More on Instalment Sales

Instalment Sales are huge in the US and UK, but not in SA. The main reason is that the rental income on a property in SA it low compared to the monthly mortgage payments. And the reason for this is because we are paying 13-15% interest on our lending while the US and UK is only paying 4-6% interest.

The ideal instalment sale is where the rental income covers the instalment every month. The instalment will typically be the same or higher than the monthly mortgage payments.

At the moment I have many sellers wanting to sell on instalment sale, but the instalment is higher than the rental income. This will not be a problem if the buyer is willing to cover the shortfall between the mortgage payment (the instalment) and the rental income.

So when will a buyer be willing to do that? Well, if the buyer is getting the property at 10-25% below market value it might be worthwhile to pay the shortfall for 1 or 2 years. This is how most investors buy property anyway. Or the buyer wants to take advantage of not having to apply for a mortgage and the cost savings doing such a transaction. There is no bond transfer or application cost and the legal fees are 50% lower. The transaction would take less than 30 days to complete.

I need to know if we have investors that would be interested in buying properties like this where there is a small shortfall every month between the instalment and rental income. You can email me at colin@prevent-repossession.co.za