This may be old ground for you and I but it is new for some posters and many readers. The only off topic comments in this thread are one of yours and my response. I have deleted my response so the thread is back on topic.
If you get involved with something that is controversial, you have to be able to deal with the opinions. Believe me, I know all too well – remember Derivex?
Robert Bou-Hamdan
Mortgage AdviserRob, Sorry mate, but I am going to have to side with Pelican. It is NOT my intention to upset people (especially rappers) and it is clear that Pelican is getting increasingly upset with yours and my points. He does not like the way this is going and he wants the topic locked before another debate on rapping leads to the only obvious conclusion.
This, of course, hurts his business interests.
And, because I have only made a small number of posts it must mean that I must be less intelligent than the likes of Pelican who has lots more posts than a klutz such as me.
I see how it works here – High number of posts = high intelligence. Low number of posts = low intelligence.
And to think those stories about this forum being a site for bullies who berate any who disagree with the majority – how unfair.
But, then, I suppose if I were to add Rob’s number of posts to mine (sort of like team members) then my intelligence would exceed Pelican’s. Oops…
Yes, lock-down time.
Night-night
Leo
Number of posts mean nothing. My high number just represents I have no life or I am a computer junkie!!!
This is certainly nothing to be proud of and nothing to strive for.
As for the bullying, I copped it big time when I started out in this forum. It passes and things get better. I think I wore most of them down. You might even end up with a ‘reputation’ like mine (don’t know what that is exactly).
Anyway, stick around. There will always be some fun discussions about wrapping!!!
Robert Bou-Hamdan
Mortgage AdviserWell I’ve certainly been involved in some adversarial encounters with Pelican, but with regards to wraps, the comments above seem to be grossly unfair.
It seems that in Australia the principles of Napoleonic Law have been applied to wrapping viz. the morality of the concept. That is to say they are deemed guilty until proven innocent…a disturbing trend emerging in our country on several fronts.
I see a genuine and concerted attempt by the serious purveyers of wrap finance (inluding pelican) to protect the consumer as much as possible.
Wankers exist in every industry and the broad pasting of muck across the whole industry by various tossers and “consumer advocates” is just not deserved IMO.
I say to Pelican, Qld007 et al; keep up the good work!
Cheers
EEK!!!!!!!!!!!!!!!!
What did I unleash with my innocent post. A few conclusions that I have drawn are:
1. There seems to be a trend towards full disclosure of facts ( which was sorely missing in the Court case I referred to) to the wrappee.
2. Although no one discussed margins in percentage terms it seems that any margin is acceptable if there is full disclosure.Get solicitor certifications to remove doubt.
3. Wrapping as a term means different things to different people. Wrappee protection is offered by way of instalment contract in some cases. For others the wrappee will not appear on the title deed until the final payment is made.
I suppose to address the issue that bugs me about wrapping what happens when a wrappee defaults after 2 years paying an inflated rent of $250 per week when the market rent is actually $150 per week? Who keeps the $10400 extra which no doubt is described in the paperwork as rent? ( I think I’ve just answered my own question there). Do any wrappers offer refund/rebate/pro rata adjustments etc when the value of the property has substantially increased?
Without speculation regarding the particular case as mentioned, I have to ask
a)why so many people dislike wraps and
b)why others think it is immoral
If someone wants to buy a house but dosnt have the initial 10% and cant get 100% finance, then why not help em out while making your own profit? Thats how the world works afterall, people providing a service for others at a price.
Lawboy,
Are you mixing up a few things there?
With an instalment contract, the title doesn’t change over until they make the final payment. Wraps (instalment sales) involve the repayment of a loan. Lease Options involved the repayment of rent – usually rent is not refunded if someone moves out.
In the case you cited, I can’t see how this relates to wrapping (or lease options). Someone sold a property at an inflated price, fraudulently obtained a loan with a major bank for their ‘client’ (without their knowledge) and then charged them a large fee secured by a second mortgage stitching them up big time.
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 pointing out that Wrapping is Illegal in West Australia. So watch out anyone thing about this in WA!!
Apostle
Apostle. Is it really illegal, or do you just need some sort of licence?
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
Originally posted by apostle:Just pointing out that Wrapping is Illegal in West Australia. So watch out anyone thing about this in WA!!
Apostle
Apostle,
Sorry, but your information is a bit misleading…..
it IS illegal if you aren’t a licenced credit provider… ( this is a good thing )
if you ARE licenced then it is NOT ILLEGAL……
Cheers
There are NO SECRETS to Investing… Everything is public knowledge….
You may know the cost of everything…. but what about the value ????
Hi Terryw,
I was looking at it from a lawyer point of view- here in qld an installment contract allows the buyer some room to move if they default and also the buyer can caveat their interest. On a pure rental agreement it gets a bit harder for them to move. I gather that each wrap deal is different in nature and has to be looked at on an individual basis.I agree with your comments on Gunter’s case however
Hi guys.. Yes you are right.. Wraps are illegal in Wa unless you can get a credit providers licence (6-12 weeks plus a lot of proof about other stuff) but We had a really bad case over here. see http://www.docep.wa.gov.au/media/media/2004/April/Mortga.html We are a relatively small state and the publicity was on Current Affair. It may be leagal with the Credit licence but the amount of negative publicity is not good. I communicated with Rick Otton about WA (he talked with the consumer credit guys) and his advice was basically ‘Get your licence BUT be very careful’
Hope this helps..Apostle
Lawboy,
Pauline Hansen wraps a nice bag of “fish and chips” in Ipswich.
resiwealth
Hey Rob, Dimichie hasn’t contributed here ?? – don’t worry Leo youre safe mate!
He seems to only read posts about economic doom and gloom. Lets talk about him behind his back!
Maybe he thinks a ‘wrap’ is a Lebo bread rolled sandwich. But then again, a ‘sandwich’ is something else. Lets talk about ‘KEBABS’!
The Mortgage Adviser
http://www.themortgageadviser.com.au
[email protected]
Essential LinksHi all,
Im new around this site but just cant help sharing a few pointers about my wrap experiences in NZ.
Firstly there are always going to be cowboys who give a general population of honest people a bad name … there is no exception to this in any industry. What are peoples views on car sales people? especially now finance is such a huge part of car sales? They are not all bad but have a pretty bad rep.
I have completed 3 wraps to date on installment sales contracts with full credit contracts act disclosure statements and signed documents that I have advised the purchasers to seek independant legal advice. My interest rates that I charge do not exceed 2% more than I am paying my bank and I will not increase the sales price by more than 10-15% above the registered valuation. The key for me to increase my returns on these properties is to buy below valuation …. the better I buy the better I profit ….. not at the expense of the wrappee. We allow all our wrappees to lodge a caveat on the title of the property registering an interest after they have completed 6 months of payments with out missing any.
My first purchasers have recently completed their purchase they have made a tidy sum on the property and are in the process of selling to clear all their other consumer debt (if you dont like wrapping you must REALLY hate credit cards and hire purchase!!!) They have already approached me about buying another wrap property.
I believe the morality debate is a dangerous one as there an arguement that rental properties are also immoral (if not more so) ……. let me explain.
When I wrap a property to a wrappee they get a property at a fixed price and a fixed payment (for the duration of the fixed interest period) …. over time property values go up, wages tend to go up, and rents go up. So taking the worst case scenario that they were never able to refinance with a bank and had to stay with me for the duration of the 30 year agreement they would now own an asset that has appreciated considerably applying the assumption of property values doubling every 7-10 years (quicker if they make improvements). Their weekly payment is the same/similar (adjusted for changes in underlying interest rates). Their incomes have increased increasing the ease at which they can service their payments.
Now lets look at someone who rents a property for 30 years. Ok the rent is little cheaper than the payments on a wrap for the first few years. However the rent is increased on them probably annually. At the end of 30 years it will be considerably higher than 1. what it began as and 2. than a wrap payment. They have no asset base or financial interest in the property. Aside from that they can be asked to leave the property if the owner wants them to, they have to place a bond and usually pay an agents fee which would normally total 1/3 maybe 1/2 of the deposit required on a wrap. With the poor savings record of people in NZ and I believe it is similar in Aus (correct me if Im wrong) they will not have been saving the difference between wrap payment and rental amount. The chances of them ever purchasing a property just seems to get slimmer as their affordability declines over time
Which deal seems more immoral? which is a better deal for the purchaser?
Anyway after that long rant Id just like to point out that Im not against either rentals or wraps each has its place in society …… in fact hire purchase is what I hate!! People buying ‘Stuff’ not assets on credit …. but thats a whole other post
Thanks
p.s. are banks immoral? I mean if I stop paying my mortgage the bank generally doesnt let me keep living there ….
Frrrr from cold NZ arrived this morning.
Andrew you see we are not all bad in the wrapping business.
Just one point you made that may differ from Oz. You mention “We allow all our wrappees to lodge a caveat on the title of the property registering an interest after they have completed 6 months of payments with out missing any.”
In Australia they have a right under the Property Act to lodge a caveat and do not require the consent of the wrapper.
Cheers Richard
richard at castlewhite.com.au
Email me for details of our Qld wrap CD which gives you a full Installment Contract.Richard Taylor | Australia's leading private lender
Originally posted by PaulDobson:… I do know that the insurance company, Australian Unity do have a special “building insurance” policy for homes sold using Instalment Sales Contracts. Herein they register the “wrappees” interest in the property (along with the interest of the wrapper’s first mortgagor). …
Hi
We used to use this insurance mentioned above. However, now as each house comes up for renewal we have been switching to a similar product from CGU, which has better terms and is cheaper for the clients.
On the matter of the original post, I downloaded the pdf mentioned, and read the entire 26 pages. That’s indeed fraud, not “wrapping”.
Cheers
Lance
.
Fair Go Homes
http://fairgohomes.com.auRapt with Wrapping!
1300 666 247
[email protected]Hi Lance
Thanks for the information on CGU. I must admit that Australian Unity have been getting “over the top” with their costs for wrapped properties. Would you mind PM’ing me with the contact details of your CGU contact. Thanks.
Cheers, Paul
Paul Dobson | Vendor Finance Institute
http://www.vendorfinanceinstitute.com.au
Email Me | Phone MeAn alternative way to finance your home.
When I read Mr. Rick Otton’s “rent 2 own” pack and “the wrap pack”, I was very excited and loved the idea of helping tenants to own a house while I could make some profit out of it in shorter period than just holding it to wait for the capital growth.
I have read some articles which were against “wrapping”, but some points they mentioned were clearly wrong. Even I , a beginner investor, could tell.
So, I’d like to think that the wrapping itself is not a really bad idea.
I’m still learning about it, but have no intention to rip huge money out of tenants who really want to own a house but have problems getting loan from a bank.
We all are in money making business but if we could help people along the way, it is better, isn’t it?Hi
So, I revist and read (again) most of this thread.
Interesting that I had a call from one of our wrap clients this week. he is “cashing us out” (refinancing) within three weeks.
Those who believe that wrapping is always immoral may be interested to see how this worked for our client…
We bought the house for 73k, and rented it for a year. The valuation at that time was 120k. We sold it on a wrap to the client for 115k (we are not greedy!) He wanted it as an investment, so we instructed our solicitor to add a few clauses to the instalment contract so he was allowed to rent it out.
He gave us 3k deposit, and his legal and stamp duty costs would have brought that up to about a 5k investment. The property was slightly negatively geared (He says he has been putting in about $50/month to make up the difference between his rent receipts and his instalment payments to us). So add 50/mo (2 years, that’s $1200) and his investment has totalled 6200. He put up some fences and painted it himself. Add another 5k. Total investment for our client was about 11k. He has put the property on the market now for $199k. He probably won’t get that, but he will probably get about 180k.
So, he started with 5k, and turned turned 11k into 65k in 2 years.
We, on the other hand, put down hard cash deposit of 14.8k, plus our costs, and so we invested close to 19k UP FRONT. Our payout profit (after costs) will be 115-74-2= 39k (less tax!)
This is a better profit for us than usual, because we rented the property while the market rose. The more normal situation for us would have been to sell the property to him for 94k, raising his profit by 20k and decreasing ours by 20k.
For us, it’s so far been true that in EVERY case where a client has refinanced or sold, they have made more profit on the property than we have, and with much less initial investment.
And in one case, the client rented from us for a year before we set up the instalment contract. The property had risen to 101k in value, but we still sold it to them for the initially-agreed 81k. They could have refinanced the very next day and would have made the same as us out of it. (BTW we did learn from this, and now have a “final” date by which they need to have the deposit saved to buy the property at the initially agreed price)
We’ve never had a complaint from any of our clients, and only once has a client walked away without a house. (He also lost his wife and his best mate, who ran off together, taking the TV but leaving him with 3 or 4 little kids. He had to move closer to his mum for baby-sitting help so he could continue to work. He was nevertheless very happy with the arrangement he had with us, and paid the “rent” up to the final day) We believe our low “problem” rate reflects the care with which we select wrapees. We don’t mind leaving a house sit for a month or two if it means we get the “right” occupier. A couple month’s mortgage is less than the agro of a bad wrapee decision in our view.
Seems to me, the “morality” of wraps is entirely dependent on the business ethics of the wrapper. Like every other business, really.
Wrapping for us is a lifestyle decision. Do we push to the max for every last dollar from every deal? Nope. We get what’s reasonable, our clients benefit too, we have a fine living based on cashflow, we go to the beach 3-4 times a week, and we sleep calmly.
Cheers
Lance
.
Fair Go Homes
http://fairgohomes.com.auRapt with Wrapping!
1300 666 247
[email protected]
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