I have read and heard much of the days in which Steve wrapped 60k houses in Ballarat.
Being new to wrapping and very interested I have been working through the figures and it appears to me the best clients are those with a stable income without the cash for a 20% deposit, as stated as Steve’s target market in the wrap kit audio.
As I am not interested in chasing the occasional 60-80k, once in a blue moon, client and would prefer the more realistic 180-220k price bracket it becomes quite clear that when wrapping these clients one requires a significant amount of capital to cover the 20% deposit each time.
This leads me to believe it is better to aim for those clients who have a deposit who are unable to obtain finance from traditional avenues, to aid my cashflow position.
If anyone is wrapping clients on properties in excess of 180k prior to margins etc I would be very interested in knowing how they approach formulating the deal to ensure they are a) covered in case the deal needs to be liquidated and b) ensuring the client is good for the deal.
Thanks
Henry
Hi Mc
a)
Purchase House – $200K
$20,000 deposit (90%loan)
Purchase Costs (5%) – $10,000
Profit, say, $35,000Sell, on wrap, for $245,000
Insist you get a minimum $10,000 deposit from your wrapees. You or your investors are left with $20,000 in the transaction.b)
Ask your friendly local broker to give you a checklist of the supporting paperwork they would collect for a normal mortgage application. As you are supplying credit via an Instalment Contract it is important that you get and keep a paper trail which shows that your wrapees can afford the loan repayments. This is required under the UCCC. The last thing in the world you want is a claim against you, in the courts, for unconscionable lending.I hope this helps.
Cheers, Paul
Paul Dobson | Vendor Finance Institute
http://www.vendorfinanceinstitute.com.au
Email Me | Phone MeAn alternative way to finance your home.
Hi Henry!
No matter what price range you are in the fundamentals are similar. Bottom line is you have to purchase the porperty at a good price in the first place. Personally I would consider wrapping below $200k to be a cheap house – especially these days.
Greg
Hi Paul
Henry requires 80% lodoc lending a Pty Ltd company name so 90% not available.
Cheers Richard
Ph: 07 3720 1888
[email protected]
http://www.yourstatefinance.comSpecialising in US & IP finance.
Richard Taylor | Australia's leading private lender
Couple of suggestions prior to committing to a property.
I have wrapped a fewproperties @ over $360K (puchased @ 310K)
There is no fixed formula as you are dealing with some pretty big numbers with repayment and the like….
You need to.
– Test the market by perhaps running a couple of adds (when you get the calls …. you can say that you have one coming up very shortly.
– Remember if youbecome too focused on your profits or one formula… you may have a long time without a deal due to many things including market demand etc.NEVER GIVE UP!
I agree with Grreg. You should always buy below market value as this ensures you have a get out plan if it all goes sour. Always plan on the worst case scenario as the people you are wrapping to are generally not the best at repaying loans, they will miss payments here and there.
Life is like a box of chocolates – you never know what you’re going to get!
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