Hi
I am new to this site and the “wrap” strategy and
since the “Wrap Secrets Revealed” is currently
sold out, I must confess that I haven’t even had
the all the basics coverd off yet.To my understanding, wrap is a bit like an
“arbitrage” in the stock/options trading world,
except that in a property wrap transaction, the
vendor creates the arbitrage and calls the shot
and that means control and power! [
]However, just like investing in a -ve gearing IP,
what legal protection does the vendor have should
the tenant-buyer suddenly become unable to pay
the vendor his weekly/monthly repayment ? Since
most vendor would have taken on a mortgage to
acquire the property in the first place (which he
then onsale to a new tenant-buyer), isn’t the risk
factor becomes the same as if you were simply
buying an IP and rent it out ? Can the wrap vendor
be protected with equivalence of a “mortgage
insurance” ?I have no problem understanding the +ve cashflow
aspect, but it’s always the risky side of the biz
that I pay more attention to.TIA
MCWOK… a couple of things here…
Firstly where renting a property out, the only protection a landlord has is that there’s usually a bond equivalent to around 4 weeks for if the tennant breaks lease. In the majority of cases this has to be paid back in full. It’s a common misconception that mortgage insurance will make your payments if you have no tennant and don’t pay. While its true that it will make the mortgage payments to the *bank*, *you* are still liable to make the payments, only now its to pay back the insurance company. Landlords insurance on the other hand only covers things like fire, theft, malicious damage (on rentals) and not vacancy.
Now to the good news! With wraps, when a tennant moves in, you typically get a deposit of a few thousand dollars… TO KEEP. This is NON-REFUNDABLE, meaning that once they move in it’s yours. If they leave it’s still yours, and… even better… the payment from the *next* tennant is still yours, too – which helps to cover any vacancy period.
Hope this helps!
Quasimodo [^]
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It seems to me that action has a most magic way of answering all the questions our fearful mind tries to throw before us…
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