could someone help me with the pros and cons of a wrap vs lease options? I think I have my head around lease options now, but I’m still working out the details of how a wrap works. thanks.
email: g e n e r a l g h e r k i n @ y a h o o . c o m
phone: 0405 411 098Nathan,
I am an advocate of both wraps and lease options in the right circumstance.
The difference b/w the two techniques is that with a wrap the is actually a contract to buy the property… in a lease option there is only a right to buy, rather than an obligation to buy.
The different nature of the contract creates the advantages and disadvantages.
Wrap
1. Get First Home Buyers Grant (timing dependant on what State you invest in) as a deposit making it a great low down strategy.
2. You have a buyer rather than a tenant so you can legally pass on all ownership costs.
3. You own the property until the last payment is made.
Lease Option
1. Might be easier to get finance as you are just having a normal tenant relationship.
2. Can still recover part of your cost as an option fee.
3. You own the property until the right is exercised at which point you are usally cashed out.
Hopefully you can see it is ‘horses for courses’. If your client has enough of a deposit or is able to get the FHOG then I’d go the wrap.
If not then I’d go the lease option.
Bye
Steve McKnight
**********
Remember that success comes from doing things differently.
**********Steve McKnight | PropertyInvesting.com Pty Ltd | CEO
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Nathan
Some more thoughts with lease options:
1) it is also easier to withdraw any increase in equity.
2) There may be a greater chance for the tenants to just walk away from the deal because they don’t ‘own’ the property.
3) There may be a greater chance of the tenants cashing you out if they can get the FHOG down the track.Terry
Terryw | Structuring Lawyers Pty Ltd / Loan Structuring Pty Ltd
http://www.Structuring.com.au
Email MeLawyer, Mortgage Broker and Tax Advisor (Sydney based but advising Aust wide) http://www.Structuring.com.au
good points. I don’t mind if the tenant walks away because it means I’ve collected above-market rent for the period, which suits me just fine. What do you mean by “it is also easier to withdraw any increase in equity”?
email: g e n e r a l g h e r k i n @ y a h o o . c o m
phone: 0405 411 098Hi Nathan
In some states (certainly Victoria due to the sale of land act) it is illegal to access the equity of a property that you are selling via a long term sale.
In a lease option arrangement this does not apply and you may access increasing equity by means of increasing your loan.
howzat ?
the Bruce
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