Fullout

Yes you will have to pay stamp duty and CGT on land.

You can try and sell the land you have purchased before settlement, but I don’t know about the deposit. If you are using a real estate agent, you won’t be able to get the new buyers deposit until settlement as it must go into their trust account. I don’t know what happens if you are selling it without an agent.

Terryw
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Polaris

If you go for the cheaper end, you could go very far using your your own money, then getting a large deposit from the wrapee which replaces most of your deposit. You keep saving in the meantime to help you go a bit further.

Mathew, no offence taken. I too have heard that it is not legal to do installment contracts using IO loans. But I don’t know where this idea comes from. My wrap contracts say nothing about it.

Another point, my VIC installment contracts say all of the wrappee’s repayment to me (wraper) must be paid off my loan. ie I am not allowed to pay the minimum and keep the difference. Does anyone know anything about this?

Terryw
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I agree with Willi

I do 5 years leases with an option to purchase anytime – the strike price is set at 20% more than market price and this decreases like a PI loan (tho more slowly)(I now think this may be too generous). I get a option fee upfront of $3000 to $4000 and get about 40% more rent than market value. This generates a good +ve cashflow and a capital gain when they cash me out. If they move out, the lose the option fee and I get to keep the house and do it again at higher rates.

So if you want to do a sandwich option you could find someone like me, take an option on their property and then you sell an option at a higher price with higher rent and a higher strike price.

Terryw
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Matthew

I think wrap is a broad term referring to both. At first I couldn’t understand why some people called LOs wraps as well. I don’t think you will find ‘wrap’ used on any legal documents. I think ‘Installment Contract’ or ‘Vendor Terms contract’ would be more accurate for what you refer to as wrap.

Terryw
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Yep. Anything related to the earning of income. Computer, Internet connection (for research etc), study courses, books, street directory, travel to see property or for study or to see accountant etc. Virtually everything!

Terryw
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Matthew

it is not illegal to wrap using a IO loan. It maybe with an installment contract, but you can certainly do it using a Lease Option. And it can be structured to work just like an installment.

Terryw
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Fullout

If your loan has been submited you will have an inquiry on your CRAA. Not such a bad thing as you could explain it, but still another enquiry!

Have you considered ING, 5 year fixed at 6.29%. Interest Only up to 95% LVR. this is a cheap rate. reverts to standar rate after 5 years. The average 5 year fixed rate is about 6.44% at present.

Heritage BS is low too; only 6.39% 5 yr fixed IO.

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Terryw
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Hi Bluebear

That strategy can work. The interest on the money borrowed to live on won’t be claimable, but it can still work. You could withdraw about 80% of the growth of each property per year. eg a $500,000 property grows 10% in year 1, you withdraw $40,000. Year 2, it grows another 10%, you borrow another $40K or so.

It works well if you have a number of properties and draw on one per year, so that gives them time to grow again.

Terryw
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I have used ANZ earlier on as they do 95% interest only loans and they allow you to capitalise the mortgage insurance. The problem with ANZ is they are extremly slow. 2 of my settlements went over deadline because of them being late getting docs out etc.

And they did 3 CRAA checks per property (one for pre approval, one when i found someting and one for their mortgage insurers to check). This resulted in 18 enquiries ofr 5 properties. I then applied with Westpac and they rejected me solely on my CRAA-until I explained and they approved me for 2 more.

Terryw
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Poochi

Don’t sell.Think about all those fees, and then you have to pay rent with after tax dollars. This is you only tax free asset.

You could get a LOW DOC loan easily. This is where you tell the bank what your income is and don’t need to provide proof.

There are also pure asset lends where the lender does not care about income. They will lend a percentage of the value of a property. You can get up to 85% of the value. (You can contact me below for furhter info.)

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Terryw
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