All Topics / Creative Investing / Wrap option question

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  • Profile photo of _joyce_joyce
    Participant
    @_joyce
    Join Date: 2008
    Post Count: 16

    Just clarifying something about wraps, when you (vendor) sell to the other party (buyer) and lets say the buyer did not buy insurance and the house burnt down, how are you going to calculate the damage?

    I think from memory of the book I read from Steve, wraps means already “sold” to the buyer, so outgoing costs like Council fee, etc is paid by the buyer (did I get this right)? In this case, house insurance is also the responsibility of the buyer. But what if buyer does not buy any insurance?

    If the house was burnt down, does the vendor then ask the buyer to immediately pay up the remaining amount upfront or ?

    I suppose for Lease option its very similar to renting (apart from paying higher rent than usual) so it is the vendor’s responsibility to get landlord insurance, pay council fees and other maintenance cost involved.

    Also, lets say I save 20% for the deposit of the property, and then borrow from the bank 80% and then maybe lease out or wrap it. (cashflow positive property). Then, for the next property, if I were to still borrow 80% from bank, do I still need to save another 20% of property amount or do I refinance the 1st property? It seems kind of impossible to quickly save up 20% in a short time and I was wondering how it was possible Steve could get so many properties in a short time. Would that mean he had already had “sufficient” capital to buy multiple properties before he started his investment portfolio?

    I’ve read his 0 to 260+ Properties and I’ve forgotten how it exactly works in this wrap scenario.

    Profile photo of Richard TaylorRichard Taylor
    Participant
    @qlds007
    Join Date: 2003
    Post Count: 12,024

    The cost of the Buildings Insurance and Council rates are passed onto the wrappee either in a lump sum debited to the loan account when they become due or factored monthly into the loan repayments. Remember the Title remains in your name and you will be directly responsible if the property burns to the ground.

    The loans cannot be cross collateralised so you cannot use 1 property as additional security for another .

    Richard Taylor | Australia's leading private lender

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