In selling our townhouse in Western Sydney, a company replied with the following replying. I am quite new to all of this. Is this what has been refered to as a wrap? If in my position, where wanting to get rid of a property for positive cashflow, is this the best way to go about things??…….
If I could give an example:
Current Property value is estimated at $245K?
We could find a vendor finance buyer for $270,000
Cashflow would look something like this:
Deposit: $10,000
FHOG: $7,000
Balance: $253,000Interest 7.95%
Term 30 YEARSMonthly payments into your account:
$1898.73Benefits:
– You can still draw on the equity of the property up to the value
of no higher than $253,000 – thus reinvest in other properties.– Positive cashflow (money in your pocket) from day one.
– No More rates, insurance costs (paid by you anyway)
– Increase your income
– Increase your leverage of your equity (makes a better case to a lender
to allow you to utilize the equity built up in the property) as your
serviceability (income) has increased.If you have had the property for 6 years (possibly paying between
$65,000-$100,000) then I would estimate you have either paid off the
property or you have a very low mortgage commitment (unless you have
drawn on the equity). This gives you a massive spread between your bank
commitments and what the new buyer is paying, thus you become the bank.This is a 2-3 year strategy as we would put the paperwork together in a
way where it is less attractive for the buyer to stay with you and will
refinance back into the banking system.Hi
yes this looks like a wrap. But the figures look a bit low. usually there is a 20% markup on the value ,this would make the vendor finance purchase price $294,000.
Also there is usually a 2-3% spread on the interest rate, so 7.99% is a bit low.
Sometimes you can take a higher interest rate for a lower price or the other way around.
Since you already own the place, you don’t have to take stamp duty into account like an investor would when purchasing a property just to wrap.
If you are wanting to sell to get positive cashflow, this may be ideal – if you can negoitate the figures up a bit.
Terryw
Discover Home Loans
North Sydney
terry@discoverhomeloans.com.auTerryw | 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
thanks so much Terry. Not sure if it is OK to ask on the forum, but do you know of the company “We buy houses”.Do they have a good reputation?
<<<Monthly payments into your account:
$1898.73 >>>>If someone can afford that much a month why would they want to do a wrap.
If banks wont touch them, then why would you?
Just sell the property if you cannot afford to keep it.
More ways than one to skin a cat Yack,
Not all buyers that a “bank won’t touch” are bad risks.
If, of the total market of buyers out there, 20% don’t qualify for bank finance for whatever reason, then that is a huge market to be tapped for vendor financing or any other creative method of achieving a sale.It is not always necessary to increase the interset rate margin by 2%+.
In fact it is possible to offer vendor finance at below the market rate ( discount the interest rate) and still achieve positive cashflow….Like I said, more ways than one to skin a cat…
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