Forum Replies Created

Viewing 12 posts - 1 through 12 (of 12 total)
  • Profile photo of polarispolaris
    Member
    @polaris
    Join Date: 2003
    Post Count: 12
    May 27, 2003 - 12:45 am

    Hi,

    Thanks for the response.

    Basically the exit side of the wrap is negotiable at maturity depending on FMV at that time.

    I am assuming that all components of the wrap are flexible ie. maturity date, interest rate, sale price.

    Can the interest rate to the wrappee be altered midway thru’ the wrap if the wrappers IP loan rate has risen? I am assuming that you would have clauses in the contract to allow this.

    Risk management is essential planning!

    Profile photo of polarispolaris
    Member
    @polaris
    Join Date: 2003
    Post Count: 12
    May 24, 2003 - 8:23 am

    Hi all,

    Would a good reason for someone to hand over control of their property be :

    1. Bank is about to foreclose. By optioning the property at current MV, the owner has a better chance of receiving any equity in the property but 2 years down the track and the bank is happy as the loan is being paid.

    2. If owner has maxed out LVR and needs to sell. Selling thru’ traditional means considering all closing costs involved ie. agents fee for example, owner will end up in the red. If an option is placed over the property the owner has a good chance of retaining what little equity the is, save on fees and receive a nice cheque from the premium.

    Also, why would the going rents in the area have a bearing on what your T/B pays. The benifit to them is the fact they are now living in what is potentially their new home.You have given them that chance. The critical factor is that they can afford to pay the rent. This is the investors duty of care to ensure the deal works for everyone.

    Profile photo of polarispolaris
    Member
    @polaris
    Join Date: 2003
    Post Count: 12
    May 24, 2003 - 2:18 am

    Hi insider,

    Yes, this is what I am trying to establish. the whole point to property trading whether it be thru’ L/O sandwich’s or wrapping is to have a win/win/win situation.

    Personally I see L/O sandwich’s as the way to go for the property trader as your working capital and loan liabilities are nowhere near as large on a property to property basis.

    But like any joint venture – and that is what property trading is – everyone has a reason for being in the arrangement.

    So, why would someone give me control over their property, either one of their IP’s or their primary residence for say 2 years. What are the advantages to the property title owner?

    Knowing exactly what these reasons are will show me how I can market to these people as part of the process of setting up a deal.

    Profile photo of polarispolaris
    Member
    @polaris
    Join Date: 2003
    Post Count: 12
    May 24, 2003 - 12:29 am

    Hi Terryw,

    Please correct me if I’m wrong, but isn’t the whole point of marking up the interest rate to the wrappee to give you immediate weekly cashflow through paying your loan installment and keeping the mark up difference?

    When the sale goes thru’ the total mark up difference you received during the contract period is deducted from the sale price as part of their deposit.

    Profile photo of polarispolaris
    Member
    @polaris
    Join Date: 2003
    Post Count: 12
    May 23, 2003 - 1:36 am

    Thanks everyone for your input.Some good insight.

    Let me put my question this way:

    If I had 30K cash to begin with how do I begin buying 1 house a month starting today? My goal is cashflow in the first 3 years.

    Can it be done without cross collatorisation (did I spell that correctly?)and using 100% IO loans with the desposit of the buyer paying for the closing costs and maybe MI. [?]

    Profile photo of polarispolaris
    Member
    @polaris
    Join Date: 2003
    Post Count: 12
    May 23, 2003 - 1:24 am

    Hi Mathew,

    No offence taken. It is always difficult to put things in words and have another person understand the intent particularly when you are a novice like me.

    OK. I see that there is a rule of thumb happening here regarding the option premium I would pay for a property.

    Is the premium calculated based on a percentage of what would be gained in rent over the period of the option or is there some other formula for working out the premium?

    Profile photo of polarispolaris
    Member
    @polaris
    Join Date: 2003
    Post Count: 12
    May 22, 2003 - 12:47 pm

    Thanks Terryw for the input.

    I thought this was the case.

    As with any business you need to understand the thinking of your customers in order to service them effecively. I think what is attracting me to L/O sandwich investing is the ability to solve alot of peoples problems and profit from doing a good deed.

    So with sandwich L/O trades who is your effective market on the sellers side of the deal and what are their reasons / benefits from participating in a L/O arrangement?

    Also, do you have any idea how big this market may be?

    Profile photo of polarispolaris
    Member
    @polaris
    Join Date: 2003
    Post Count: 12
    May 22, 2003 - 12:11 pm

    Hi willi,

    Thanks for your imput.

    With a sandwich L/O trade (please anyone correct me if I’m wrong) there is the seller who owns the title of the property, the buyer who wants to own the title but can’t obtain finance for what ever reason and the investor in the middle profiting from bringing the two together and eventually moving the property from seller to buyer.

    I understand the concept of controlling the property with options. I have no problem with the T/B reasons for being in the arrangement and also the investors – the reasons are the same as for wrapping.

    One of the benefits being promoted for a seller to enter into such an arrangement is the ability to sell their home quickly.

    I can’t see how this is a benefit if they cannot use whatever equity they might have in the property towards the purchase of the next home if it is tied up for the term of the option contract?

    I can see it as being a benefit if the banks will accept the use of that equity as part of their new home finance even though it is not realised.

    So, will a bank finance the sellers new loan using the optioned property as part of the equation?

    NB:

    – The seller retains the title to the property during the course of the option contract.

    – All liabilities of the property being leased are assumed by the investor who in turn subleases the property to recoupe these costs plus profit.

    Profile photo of polarispolaris
    Member
    @polaris
    Join Date: 2003
    Post Count: 12
    May 22, 2003 - 11:23 am

    Hi Willi,

    I am in the process of evaluating the virtues of lease option sandwich’s. The only challenge I have is figuring out why someone would give me control of their property for say 2 years if the reason they had was to sell the house immediately without attracting agent fees and retain max equity.

    However, they would need to vacate the premises, would they be able to obtain finance for their new home using this property as part of the finance approval given they haven’t received the equity they might have in the initial property as yet?

    The goal of sandwich L/O being to create a win / win for everyone. Seller is able to upgrade to a better property, T/B has the opportunity to get into a home sooner, investor receives the benefits of investment.

    Hope I am making sense.

    Profile photo of polarispolaris
    Member
    @polaris
    Join Date: 2003
    Post Count: 12
    May 22, 2003 - 8:39 am

    Hi Mathew,

    I am trying to understand why someone would hand over control of their property to me as part of my sandwich trade given they will only receive maybe 1K straight up from me as my option premium and not receive any benefit from the property for a couple of years until the trade is exercised. [xx(]

    Profile photo of polarispolaris
    Member
    @polaris
    Join Date: 2003
    Post Count: 12
    May 22, 2003 - 1:37 am

    Hi all,

    Would this be a fair approach :

    1. borrow 80% put down 20% from own pocket either from primary residence equity or cash. Lock in 1st IP.

    2. Wrap this property with wrappee who has maybe 5% deposit towards the value of your next IP.

    3. borrow 95% IO loan towards next IP. Capitalize the MI. This loan is essentially a 100% finance.

    4. Wrappee of this IP has maybe 5% deposit which will go towards the next IP. The process is repeated until you max out your borrowing capacity.

    5. Set up new company and begin the process again.

    NB :
    – Lock in 1 IP / month.

    – Each property is a stand alone IP.

    – Each company max’s out borrowing to complete its string of properties as an individual entity.

    – the primary goal in the first five years is cashflow.As the deposit is effectively an advance in your CG you reinvest this immediately into the next IP.Each IP is Vendor financed over a 5 year period. All things going well at five years you will begin to receive cashouts (if not earlier)which will go directly into IP’s of which your goal is CG.Your cashflow at this stage should be more than plenty to put food on the table. The overrun – well invest it wherever you like.

    [;)]
    How Many holes do I have?

    Profile photo of polarispolaris
    Member
    @polaris
    Join Date: 2003
    Post Count: 12
    May 21, 2003 - 8:56 am

    Hi Steve,

    What is a small amount of money?

    I have roughly 160K equity in my home and maybe 10K cash (savings not disposable). My income just covers my expenses comfortably.

    Is this a good position to begin creating 1 deal a month? [?]

Viewing 12 posts - 1 through 12 (of 12 total)