I have just recently finished reading the 0 to 130 properties book. I have been a procrastinator in the real estate investment market, in that I have never purchased a property. This was primarily becuase I couldnt understand why you would buy something to lose money on (-ve gearing). Well this book opened my eyes. Thanks.
I have been using your 11 second solution (plus some calcs I have setup myself) on just about every property I have looked at (over 100 in the last couple of weeks) and the only time I get the +ve cashflow scenario is if I use what I believe a wrap strategy can offer.
My wife is a conveyancing secretary (with over 18 years in the business). She is exremely negative about wraps, to the point she becomes considerably agitated if I even mention them. She believes every wrap she has ever had any involvement with has turned bad for the purchaser. “They get left high and dry if the vendor goes bad” is just one of many comments.
I dont know enough about these yet, and therefore was wondering if anyone has any more detailed references they could enlighten me with. Obviously the wife would probably consider divorcing me if I was to purchase the wrap kit, so Im looking for something that can educate me to educate her, without the financial burden of such a tool.
I actually have a scenario that I am investigating where a property is for sale with a long term tenant who would, as they put it, “like to stay forever”, and I believe a wrap could possibly be the way to go, as purchase and hold only gives a marginal +ve cashflow of about $5 per month.
Any help greatly appreciated.Steve…
Yes wraps are real BAD! And I will tell you why….
Purchased prop. in Tasmania for $15K, sold on 30yr contract, with extra $5K on the price. Now within 1 yr all the property prices had risen to $50K!!! How bad a deal is that for the wrap buyers!! – terrible!!!! Not only did they get a house (which the bank refused to lend them the money), but they have now more than $30K equity in it…..
But it get worse…. They now have refinaced me out and now they are paying lower repayments on $20K (even though there houe is worth $50K!!!), Dreadful!!
Some people say keeping properties would of been better and it would of been, but there all wrap buyers are happy…. & so am I.
As for your wifes comments: 1) The buyer can place a cavet on the property; 2) You can disclose to certain banks they are wrapping and they will still lend you the money to do so; 3) Perhaps your wife can explain how these people can get a bank loan? What they can’t? And you enabling them to own their own home… Hell IT must be a bad deal!!!; 4) Your missing out on a great profit potential because of someones bias (trillions of $$$ have been lost because of this – “o’h that area won’t take off”, “you can’t do that”, etc); 5) there are steps you can take such as joing the VFA to solve any problems you may feel, and the buyers seem to like the extra security, and most wrapers don’t take off with the money, they would rather go buy more houses… 6) Banks actually make a higher mark up on the interest rate, than we do.. fancy that… – L0L!!; 7) Your wife dosen’t like the fact the wrap buyer is not protected, well quite frankly neither are you – stop paying your mortgage or land taxes, it will take a while but the bank will reposses the property, all your doing, is starting the process faster, because you don’t get the advantages the banks do… 9) The wrap buyer gets independant legal advice; 10) The wrap buyer can protect his/her income with income protection insurance, I strongly recommend to my clients to get it, but if they choose not too and default on me, what am I ment to do??? They’ve got the legal advice and they know what will happen (usually I give them $500 when the leave the property and it is in good condtion). I’m not a charity though, and I won’t be taken for a ride.
I’ve been quite forceful (I think..) and my intention is not to be harsh, so you may like to edit it before you show your wife.
Rgds.
Lucifer_auSteve,
Lucifer has made all the relevant points in his posting.
We have a similar situation with quite a few of our customers. They have purchased a property from us, fully disclosed, with the intention of re-financing within 2-3 years…
In a few cases, they have been in the property 6 months and the house is already valued at more than what they paid for it…
There are two areas which do need addressing with wraps, and, the VFA is actually working on these with the Gov’t as we speak.
1. Title of property – For now, all that can be done is a Caveat, which we recommend our customers do….
2. Protection againts wrap company going bust. – Obviously wrap companies don’t want this to happen. Several people have made good suggestions on this, and, sooner or later there will be a good solution to this…
Cheers
Scott
Pelican Investments
http://www.pelican-invest.comsteve,
I’m new to this wrap thing as well and I’mm just hunting information myself. the ABC has a program at 8pm April 6th if you are interested and it’s about Rick OTTON.Keith
KjF
Scott,
You mentioned the VFA is working with the Gov’t about Title of the property.
I’m assuming you mean to get the title into the wrappees name.
Why?
What about protection for the wrapper. They are the one’s who have put 20% down, payed stamp duty and gotten a mortgage over the property. They also guarantee it, putting their own assets (ie. their own home), on the line, and as such, also deserve protection.
There’s nothing wrong with “The title shall transfer when payment is made in full”, as is the case when you purchase any other goods with credit.
Additionally, the bank the wrapper uses to obtain a mortgage over the property would expect the title of that property to be in the wrappers name.
If the title changes to the wrappee upon signing of the contract and settling, I’d imagine the bank would see that, realise they’ve lost the security over the mortgage, and demand the loan be repaid immediately.
In addition to that, the wrappee would also have to come up with the stamp duty immediately, instead of being able to defer it 1 to 3 years (or whatever) until the time they re-finance into mainstream banking, which is when the title transfer would take place under the current system.
You’d expect most wrappees to re-finance into mainstream banking within 5 years anyway, at which time they will get title to the property.
Problems would only occur for them if they stop making their payments. Currently, this would result in them breaching the contract and as the title is in the wrappers name, it would seem less of a headache repossessing the property in that case, than if the title were in the wrappees name.
G
Invest in People for a Prosperous Future!
Gordon,
You’ve misquoted, and, misunderstood my posting me thinks !! [blink]
Originally posted by Pelicaninvestments:There are two areas which do need addressing with wraps, and, the VFA is actually working on these with the Gov’t as we speak.
1. Title of property – For now, all that can be done is a Caveat, which we recommend our customers do….
2. Protection againts wrap company going bust. – Obviously wrap companies don’t want this to happen. Several people have made good suggestions on this, and, sooner or later there will be a good solution to this…
What I’m saying is, the VFA is working with Government departments, such as office of fair trading, to ensure “concerns” are “addressed”
I’m not saying what you have inferred….
The title SHOULD stay with the wrapper as a form of security, BUT we MUST have a way of protecting the wrappee in this situation.
It’s about doing this properly, and, ensuring everyone is safe guarded.
Cheers
Scott
Pelican Investments
http://www.pelican-invest.comAhhh. Mis-interpreted no doubt.
I’m sure I’ve read several posts in the past from members of VFA saying one thing they’d like to see is title in the wrappees name.
So… I assumed that’s what you were alluding to.
We all know what they say about someone who assumes. [whistle]
G
Invest in People for a Prosperous Future!
Gordon,
No probs !!!
I think you can see where we are aiming for anyway…..
the ol “win-win” as oft quoted around here…..
Cheers
Scott
Snapdogg (Steve)
Not all wrap contracts go bad! What it boils down to is the quality of the wrappees you put in there, plus the integrity of the wrapper!!
You and your wife would be choosing who goes into the house in the first place. If you select a wrappee who has no trouble making their repayments, and then (for example) they re-finance you in a couple of years time, then that sounds like a win/win situation to me!
Maybe you and your wife could meet up with some successful, decent wrappers (and I know there are a few out there!!) and she will see that it can work if you aren’t greedy and know what you’re doing!!
Good luck
Lozza
Hi Snapdogg,
Maybe your wife has heard of these stories.
http://todaytonight.com.au/stories/904184.html
Derek
Read my comments? Think I can help you? PM or email me.
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