Hello all
I would just like to say hello to all on the forum as a new member. My name is Brett, 22y.o Student studying in Perth WA. Several months ago a friend of mine lent me the “Rich Dad Poor Dad” book written by Robert Kiyosaki (fantastic book) and since then I have been reading as many books, articles etc as I can on achieving my financial freedom and in searching around the Net, I happened to stumble accross this site which from what I can tell is going to be an extremely useful resource being among like minded people who want to achieve financial freedom through property investment.
With the intro out of the way, there is a quick question I wanted to kick of with concerning “Wraps”. Steve’s explanation of the Wrap I found to be quite excellent and I understand the priciple of what a wrap is doing. However I was curious to know this: To me it would appear that you are finding a home, selling it, acting as the financier for the person buying it buy providing them with an Interest spread of about 2%+ which is all fine, but why would someone looking to buy a house go down that path in the first place when they could get (presumably) better rates from a bank. The only answer I can come up with is that for one reason or another, the individual cannot get approved financing from a bank and that is why they are willing to take a slightly higher rate with you. If this is the case (and it may well not be, hence why Im asking) isnt that a little risky?
If this has already been covered my apologies in advance for bringing it up again. The Wrap idea is a very appealing one, although at the moment all my research focus is put towaard working ‘pre-forclosures’ to make build up lup sums of cash in which to buy income producing property, but nonetheless the Wrap has sparked my curiosity.
Many thanks!
Regards,
BrettHi Brett,
Welcome to the forum! You’ve got the understanding of wraps very quickly it appears [
]. There are risks involved as with all forms of investments. There are ways to minimise these risks.I just want to clarify your question
quote:
If this is the case (and it may well not be, hence why Im asking) isnt that a little risky?I want to ask, risky for whom? The investor or vendor financier or the wrappee? The answer to the question depends on your clarifying answer.
We qualify all the leads before just handing over houses to anyone and there is a process we go through to do this.
Sorry if I’m slow this day, but the boys kept me up till 4am.
Cheers
Soosh [|)]
There are no problems, only solutions!
quote:
I want to ask, risky for whom? The investor or vendor financier or the wrappee? The answer to the question depends on your clarifying answer.Hi Sooshie [
]My presumption is that the reason someone is coming to you to buy the property and accept financing from you (at a slightly higher rate than normal) is because the person cant get financing at a bank or other similiar institution (otherwise if they could get financiing at a lower rate, why wouldnt they) so if this is indeed the case, isnt it risky to take the person on if there is a ‘above average’ chance they could not meet their repayments. I havent done any reading into finding out what happens if the person is unable to meet their repayments, so there might be some issues there that make things clearer. [
]Regards,
BrettHi Brett,
Where as I am no expert on this, the properties are usually at a lower cost price i.e. depending where you are for a very rough example … Wrap house prices bought in Traralgon b/w 40-80K, Moe 50-80K, or Geelong areas 85-110K etc… The rent for these areas might be anywhere from 100-180 dollars per week. The idea is to keep the repayments on the wrap property, lower or at the current rent price the wrappee is now paying. This way their money is not ‘dead’ money but going towards their own ‘foot-in-the-door’ so to speak, but it’s not costing them that much more per month. The venture is still are cash +ve but the difference in interest rate is your income and the repayments for the wrappee is lower than their rent…thereby win-win for all.
It may not always work like this and when you qualify someone for their eligability for a wrap its important to note how much they are paying in rent per week and what thier income is. If they have no income, well the risk is skyrocketed…
I hope I am not confusing you more. Perhaps on Monday, when Steve is in the office..(hmm Hmm) [] He might reply and put me out of my misery… Just kidding! [:0)]Cheers
Sooshie [
]There are no problems, only solutions!
Hi Brett
Sooshie is quite correct, but this detail may be what you are looking for…
Wrappers should not be selling to people who are WAY outside the banks “square”, but to those who are only slightly outside it. e.g. people who have a good income, but for some reason are not quite acceptable to the bank. Perhaps they damaged their credit by not paying their mobile phone bill 5 years ago, or they have not been in their job a long enough time for the bank, or have a large enough deposit, or (horrors!) they work for themselves.
If their rental history going back 5 years or so is good, and they will pay about the same as their previous rent to buy a house, why should we conclude they are a bad risk?
We still treat the situation very carefully, and satisfy ourselves that the person is a good risk, and as far as we can, an honourable person who pays for the roof over their head FIRST, before the pleasures of life.
A proper credit check, and a careful interview of the current and several previous landlords is vital.
Hope this helps [
]Lance
.
Fair Go Homes
http://fairgohomes.com.auRapt with Wrapping!
(07) 5465 4999
[email protected]Thanks very mucn Lance and Sooshie the information has helped.
Regards,
BrettHi,
Firstly Thanks Lance,
I was almost in the deep end with this one….
Good luck Brett, if you read the posting about bad tenants, you will realise that problems do occur and no investing (that I know about) is risk proof. Just follow the rules and don’t take unecessary risks. From a legal perspective cover yourself, spend the extra dosh and get a good lawyer who knows about wraps. Get a good lender and get cosy with the agents and the bank. Do your foundations first then
build the walls and roof (so to speak).Hubby and I are also having a little kink in the wrap business. We are happy to ride the waves, but you need to ask yourself, AM I?
Food for thought
Cheers
Soosh [
]There are no problems, only solutions!
Just like to say Hi Brett, you seem to be in a similar position as me, i.e. 22yr old, studying and in Perth. I too took a keen interest after reading Roberts books and also have been trying to get my hands on anything and everything that resembles wealth creation.
Anyway introductions aside the risk involved in wraps = profit, u take the risk u reap the profits. The way i look at it is that with a wrap if the wrapee defaults or goes bad, at the end of the deal u still own the house to either, rent, sell, live in or find a new wrapee. The only catch is make it full proof by your lawyer and get good tenants that wont wreck the place.
] He might reply and put me out of my misery… Just kidding! [:0)]
The topic ‘Greetings’ is closed to new replies.
