VTBs - What drives it?

[nchotalia]

What is the reason the vendors offer VTB at the rates they do which are lower than banks.

Why would they not take that same money and invest somewhere else with better gains in their pockets? When it is time to unload the property would one have to offer similar VTB to attract buyers?

 

[RussellWestcott]

Off the top of my head, this is 6 reasons why I offer VTB's when I'm selling:



- Cash flow >> this can provide an income stream



- Flexibility >> more options, and willing to work with the buyer to close the deal, if you are flexibly you have more potential buyers



- Entice Buyers >> VTB can give me a unique selling position, and buyers are attracted to 'low money down' deals



- Ease of buying >> if you make it easy to buy you will have more buyers (why is the Brick do not pay to 2041 so popular)



- Potential higher price >> if I am providing some of the financing, making it easy to buy, I may be able to get full market (or maybe more than market value)



- Deferral of Capital gains >> I may be able to defer my Capital gains for up to 5 years. There is a great article on Don's blog regarding this >>click here



Hope this helps, this is a short list of the reasons why a vendor may offer a VTB, hope it helps.

 

[housingrental]

You've partly answered your own question within your question. To help facilitate a sale. Other reason might be for tax deferral. Final reason is rate of return of interest payment might be higher than seller can get in similar time period loans elsewhere and they are comfortable with the asset and they are looking for consistent cash flow.

 

[nchotalia]

Perfect ! Thanks very much and the reference to the blog.