Buying Real Estate

Buying Real Estate

Real estate provides excellent opportunities to invest Trade Dollars into real estate that will generate cash profits in the long term. Real estate isn't a particularly liquid asset, but real estate becomes more valuable over time and provides an excellent inflation hedge and tax shelter. Since Trade Dollars come from selling surplus or from additional new business and have a low incremental cash cost, many investors find that they can be more aggressive in pursuing investments such as real estate.
Because Contrabart members can earn Trade Dollars without significantly affecting cash flow, investors can buy speculative properties and wait for values to go up. In some cases, it's even possible to walk away with a pocket full of cash.

Even if the investor is forced to sell at a paper loss, the sale can still represent a cash profit. Here's how it works. Let's say a business has an incremental cost of 35 percent in its Trade Dollars.

The business owner buys a property for $500,000 with 30% Trade Dollars (T$150,000 + $350,000 cash), so the total cash cost in the property is $402,500. If he sells the property for $455,000 cash, he has still doubled his cash investment while reporting a $45,000 loss on his taxes. The ATO doesn't care whether you pay for the property in cash or Trade Dollars. The reportable loss is still the same.

Trade Mortgages
You can still buy real estate, including property, homes, units, even though you don't have sufficient trade available to pay for it. Trade exchange members have recently purchased units in Sydney, townhouses in Southport, waterfront acreage at Hervey Bay, an office building in Brisbane, and a resort in tropical North Queensland. These transactions ranged from $300,000 to over $4 million. Typically, the buyer paid between 25-30% part payment in Contrabart Trade Dollars. Where the member didn't have sufficient Trade Dollars the balance was financed with a trade mortgage, just like in the cash world.

Contrabart makes interest free Trade Dollar mortgages available to qualified buyers of real estate, where the repayments are paid in Trade Dollars over a period of time of up to 5 years interest free. You provide your products or service to members and deposit the Trade Dollars into your account. Even better, Contrabart brokers refer the new business you need to make the payments, and online sales can enable you to pay off the property even faster. It's that simple.

A recent property sold was a luxury Townhouse in Sydney. The property market in Sydney was slow so the developer decided to sell the property accepting Trade Dollars as part payment. Because he had a need for the Trade Dollars, he was willing to take 30% of his equity in the Townhouse in Trade Dollars. The asking price was $500,000. The equity of $150,000 was paid in Trade Dollars; the balance of $350,000 was paid by obtaining financing with a bank mortgage.

An example of creative trading would be for the buyer to apply for 80% financing of the $500,000 and get a $400,000 mortgage to purchase the house. The seller only requires $350,000 in cash to pay off his indebtedness, leaving an excess of $50,000 cash that the buyer keeps. The buyer also makes a down payment of 20% of the trade mortgage, $30,000 in trade, leaving a trade mortgage of $120,000. This can be paid in product or service of approximately $2,000/month for five years interest free.

Bottom line is, the house can be bought for trade and cash, and the buyer walks away with $50,000 in cash and lives in or rents the house for five years. The house can then be sold for at least $500,000 plus capital gains of say 20% which would make the property worth $600,000. Pay off the remaining cash mortgage of approximately $400,000, and walk away with another $200,000 in cash.

If you are interested in creative trading that turns Trade Dollars into cash, let us know. Then the next time a deal comes along, you'll be the first to know.