Solicitor Peter Carter answers the questions about the rent to buy schemes that are catching many would be Aussie investors.

Also we hear that the gap between the rich and the poor keeps widening. In some countries the gap is at its highest level in 30 years. The good news is that Australia is not only one of the wealthiest countries in the world but also has one of the most equal distributions of wealth. Today we look at why the rich are getting richer with Michael Yardney.

This weeks success story features a young man who together with his Dad did a 1 into 4 lot subdivision which involved a minor renovation of an existing house and creating 3 additional lots.

In real estate there is a saying that ‘you only get one chance to make a good first impression'. First impressions do count and can make or break your chances of getting a property sold. But does it make a difference to a valuer? We find out today because that is what we asked a valuer.

Any drop in interest rates is promoted widely as “good news” for the housing market and whilst a drop in rates may on the surface bode well for mortgage holders wanting to pay down debt, the bleak reality remains, that for savers, many of whom are would-be first-home buyers, the news is not good at all according to Catherine Cashmore. She tells us why today.

Brad Beer returns to answer a question from David that came about because of a comment Brad made in an earlier show.

 
Transcripts:
Peter Carter
Kevin:  I don’t know if you’ve seen it in your area, but I’ve certainly seen it in mine. Driving around, you’ll see signs on lampposts and street signs that say, “We will buy your house for cash. We’ll pay the full price, and we’ll buy it now.” What’s behind those? It’s a rent-to-buy scheme, and I want to talk about it because it has been of concern to me for some time.

Peter Carter is from Carter Capner Law, and he joins me. Peter, I know you know what I’m talking about. Could you just explain how these schemes work?

Peter:  It depends on the imagination of the entrepreneur behind it, but typically it’s a situation where the perhaps desperate, or hopeful, or optimistic seller thinks they’re going to get a bargain out of this type of deal. On the face of it, they do.

The entrepreneur offers to pay full price, but it’s a projected long-term settlement. Usually they’ll pay an option fee of cash or sometimes it’s even monthly fee. But they get the right of immediate occupation. The entrepreneur – or agent; let’s call them that – gets the right of immediate occupation, and they install their customer as buyer under those terms.

The option fee is paid out of the rent received by the agent’s customer to the seller and comes off the ultimate purchase price. But if you have a three- or five-year term involved there, it can become a nightmare for the owner-seller. They might never get paid, and that’s often what happens.

Kevin:  Is the figure that’s paid today’s figure, or is it the figure projected toward the settlement time – which could be two or three years away)?

Peter:  It’s today’s figure, but it’s the asking price. There’s usually no argument about what the asking price is, because the object of the entrepreneur is to get hold of the house so they can put a tenant in.

Kevin:  The real risk here, of course, for the seller is that you’re giving up occupation. There have been a number of occasions, I believe, where the property either wasn’t settled or when it was due to be settled, it was trashed.

Peter:  Yes, that’s right. The attraction to the buyer is that they get a long time to settle. They’re actually only paying rent, and part of that is going to the buy price, which to many punters looks attractive. But of course, the entrepreneur is taking a cut as it goes through.

Kevin:  Then of course, the risk is that the property won’t settle. What sort of recourse do you have in this situation? Wha