Im still trying to get a handle on these WRAPS.
I understand that you on-sell the property to someone else, who pays a larger purchase price and higher interest rate. What hasnt been discussed, is how you set this up. Just where are all these suckers happy to pay $25k more than you, AND a much higher interest rate? If they can afford this, why didnt they just buy it?
Where do you find them?
How is the deal put forward to them?
What happens if they default?
If its so easy, why dont they do it to someone else?Suckers??!!
Here’s a link that will explain wraps in a bit more detail
https://www.propertyinvesting.com/strategies/wraps
Personally, if I was you, I’d pay EXTRA special attention to the ‘Critical Success Factors’
Cheers
David U
Hey Crashy, I think you need one critical piece of info – in that the reason people would be interested in a wrap is because they lack either a) the deposit required to obtain traditional finance or b) the income required to obtain traditional finance (eg they may be self employed and hence in the eyes of a bank, cannot sufficiently ‘prove’ their income) – there are ways around ‘b’ (eg lo doc loans) but apparently around 20% of the population is in this situation (thats what I heard somewhere anyway).
A wrap purchaser may buy on a wrap with a deposit of say $3,000 (typically with the FHOG) – so $10,000 all up. This could mean that they are able to buy their first home and get out of the rent rut. Very appealing for many people. I have a tenant in one of my IPs renting at $180pw and she could buy for $240pw with a deposit of $10,000. By the time she has paid off the house, it will be worth far more than the purchase price and an extra margin on the purchase price of $25K ($1K per year over 25 years) may be quite reasonable.
In answer to your specific queries (and these are very quick basic answers so I encourage you to keep looking around the site for more info – especially in the wraps specific discussion area):
1. Advertise in papers, ask existing tenants (thats what I did), then qualify them re income etc – are they able to afford the home under a wrap? under a normal loan?
2. However you are comfortable putting it forward to them – but best to be as open as you can with the purchaser so that there is no confusion.
3. If they default then technically they lose the house (same as if you didnt pay the bank mortgage payments, they would sell the house). Better to have a person rather than a bank asking you to pay up in this situation – a person (like me) will look for a solution, not just say ‘you’re out’.
4. not worth answering, sorry. Who said wraps were easy?
Anyway, keep looking – you’ll get there.
Tas [
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