Has any one got an opinion based on fact or experience about wraping from an investor’s point of view?
All opinions welcomeHi
I tend to agree with jenman. The battlers/wrapees are not protected.
noted
would this stop you from doing a wrap?Fact or experience is a hard one… I wouldn’t wrap if you paid me- hehe.
I think they are unethical. I believe in paying a fair price for houses- buying them from vendor’s at fair value and selling them at fair value.
Fair value plus market mortgage rates- simple vendor finance.
One hting I find about the wrapping sites- they often are so desperate sounding “Hurry now!!!! You’ll miss out! What are you waiting for???” I find them kind of sad.
Sorry- there’s nothing factual about what I’ve written- but I am not going to undertake practices that I find unethical, to be able to have an opinion about them. It would kind of defeat the point of what I’m about.
kay henry
Kay I appreciate your thoughts, I am only interested in doing ethical and moral bussines however it poses the question, if the wrap is a win win situation and your offering them a good deal, does that seem ethical?
Or is there something I missed?The question of the topic is “Wraps – Good or Bad?”
The answer is Bad.
Cheers
Good Bec
Win-win seems to be trotted out constantly, but I think one side tends to win more than the other.
I just find wraps too open to abuse for my liking. THe only way I would ever do one would be to help out family (and I wouldn’t be charging them a higher purchase price or interest rate).
There are many cases when a wrap is very ethical. I personally have had a young couple as tenants who could not obtain finance. They are suppporting his child from a previous marriage and their own little girl. If they happened to miss the bank on rent day they were on the phone to me before I even knew it. Before Christmas they asked if they could pay extra each week so that they could have two weeks over Christmas when rent was not owing (who’d say no to that) They were paying $220pw which is a high rent here. The young lady was laid off work and as she is deaf will find it very hard to get another. Rent was still paid on time. I’d wrap to this couple in a flash and then a year or so down the track they would have enough equity to refinance. I fail to see how this would be unethical so long as interest rates and principal mark up are fair and reasonable.
If I knew then what I know now……….you know how it goes
From the wrappees perspective, I beleive wraps are great. Many people would be paying much higher rates and huge exit fees if they went to a non conforming lender.
From an investors perspective, I have done a few wraps and probably wouldn’t do any more. The returns are not worth the effort and hassle. It also hurts your borrowing capacity by using your resources which could be invested elsewhere for higher returns.
Terryw
Discover Home Loans
North Sydney
[email protected]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
Just before Christmas I went and visited all of my wrappees to deliver a Christmas hamper.
All I can say is – it totally reinforced to me why I continue to wrap. They are all so ecstatic to finally be in their own home, they’re having a ball improving their houses, and quite a few of them already have plans about when they’ll be able to move into mainstream banking finance (not non-conforming).
Yes, I make some money too, and none of them have a problem with that (we talk about that before they even enter the contract).
Maybe the wrap scenario isn’t perfect, but when someone bursts into tears and hugs me because they were so thankful that their 2003 Christmas was going to be totally different to 2002 when they felt at rock bottom, all because of me apparently, I can’t accept that it’s all bad.
The more I do this, the more I enjoy dealing with the people who buy my houses.Keep smiling
Felicity
I feel wrapping can have a detrimental effect on the wrapees. The principal that they percieve they own the house makes them take care of it if they really carnt afford it then it falls in a heap and the only winners are the wrapers with the wrapee worse off. To wrap as a favor can work for family. My family gave me a hand up when I first started out and I would help my family out.
I wrapped my first buy and hold to the tentant about 6 months ago .. they are such different people now. He had a huge chip on his shoulders when I first met him and the last time I was in town a couple of months ago he was yackin’ away about all their plans for the house and yard. And couldn’t stop thanking me for the help.
It may not be a perfect system, but it does work in the right situation. It’s not for everyone (wrappees and wrappers) but for those that do it with integrity do a good job.
Cheers
Leigh K[]Carve your own path and lead the way …
Hi,
The discussion seems to be here that wrapping is about selling over priced houses to people who can’t afford it!
From my experience, this is rarely the case and is counter productive for both the investor (who wants cashflow… what good is a vacant house) and also the purchaser.
The key to a successful deal is to pre-qualify the applicant to ensure s/he can afford the repayments + ownership costs, both now and into the future.
Done correctly, I don’t believe that anyone is being taken for a ride as there is full disclosure of the profit and the risks.
Re price margin: The agreement often lasts for 25+ years, so a small annual capital gain will mean that the property is easily worth more than the contract price. If the gain is higher then the client cashes out early and moves on.
Re: interest margin: a +2% on my loan will still be a lot less than non conforming interest rates, which wouldn’t be available anyway unless the applicant had a 20%+ deposit.
In the end, wrapping is a private finance arrangement, where the underlying security is the property. As such, the interest charged is lower than for personal loans, but higher to reflect the risk to the investor.
No one holds a gun to anyone’s head. Instead, the way to do it (full disclosure), means the buyer goes into the deal armed with far more information than a normal sale.
*sigh* I accept some people execute the strategy poorly, but these are in the minority and I’m trying to work with authorities to tighten the rules to weed them out.
Talk of people being kicked out of homes and left on the streets is a nonsense. There are rights, and these rights are protected on the title to the property.
I advocate that there is a lot of benefit to be had when the stratey is executed properly… and have the evidence in the form of happy clients to prove it.
If you could meet the people who now have a home, and those who have the opportunity, perhaps you’d better understand how it can be used in a way where everyone benefits.
My vote is ‘good’, provided certain circumstances are met, namely affordability checks and full disclosure.
Regards,
Steve McKnight
**********
Remember that success comes from doing things differently.
**********Steve McKnight | PropertyInvesting.com Pty Ltd | CEO
https://www.propertyinvesting.comSuccess comes from doing things differently
Phil – The answer is as Steve has mentioned, GOOD, if you do it properly.
Make sure you
a) disclose as much as you can, and be honest about it. and
b) make absolutely sure that the person buying can easily afford the payments.Felicity – glad to see we’re not the only ones being thanked profusely for helping someone to own a home of their own…
Monkeybam – The effect I see so far is positive. The home IS theirs… you DO want them to own it…Put it this way folks, I DONT want the hassle of someone not paying and having to leave in the worst scenario. I WANT them to have a home, and, for them to use me as a stepping stone into the mainstream banking system.
Having to re-sell a house is not what I want….
As far as the whole overpriced property argument is concerned, there may be people out there doing that. But that is why we need regulation.
I have one person in a house, and, the valuation on the house is already more than what I sold it to him for. That is AFTER markup by the way folks…..
Cheers [:o)]
Scott
Pelican Investments
http://www.pelican-invest.comSteve,
With your contacts at Channel 9 – will you soon put in your 2c worth on ACA so they stop this anti-wrap bias that the media has been so intent on lately (such as the Rick Otton/ACA interview).
Thanks to ACA/and that “bad wrapper” MHA now do not do full disclosure anymore.Hi,
Both Ch 9 and Ch 7 have done pro wrapping stories before, it’s just that the flavour of the month is now it’s ripping people off.
I invited Ch 9 to go back and interview the 3 people they spoke to a couple of years ago to see how it has worked for them, but they weren’t particularly interested in that side to the story.
I was not able to go on camera due to an agreement I have with Ch 7 and giving them an exclusive over the MAP.
Make no mistake, there are some who are doing the wrong thing and breaking the law… I see it as an issue of enforcing the laws which are there to protect.
Consumer Affairs here in Vic has started doing just that, so those doing the wrong things will hopefully be taken to task.
Bye,
Steve McKnight
**********
Remember that success comes from doing things differently.
**********Steve McKnight | PropertyInvesting.com Pty Ltd | CEO
https://www.propertyinvesting.comSuccess comes from doing things differently
The TV stations that did the “pro-wrapping” stories did not realise they were promoting an unethical method. They had much in common with the so-called buyers. They were naive.
Now that the disclosures are coming out, you are going to see more truthful stories about wrapping. Judging by the way wrappers react to truth, you won’t like the stories.
Yea, yea, I know you won’t like to hear this.
Cheers
Bec
Come On Bec
Even you know that your last statement was just antagonistic and I don’t believe that you really believe in what you wrote. The TV stations know full well what they are doing and know exactly what type of story they want to promote.
Personally I think we will see less of these stories as property becomes less of the flavour of the month and they move into other “hot” topics.
Cheers
Leigh KCarve your own path and lead the way …
Is wrapping good or bad? From the comments on here there appears to be two angles the response come from;
1) The actual system of wrapping
2) The person doing it (wrapper)Don’t confuse the two as they are seperate.
The wrapping system is very fluid and despite the perceptions of some, there are no rigid rules on things like margins, markups etc.
You CAN wrap a house for BELOW market value and BELOW bank interest rates. If a house is valued at $200k, it CAN be sold for $150k. Bank rates might be, say, 6% and you can finance your buyer at 2%.
So it’s not compulsary to sell at inflated prices or interest rates.
It’s much like charging rent on your IP.
If I bought a house 20 years ago, had no mtg on it, then I could charge $20 p/w rent when other similar houses are getting $200.
As for the wrappers;
Well, EVERY industry has it’s good & bad operators. If you just look at just one group, then you develop a fairly biased view and tend to not want to see the others.Are there good wrap operators out there… yes in deed. Are there bad ones, oooh yeah.
Are there good buys to be found under a wrap, of course. Are there some real stinkers…. you bet.
So in answer to the question, I feel you should not use a broad brush, rather look at the individual deals and operators.
PS And it’s not all one way either… there are some real rotten buyers out there too. I’m lucky, all of mine are fantastic people.
Hi Guys
ESC have withdrawn their support of Wrapping in NZ.
Regards
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