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VTB

H

hardel

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Hi All,

I was talking to a vendor today about his property and I popped (I am a newbie first time doing this) the question about a VTB. He was not familiar with this and I told him a little about it (which is not a lot), but he seemed warm to the idea. I don`t want to mess this up, so here I am again looking for guidance. He is asking $259,000. What kind of percentages should should I be looking at for the vendor and buyer? In a VTB is it appropriate to negotiate on the price? What are the benefits to the seller?

You`re time is greatly appreciated!

Regards,

Harold
 
Harold,

There are no "fixed" percentages or formulas. You have probably heard this saying before...Cash is KING! As a real estate investor, this could not be any closer to the truth! The more you can spread your cash around, the more properties you will be able to purchase.

My recommendation to you would be to ask the vendor how much cash he or she is willing to leave in. Once you know this you can go from there. A word of caution here...you WILL find vendors that do not need ANY of their cash! How do you think I know this?

The best of luck to you!

QUOTE (hardel @ Jan 20 2010, 02:24 PM) Hi All,

I was talking to a vendor today about his property and I popped (I am a newbie first time doing this) the question about a VTB. He was not familiar with this and I told him a little about it (which is not a lot), but he seemed warm to the idea. I don`t want to mess this up, so here I am again looking for guidance. He is asking $259,000. What kind of percentages should should I be looking at for the vendor and buyer? In a VTB is it appropriate to negotiate on the price? What are the benefits to the seller?

You`re time is greatly appreciated!

Regards,

Harold
 
If the seller is warm to the idea always have them suggest a number. Do the same regarding the terms, have him make a suggestion.
Once he opens the door start to push the negotiations where you want them to go. You may be surprised how much you can get by simply asking.
Always remember every part of the deal is negotiable and what ever he suggests is only a starting point. But always remember the key to negotiations is being able to walk away from any deal.

Don`t be too eager or worse afraid to lose the deal or you will definitely over pay.
 
Thanks Peter, I appreciate your input. I will investigate a little further before I proceed.

Harold


quote name=`tonypeters` date=`Jan 20 2010, 06:09 PM` post=`76634`]
Harold,

There are no "fixed" percentages or formulas. You have probably heard this saying before...Cash is KING! As a real estate investor, this could not be any closer to the truth! The more you can spread your cash around, the more properties you will be able to purchase.

My recommendation to you would be to ask the vendor how much cash he or she is willing to leave in. Once you know this you can go from there. A word of caution here...you WILL find vendors that do not need ANY of their cash! How do you think I know this?

The best of luck to you!
 
QUOTE (hardel @ Jan 20 2010, 02:24 PM) .. He is asking $259,000. What kind of percentages should should I be looking at for the vendor and buyer? In a VTB is it appropriate to negotiate on the price? What are the benefits to the seller?
ask for 20% to 25% VTB at around 5-10% annual interest .. assuming 30% down and thus 5 to 10% cash in the deal ..

depends on seller`s motivation, location, supply/demand and price .. no real rule of thumb !

benefits to seller:

delayed tax payments on gain
interest on a portion of his property (where else do you get 6% or more guaranteed ?)
and if he cares: old guy helps young guy get going !
 
Most lenders are going to require 10% of your money into the deal in order to allow a VTB behind the first mortgage, so keep that in mind when negotiating.
 
trying to get my head around all this...

So if I have 10% and get a VTB of 10%, that leaves me with 80% from the bank. For the sake of CMHC am I going in with 10% or 20%? That is, will I have to pay CMHC on the mortgage?

Thanks
Mike
 
QUOTE (MikeMcC874 @ Jan 21 2010, 04:23 PM) trying to get my head around all this...

So if I have 10% and get a VTB of 10%, that leaves me with 80% from the bank. For the sake of CMHC am I going in with 10% or 20%? That is, will I have to pay CMHC on the mortgage?

Thanks
Mike

No, you are going with 20%. but the lenders determine how they want it to work.
If you have a 10% vtb and 10% of your own cash in the deal most lenders will not make you insure the deal. However as Rob can point out not all lenders are willing to work with deals that include VTBs
 
QUOTE (MikeMcC874 @ Jan 21 2010, 03:23 PM) So if I have 10% and get a VTB of 10%, that leaves me with 80% from the bank. For the sake of CMHC am I going in with 10% or 20%? That is, will I have to pay CMHC on the mortgage?
no, as your loan to value borrowed as a 1st mortgage is 80%, assuming it is residential !

Not all lender will do this loan if there is a 2nd on it !
 
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