help with wrap

Hi jcls

I would be very careful here before I just put it down to poor cash flow management skills and head off to try to consolidate their debts into a loan with a lower interest rate.

It is usual for wrappees to be paying more for their installment payments they they usually pay in rent. If they are having problems now, how are they going to handle the higher instalment repayments?

Also, if you are using an installment contract and not a lease option, you are effectively providing credit to your clients. As a provider of credit, it is your duty to satisfy yourself that your clients have every chance of making all the payments necessary under your credit contract. Unfortunatley you now have information that shows that your clients may not be able to handle their future repayments and this information could possibly be used against you in a future court action which may try to set aside your contract as “unconcionable”. Not a nice place to be!

At best, I might let them rent the place for 12 months, with an attached 12 month savings plan or maybe a 12 month option. Both arrangements would allow for some form of rent credit from each weeks rental payment, to go towards their future deposit on the property.

I hope this helps.

Cheers, Paul

Hi John

Yes that’s pretty much the idea. You just set up a 12 month lease with a 12 month option. You then set their lease payment at a level which makes the property cashflow positive for you (including rates, insurance, etc), plus a weekly amount which will be your client’s rent credit. As you say, if they are able to cope with this for 12 months you can roll them over into a 3 year lease option and possibly later an instalment contract.

I hope this helps.

Cheers, Paul