi apologist who is determined to hold all money grubbing investors to a higher standard... cause it just aint so.

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  • Bluekiwi
    replied
    Originally posted by pooomba View Post
    You both get RV's and split any difference is a simple way.
    Nice, thankyou Dean

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  • Dean@Massiveaction
    replied
    You both get RV's and split any difference is a simple way.

    Leave a comment:


  • Bluekiwi
    replied
    Originally posted by pooomba View Post
    Mark the option stipulates "fair market value" and has a clear process for establishing that.
    "Options Rock" and gets Dean almost excited about them as he does over his wife and god - think I have that right.

    I have downloaded all your conditions from Massive Action so I will go and read it.

    But quickly how would market value be established in say 5 or 6 years for example.

    Is it like get 3 RV's divide by 3 and take off 2% agents commision and add in the value of the last cat she had ?

    Not the Big Mac price index or anything silly.

    Leave a comment:


  • Xav
    replied
    So this:
    Originally posted by pooomba View Post
    So we got the people in front to agree in writing to... sell to us when they were ready to sell at fair market value.
    Should read as follows?
    Originally posted by pooomba mk2
    So we got the people in front to agree in writing to... sell to us at a time of our choosing
    Feel free to ignore this if you want, I am just trying to be helpful. But unless you mistyped the first time, what you think you have done and what you have actually done are two different things.

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  • Dean@Massiveaction
    replied
    As I said Xav I use option agreements.

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  • Xav
    replied
    Originally posted by pooomba View Post
    Option agreements are caveatable Xav.
    To ensure we are on the same page:

    An Option to Purchase is a right to require the other person to sell you their property at any time of your choice within the option period. you would be familiar with these in a lease option context.

    A Right of First Refusal (or Right of Pre-emption) is an agreement requiring the other party to offer you the property first if they intend to sell it. If you refuse they can then sell to a third party, except that (usually) if they decide to sell for less than they offered it to you for they have to reoffer it at the lower price.

    The agreement you have described in this thread is a Right of First Refusal, NOT an Option to Purchase. It does not matter that you call it an option, the legal effect of it is a Right of First Refusal.

    An Option to Purchase creates an equitable interest and is caveatable.

    A Right of First Refusal does not, until the "triggering event" (them wanting to sell).

    If you want to discuss it with your lawyer the leading case is Motor Works Ltd v Westminster Auto Services Ltd [1997] 1 NZLR 762.

    Leave a comment:


  • Dean@Massiveaction
    replied
    Mark the option stipulates "fair market value" and has a clear process for establishing that.

    Leave a comment:


  • jporteous
    replied
    Hi

    Is there a rule of thumb for options - % of asking price for upfront option payment?

    Jon

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  • Mark_B
    replied
    Originally posted by pooomba View Post
    Mark I used an option. I was just trying to explain them for those who might not know what they are.
    I use options all the time, they rock!!
    I don't doubt that a good option agreement is worth paying for.

    But without a price or time period specified in the agreement, it is just a right of first refusal and not worth much at all (the point I was making).

    You can pay me $1k for a right of first refusal on each of my properties if you want. I'll offer them to you for $1m a pop tomorrow.

    M

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  • Dean@Massiveaction
    replied
    Option agreements are caveatable Xav.

    Mark I used an option. I was just trying to explain them for those who might not know what they are.
    I use options all the time, they rock!!
    Last edited by [email protected]; 01-08-2008, 12:42 PM.

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  • Mark_B
    replied
    Originally posted by pooomba View Post
    Simply explain that you would like an option to purchase their property if they ever decided to sell.
    You are willing to pay a fee of say 1K or 2K for the opportunity to be first in the queue when they eventually want to sell.
    Hi Dean

    We've been agreeing on things alot of late, so I am a little reluctant to post this, so sorry.

    But, what you have described there isn't an option.

    An option is the right, but not the obligation to buy a property at a specified price within a specified time period.

    With an option in place, you have control of the process as you can legally make them sell it to you.

    Otoh, a right of first refusal (which is what you have described) simply puts you first in line should they ever decide to sell (they are not obligated to sell at all) at whatever price they're prepared to offer it to you.

    Big difference.

    And not one worth paying any money for imho.

    M

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  • Xav
    replied
    Originally posted by k1w1 View Post
    Serious question. If the offers are long term and unconditional, how do you prevent the vendors failing to do maintenance - trashing the place, basically?
    Under the agreement for sale and purchase they must keep the property and chattels in the same condition as they were in at the date of the agreement. If they don't then you can claim damages for the costs of repair. Unfortunately you can't deduct this from the price you pay to settle unless they agree, but usually people do.

    You should always caveat the title for a long settlement, which prevents them doing anything to the title of the property.

    Originally posted by pooomba View Post
    For example I was looking at a property that had great views but there was a bach in front of it that could block the view if it was developed. So we got the people in front to agree in writing to A: not redevelop the site and B: to sell to us when they were ready to sell at fair market value.

    We caveated the title and proceeded with the other deal.

    This meant that we could put a height restriction on their site when we bought it and protect the view of the property we were buying. We were trading the property so simply provided the sale for the front property as part of the deal with instructions on what to do to permanently protect their views.

    Paying full price for their property in this case wasn't an issue as the loss of views to the rear property would have reduced it's value by over 500K.
    While you could do that, it would have been better to just pay them $X in return for them agreeing to put a restrictive covenant on the title.

    Signing an agreement for sale and purchase seems a bit odd in that situation since you didn't actually want the property and it meant you had to include it in your trade.

    Incidentally, "B" is a right of first refusal (or right of preemption), not an option to purchase, and legally cannot actually support a caveat until the time they decide to sell (the "triggering event"). Even then it may not be caveatable if your right of first refusal is not worded correctly. So currently it looks like your legal position isn't that desirable.

    Leave a comment:


  • Dean@Massiveaction
    replied
    Simply explain that you would like an option to purchase their property if they ever decided to sell.
    You are willing to pay a fee of say 1K or 2K for the opportunity to be first in the queue when they eventually want to sell.

    Leave a comment:


  • Bluekiwi
    replied
    Originally posted by pooomba View Post
    Another useful long term settlement strategy that doesn't lock in the price is where you want to control a property next to one you already own or you are wanting to buy now. You would normally do this with an option of course but you can make it an S&P.

    For example I was looking at a property that had great views but there was a bach in front of it that could block the view if it was developed. So we got the people in front to agree in writing to A: not redevelop the site and B: to sell to us when they were ready to sell at fair market value.

    We caveated the title and proceeded with the other deal.

    This meant that we could put a height restriction on their site when we bought it and protect the view of the property we were buying. We were trading the property so simply provided the sale for the front property as part of the deal with instructions on what to do to permanently protect their views.

    Paying full price for their property in this case wasn't an issue as the loss of views to the rear property would have reduced it's value by over 500K.
    I am dropping in tonight on the house next door to the one I will start negotiating on.
    To see if they want to sell or are thinking of selling at some time in the future.

    If I can secure both properties I have subdivision potential to create another section at the back (with road access as it is a corner block)

    Would be total 1,650m2 in Res 4b.

    Haha.. not sure what I am going to say but I am dropping in for a chat anyway.

    I am thinking of how to say in a nice way:
    1. Do you want to sell now
    2. Are you thinking of selling in the future
    3. Can I buy in the future even if you dont want to sell now or arent even considering it
    4. Can I have when you die you silly old bat (na just kidding I am hoping she doesnt think I am some sort of nutcase)
    Last edited by Bluekiwi; 01-08-2008, 12:03 PM.

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