Hi all,
I am very interested in the idea of wrapping properties. i have only just come across this system and am quite naive to the whole property investing game. i am a homeowner but that is about all the experience i have.
the idea of wrapping which appeals is the security (provided you have the right tenants) of decent weekly cashflow (obviously dependant upon the numbers of properties you have).
as i understand it the basics are that the vendor takes out the mortgage and the purchaser is legally bound to a repayment plan and will eventually own the house if they by out the mortgage or make payments for the full duration of the loan.
the question i have is regarding the finance side of it. would a lender be willing to approve finance for a loan if the vendor had a purchaser before the mortgage was taken out and this was agreed? so before the mortage is taken out there is already a guarantee that the repayments will be more than covered. or does the vendor still need to qualify for the loan under normal terms? if so that would severley dent the amount of properties which could be purchased.
another query is what if you have a wrap which has being going steady for say 3 years. then the purchaser wish to move, is it up to them when the property is sold? also any capital gain is taken by the purchaser aswell as any equity they have accrued in the mortgage as i believe.
forgive me for all the questions, i am 23 and looking into options which can hopefully secure my future financially.
any help would be greatly appreciated guys,
christian
Hi Christian
We use both Lease/Options (Rent To Own) and Wraps (Installment Sales Contracts) in the current market. We find that it's the particulars of each property transaction that steer us towards one of the many vendor finance strategies. However starting off with just one (or two) strategies is a good way to get going.
To ensure that you know the difference between a Wrap and a Lease/Option, may I suggest you have a look at:
https://www.propertyinvesting.com/strategies/wraps and
https://www.propertyinvesting.com/strategies/lease-optionsAnother interesting resource to read concerning Vendor Finance, in real estate, in Australia is:
http://www.vendorfinancelawyer.com.au/page28.htmlGood luck.
Cheers, Paul
Paul Dobson | Vendor Finance Institute
http://www.vendorfinanceinstitute.com.au
Email Me | Phone MeAn alternative way to finance your home.
Lenders do not like wraps for a variety of reasons and are unlikely to lend if they know about it. Some larger wrappers have gotten around this by having relationships with branch managers of larger banks who may be able to bend policy.
Lease options would be easier to get finance for, but even then if you tell the lender that you will be selling an option on their security property they won't like it – technically you will need their permission.
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
ok thanks for the info guys.
does that mean then that you have to be able to qualify for the loan as per normal lending guidelines?
for a normal person working a normal job ($50k pr yr) then that would severely limit the amount of properties one could by??? obviously to wrap where you had enough positive cash flow to not work and just manage your properties and prospect for new ones this wouldn't be possible if you had to qualify the normal way…………???
any info greatly appreciated.
cheers,
christian
This means if the bank knows you are wrapping, they will not lend at all. If they don't know you may still be able to do it, but you would be breaching the loan agreement with the bank.
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
I am contemplating the sale of 3 properties:
1. Dual Occupancy approved, ie stamped plans and permit for a 3 bedroom, 2 bath, double garage,
Safety beach, 50 m to beach, almost next to Marina. Front house solid and easily renovated cosmetically.
Around $520,000.2. Cabin in a seaside caravan park , almost new fully furnished.
$115,000, suit 1st home owner/retiree with limited funds.3. 4 bedroom, 2 bathroom, fully renovated, including furniture, Merrijig near Mt Bulla, around $400,000.
In this slow market, I am willing/able to provide some vendor finance on a deposit of approx 1/3, and being the the first mortgage holder.
Would this improve saleability?
What is the best approach?
Where are these properties best advertised?
I don't need to do a "wrap", as they are not financed.Thanks, Regina
Hi,
I was searching threads, some great infor here, thanks.
Question.
Currently there are some great buys on the Market (looking at Gold Coast). As an investor, is it wise to expand portfolio by using Wraps/Vendor finance to build portfolio? I am currently in position where primary income (self employed/contract IT Project Manager) cash flow has increased significantly, but recently changed business structure to a Trust and with no deposit available.
2nd Question, as Company is setup as trust and has minimal liability/risk, could the trust purchase the Vendor financed property? This would provide greater cash flow, but not sure implications now and future.Thanks in advance for any replies
Hi there. I'm a new investor in Cairns, wanting to do my first lease-option deal. But I can't find a solicitor to help me. Please can anyone recommend a good one in Queensland. Thanks
Jsawtell
I think the present time is a wonderful time in the market to get back into wrapping.
I have run a Vendor Finance Company here in Qld since 1996 which is the largest provider or Vendor Finance in Qld.
The lending market has changed dramatically with many lenders tightenight their criteria so the type of client you attract now is totally different to the those looking for finance some 4-6 years ago.
I would keep your investing entity and your work entity separate for a variety of reasons.
One issue i can see is that you will not get 100% Wrap loan in the present climate.
Richard Taylor | Australia's leading private lender
Jill
Are you sure it is a Lease Option Contract you are after not a Installment Contract ?
Richard Taylor | Australia's leading private lender
Hey There,
I have been using Lease options for quite some time now…. we do them over here in NZ…. (Did them in Aussie before coming back here!)
We have only ever seldom paid more than a $1.00 option fee for control of the property for at least 5 years. In the curnet market we are not diong them for any less than 7 years.
You will be amazed what a seller will do if you can offer them a solution to either stop the bank rolling in and selling it… or they are not able to meet the repayments…. we have even helped out investors that made the 3 Key fundimental mistakes (paid too much, Negative Geared and wrong area)…. some are sick and tired of owning a lemon and with the market stale and even falling in some places still…. if you can offer them the plaster that will stem the bleeding so they can get on with things…. they are most happy to let you take an option on the house.
Options are Great tools…. you do need specialist training (Just like a mechanic with all the latest electronic diagnostic equipment)…. if you do not have any experience … there is a mine feild of issues and challenges that await you…. however you will never learn from sitting in your armchair and thinking about it…. Go and do whatever it is that you yearn for and you shall learn the tricks of the trade as you go along…. just remember not to get yourself exposed….. always plan your exits (plural)
Cheers
Kiwi!
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