A wrap is where you buy a property, jack up the price 10% or so, then offer a potential buyer vendor finance (bank loan via proxy – you being the proxy). How is this profitable ?, you have to wait 20-30 years to get the money (or does it just provide a positive income like rent would in that you have to pay the bank $300 a week but you are receiving $350 a week from the buyer).
Clarification, opinion and advice are welcomed.
‘All I ask is the chance to prove that money can’t make me happy’
In a nutshell you are getting the 2% loading on the repayment plus wrappers hope for the wrappee to refinance the property after a few years. They then make the 20% loading on the sale price. In an ideal world the property is worth more to the wrappee by this stage so it should be win/win.
Hope this didn’t over simplify things.
Cheers,
Simon Macks
Mortgage Broker
http://www.mortgagehunter.com.au
0425 228 985Comments may not be relevant to individual circumstances. If you intend making any investment, financial or taxation decision you should consult a professional adviser.
Tony,
There are 2 wrap strategies….
1. Long term, where you are only aiming for the long term %/$ spread between the 2 loans. seeing out the term for 25-30 years…. or
2. Short term ( 2-3 Years ) This is where the wrapper is used as a stepping stone into a real bank loan…… this is fairly common, Essentially any markup in price you get once the re-financing takes place, and, obviously you have also been receiving the % spread between the loans….
Cheer
Scott
Pelican Investments
http://www.pelican-invest.com
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