Renting To Buy

If you are thinking of buying your own home perhpas you should act sooner rather than later.  Why?   Leading property forecasters Biz Shrapnel, have made the prediction in their latest report.  Tyhe report was written by economist Frank Gelber, and makes the following key points:

• Interest rates will rise… They have.

• Owner-occupiers will s*&t themselves and stop bidding… They have.

• Owner-occupiers will put their cheque-books back in their pockets and keep paying the rent… That’s what’s happening right now.

• Vendors selling their homes will have to consider all offers or take property off the market… Look out for this.

• Rent will explode, especially in Sydney… This is already taking shape.

So the message is to position yourself before prices jump again.  Can’t qualify for a home loan right now?  No problem.  Go to www.homebuyexpress.com.au and check out the rent buy home ownership plans.

The sub prime mortgage meltdown is definitely having an effect in Australia. Here is what is happening right now:

• Sub Prime lenders such as Bluestone, Liberty and Pepper are either withdrawing from the market, or at least they’re significantly reducing their exposure to it.
• Lenders that are still doing business have dramatically tightened eligibility requirements and increased interest rates.
• The Reserve Bank has increased interest rates 11 times in a row in the last couple of years
• In the last few months, most lenders including banks and non-bank lenders have increased their rates by MORE THAN the Reserve Bank increases

And Here Is the Good News:

Because of the foregoing, prices in most mortgage belt suburbs in Australia are now starting to moderate. Even in our home base of Brisbane, the last couple of months are showing an increase in house listings, and a softening in prices compared to the high point late last year. We estimate that prices have come back from their highs of last year, by 10 per cent.

So, buying is becoming keener. With more houses for sale, we can drive a hard bargain with motivated vendors. That has to be good news.

And there is more………….

Interest rates will start to fall, sooner or later. When? We reckon the Reserve Bank has gone too far and will recognise the error of their ways within 6 months. Then, the push will be on for a drop.

Everything goes in cycles. Interest rates are no different. On Friday, the Financial Review reported that a majority of economists now predict interest rates to fall within 12 months. We think it will be sooner.

At Home Buy Express, we’ve been structuring rent buys for our clients for more than 7 years now, and during that time we’ve seen different market phases. And there is no doubt our favourite phase is when the market moves into its ‘quiet phase’ - like now. So if you are committed to buying your own home, but cannot qualify for a home loan, give us a call on 07 3357 9467.

One of the best ways to increase the value of your rent buy house is to give it the right royal reno treatment!

Take our clients, Peter and Janelle. They took possession of their house in Loganlea (in the southside of Brisbane) in 2006. Within a month of moving in, they got started on their makeover project.

Room by room , they have transformed what was once a basic low set house (unfortunately we don’t have ‘before’ photos) into a stylish, comfortable little palace.

Using sweat equity, some money, and loads of good taste, Peter and Janelle have affected a remarkable transformation. Take a look at the photos and see for yourself.

And here’s the bottom line: their buy price is around $220,000. And at the time of writing the value of the property is almost $300,000. Not a bad result considering the relatively short time Peter and Janelle have been in the house.

Like the idea?  Give us a call at http://www.homebuyexpress.com.au  07 3357 9467.

Crazy times we live in.  We have a healthy economy, yet some people aren’t happy about that.  They see house prices heading skywards.  They see interest rates trending upwards with another .25% increase being announced in February.  And because more people are opting to stay as tenants, rents are rising strongly all over the country.

So, what’s goin’ on?  And what should you do now?  I assume you seriously want to buy your own home.  That’s a given, right?  But should you do it now, or should you wait and see what happens?  Well, I can’t answer that. 

House prices may flatten this year as a result of interest rate increases.  But, in South East Queensland for instance, the fundamentals are strong, with lots of people moving into the region.  The effect of this is that housing shortages are the ever present reality.  Housing shortages in turn lead to a rise in rents.  

So if you do hold off your decision, don’t wait too long.  Once the interest rate pendulum swings the other way (and it will, no question), prices could rebound very quickly.  And you may miss out - again.

Therefore if your situation is such that you simply must get into your own home, sooner rather than later, the rent buy option could be a perfect fit for you.  Check it out!

This year we have had a flow of people financing out of their rent buy arrangement via our business Home Buy Express.  Anyone who says these arrangements don’t work is obviously not in possession of the facts.

A case in point.  We helped a couple into a house in February of this year.  The house is situated in Holland Park in Brisbane.  This couple went to work on the property making improvements to it at a feverish rate.  Some of the improvements were as follows: air con, new office downstairs, painted throughout, and a termite barrier.  Now, just 8 months later, they have organised bank finance and will complete the purchase in the near future. 

Here was a couple who could not get a bank loan for the simple reason that the husband is self employed and did not have the 20 per cent deposit to qualify.  So they did the smart thing and went with a rent buy plan.  Now, with the improvements to the property, they have created tens of thousands of dollars of equity in that short period.  Isn’t that a SMART way to get  a bank loan?  Of course it is!

Self appointed consumer advocate Neil Jenman is at it again.  He’s doing what he does best; he just loves to rip into anything he doesn’t like.  He certainly doesn’t like rent buy.  Rent buy is now added to his long list of pet hates.

This is OK.  Neil gets his jollies from ripping into others.  He’s been doing it all his life; I worked briefly (mercifully) with him when he was just 19 years of age.  And he was exactly the same then, as he is now.  I remember the experience well, regrettably. 

But let’s look at his criticisms.  The main one seems to be that he doesn’t like the fact that the tenant does not hold title to the property.  He says the risk is unacceptable.  We say the risk is manageable.  As long as you organise a rent buy via a reputable investor or company, you should be fine. 

Our experience has been totally positive.  Since www.homebuyexpress.com.au launched in 2001 we have not had a single situation where one of our investor partners got themselves into trouble and defaulted on their mortgage (thereby preventing the tenant from financing out and taking over ownership of the property).  So, where’s the risk?

Keep in mind that most people are only on the rent buy (or vendor finance) arrangement for a couple of years anyway.  Best advice for you is to only align yourself with a rent buy business with a good track record and a long history of success.

The Sydney Daily Telegraph reported recently on July 21 2007 SYDNEY families struggling to scrape together a home deposit or unable to cope with a bank mortgage are turning to rent-to-buy schemes in increasing numbers.

The scheme offers those desperate to get in to their own homes a low-deposit loan - often as little as $2000 - with the remainder of the loan paid as rent over the life of the loan or until the customer refinances.

The total of the home is not handed over to the customer until the debt is paid off.

Interest on the loan is usually 0.5 to 2 per cent higher than the bank is offering although repayments are fixed for life and couched in terms of rent.

Troy Boldy is the director of one of the rent-to-own companies that have cropped up in western Sydney.

He buys cheap homes and offers them to home-seekers under the rent-to-own stamp, with the customer paying him directly rather than repaying a mortgage to the bank.

He says in the past 10 months his company Rent 2 Buy Houses has had more than 600 enquiries from people wanting to get in to their own home but unable to get bank loans or a deposit together.

Webuyhomes.com.au is another of the companies offering a similar rent-to-own scheme.

It is also reporting an overwhelming level of interest in their service.

Mr Boldy said there were thousands of hardworking Australians desperate to get in to a home who can’t because of their imperfect credit history or who were unable to get a deposit together while paying record rent prices.

“The rent-to-buy system allows people the opportunity of home ownership without having to visit the banks because they are buying directly from the owner,” Mr Baldy said.

He said many of those who came to him were self-employed, recent divorcees and new arrivals.

“Trying to buy your own home whether it is a house or a home unit can be quite a struggle for some people - especially when you’re renting and trying to save for a deposit at the same time,” Mr Baldy said.

The banks can put some strict criteria on individuals and couples making it harder to get a home loan to buy their own home.

For many, home ownership remains a pipe dream as the required deposit keeps rising ahead of saving rates. It can become a Catch-22 situation because the goal posts keep moving.

Real Estate Institute NSW President Christine Castle said rent-to-buy was one of the more inventive ways of getting in to the housing market - forced by falling housing affordability.

Ms Castle, who is also a working real estate agent, said she has seen an increasing number of friends, siblings and even work colleagues making the decision to go into a mortgage together as a way of getting in to their own home.