His tool of choice is instalment contracts: a type of vendor financing that allows him to create good outcomes for all parties, make cashflow instantly with very little investment, and have multiple routes to another payoff in the future.
Not a clue what vendor financing or an instalment contract is? Don't worry – I've never done this type of deal before, so I made sure Thor clarified everything with a real-life example.
In this interview, you'll learn:
- How Thor went from an underground mine in Australia to being a shopfitter in Ireland to being a property investor in London
- Why Thor picked London as the place to learn his new trade
- What exactly an instalment contract is!
- The factors that make an instalment contract arrangement attractive to vendors (and it's not normally to do with being financially distressed)
- Why instalment contracts are more palatable to vendors than lease options
- How to show the vendor the benefits and make them fully understand the process
- The methods Thor uses to find suitable deals
- Thor's multiple exit strategies (and how they can help to avoid letting agents' fees)
Thor's example of buying a property in neutral/negative equity with an instalment contract
Enfield, North London
List price: £305,000
Mortgage payments: £650pcm (interest only)
- Vendor got £3,000 upfront to move into another rented property
- Thor spent £11,000 on legals, maintenance etc
- Wrote off the 2nd charge to bring the debt to £280,000
- Thor exchanged on the property and arranged with the bank to take over the mortgage payments
- The mortgage has 18 years left to run, and completion has been set to coincide with redemption of the mortgage.
So Thor's exit strategy is to refinance or sell the house in the future. In the meantime he's making a monthly profit of nearly £1,000.
When he does sell the property, he has a side agreement with the vendor to pay him an extra £10,000. If the vendor had sold conventionally he'd have ended up with no profit, so he's happy to wait.