Forum Replies Created
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Keep smiling
Felicity
Yes, capital gains is great, but don’t discount the value of cashflow. Nearly 3 years ago, when I started on the wraps journey, we could have bought one, maybe two more properties maximum, hopefully with a little bit of positive cashflow. We’d have had some good growth (hopefully!), but hubby would still be slogging his guts out 70-100 hours per week in a job he hated.
Thanks to wraps (and a nice package!) hubby has been studying full time this year, and will be going on to work with primary age kids at risk – and is unlikely to be paid for it.
Wraps has made this possible – the ongoing cashflow has replaced his job income.
Has it made us rich? Nope, not yet. But it’s made us time rich, and that’s worth a huge amount.
My next goal is to take the cashflow and start to build our buy and hold portfolio which will generate the long term wealth, including capital gains.
Everybody who comes to property investing is at a different point in their life, with different dreams and goals. You have to look at what your most immediate goal is, and work out which property strategy will get you there the quickest.
My 7yo son summed it up best the other day – he’s seen both sides of the coin now – “mummy, I’m glad you have lots of houses that make us money, because I never want daddy to go back to a job again”.Keep smiling
FelicityVictoria actually publishes their information every year – I have quite a collection of them on my shelf!
Keep smiling
FelicityWhen I have private investors who put in a set amount of money at a set interest rate, I always give them a loan agreement, and completed documentation for a second mortgage. They hold the mortgage paperwork, unregistered, unless there is a dispute. They also have the right to put a caveat on the property, although none of my investors have.
I try to keep it simple!Keep smiling
Felicityresiwealth
You obviously don’t know much about wraps. I recently did one with a rate lower than my bank rate, and sold the house at market value.
My buyers weren’t broke, they simply had jobs that banks and other lenders don’t like much, and a small deposit.
They were absolutely over the moon to be able to buy their own home for them and their adorable little girl.
If you don’t like wraps, that’s your choice, but there are plenty of people who are extremely glad to have a chance to own a home, and I can tell you now, they don’t like being described with terms like “battler” “desperate” or “broke”, to use a few. They also don’t think they’re being screwed – go take a look at the interest rates some of the non-conforming lenders charge “imperfect” borrowers, let alone early repayment fees etc, and suddenly wrapping seems cheap in comparison.Keep smiling
FelicityA good starting place would be to spend some time reading the Getting Creative forum, and also some of the archived material.
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FelicityJen
I have wrapped a house in a similar situation.
I have never anticipated that they would be refinancing quickly, I always expected they will be a long term cashflow buyer. So far that has been true.
There’s been some good equity growth in their house though, and I have certainly referred them to a broker to discuss their options (including the possibility of me taking back a 2nd mortgage if they can borrow 80%). They don’t want to – they’re quite happy with our arrangement.
Go figure!
Anyway, my point is – if you take on these buyers, do it because you’re happy to have them there long term!
If they move on quicker, that’s a bonus.
Keep smiling
FelicityA bit of both!
Funnily enough, no matter how they start, I still seem to end up with both. I had one couple who looked likely to refinance quickly go bankrupt, so they’ve turned into long term cashflow buyers.
Mostly, though, I do aim to put in people who are likely to be in a position to refinance reasonably quickly, and then I see what happens!Keep smiling
FelicityI remember a couple of years ago I went to a meeting of the Technical Traders Assn (shares) and after the meeting most of the people went to dinner.
I sat at a table of 12 people – 2 GReeks, 3 Italians, 2 Asians, 2 Indians, 3 Anglo-Saxon. We had a fabulous time, and at one point I actually sat there and felt proud to be Australian. Nobody had even thought twice about the diversity of backgrounds, we had a common interest and that was all that mattered.
Racism exists, but the more opportunities we take to experience other races and cultures and realise that we’re not so different under the skin, the better.Keep smiling
FelicityI do have a clause in the contract that allows me to oncharge any early repayment fees from my lender… just noticed that point in Terry’s post.
Again, though, it’s my choice whether to charge it or not.Keep smiling
FelicityRemember, too, that if something is in your contract, you have the option whether or not to apply it.
For example, if you have a few people who could refinance but aren’t moving on, you could send them a Christmas Special! letter, saying you’ll waive the early repayment fees for anyone who refinances before Christmas….Keep smiling
FelicityGood advice, and I always tell new brokers / banks that my CRA is extremely busy, but clean. I then show them a list of properties as justification.
I should also point out that many banks now put an entry on your credit if you go guarantor too.
Quoting from my own credit check…
“XXX made on enquiry on date in reference to an application for a Real Property Mortgage account where you applied as a Guarantor for the amount of $xxx”
I have quite a few of these on my credit now, when we’ve used a company as trustee for a family trust, and been required to go guarantors as directors of the company.Keep smiling
FelicityPersonally I would be happier if API would be a little more creative with their subject matter, although not necessarily negative.
I’m getting a little bit tired of reading the “same” profiles over and over, it sometimes seems only the names and locations of the properties change.
But I’m aware that editorial policy isn’t particularly adventurous.Keep smiling
FelicityYou could also ask the vendor to leave the deposit in the deal as a second mortgage (called vendor finance). Make sure your lender is okay with this first though.
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FelicityTerryW
Depends which lawyer you consult!
There’s a couple of interpretations of the act.
Certainly I think that it’s always imperative to keep your loan lower than the wrap loan, and preferably with a serious buffer inbetween.
My lawyer’s view is that IO loans are not specifically banned (they didn’t exist when the law was drawn up) so therefore you can use them, but his personal recommendation is that it should only be for a short period of time.Keep smiling
FelicityHi hardrain
I need to go and organise breakfast for the kids, but I’ll at least answer a couple of your concerns. I have done a lot of wraps, and think they’re brilliant! However at some point the people pay you out and you lost the asset, so down the track you need to consider more long term assets too. Wraps are mainly about cashflow.“so if my customer left me a 15% property deposit …”
Ummm, most wraps aren’t done with this sort of deposit. Maybe $15,000 deposit? Quite often it’s less than this, or involves the FHOG which is some states you have to wait for.
“if the wrappee is unable to continue paying, they essentially lose all that they had paid so far, which would make me feel pretty bad.”
You’ve been reading too much uninformed comment! My contracts all include procedures for dealing with this type of situation. In essence, if the buyer has reasonable equity, they get most of it back. However, hearsay suggests that most buyers default early on if they’re going to default, so at that stage they are unlikely to have much equity. Or to have paid a great deal extra, either, I suppose.
“These days aren’t there lots of companies willing to hand money over to credit problem people that the banks won’t touch?”
Yes and no. Certainly companies will deal with credit impaired people, but then if you add in only $10k deposit, perhaps self employed… it’s not that straightforward. Most of these non-conforming lenders are reluctant to go higher than 80% LVR, and the interest rates are scary, let alone other fees and charges on some of their products. Non-conforming lenders are often touted as the obvious alternative to a wrap, but in actual fact they’re not as easy to get money from as is often suggested.
Overall, you always need to factor in a vacancy period for your house, set your numbers based on what’s achievable rather than trying to screw every single cent possible out of the deal, and have fun.
Keep smiling
FelicityWell, I’m in the process of removing a defaulter now, and believe me, the SRO is going to know he didn’t complete!!!
Particularly as the FHOG was supposed to be his deposit, he kept stalling me about it, and I found out later he received it (changed the paperwork so he got it by cheque instead of it going into my bank account) and he still says he never got it. Grrrrr…..
I can’t believe how many mistakes I made with this guy. Sigh…. [blush2]
Learning curve….
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FelicityI’ve had the Cashflow 101 EGame for a while, and love it!
I’ve just bought 202 (well, hubby gave it to me for my brthday hehehe) so hopefully that’s just as good. I also got the CAshflow for Kids E Game, and both my kids (3 and 7) have played it and found it fun.
The good thing about the E Games is you can play by yourself!!Keep smiling
FelicityIn Victoria, as part of the application, the buyers have to sign a statement which says that in the event they don’t complete the contract, the FHOG is repayable. The onus is on them to notify the SRO if they don’t complete.
Whether or not the SRO would chase them for repayment, who knows!Keep smiling
FelicityI think that information can be extremely valuable, if you are selective about what you pay for, and take action on the information.
There are certainly some shonky people out there, that’s life. But I know that after reading lots of books, going to plenty of free (or $50) information nights for various speakers etc, I finally decided I wanted to pursue wraps. I then spent the money on Rick Otton’s Wrap Pack, and haven’t looked back. It included 12 months of mentoring too. It was the best money I’ve ever spent. I have repaid that money so many times over!
But I had carefully researched both which strategy I wanted to use and who were the best people to learn from. Then I spent the money to get educated.
It worries me enormously when people go to seminars by people like Henry Kaye, spend exorbitant amounts of money, have no idea why they’re there or what they want to do, but just have some vague idea that they’re going to get rich from it. Although a few will go on to great success, far too many will walk away a great deal poorer and never do anything with the information.Keep smiling
Felicity
