Ethical Wraps

Hi Everyone, I am new in property wraps but I have signed up for Rick Otton's seminar in Syd this year. I have been reading a lot about wraps recently and there seems to be a lot of negative thoughts on it because of the risks for the tenant. I certainly don't want to be involved in wraps if it is such a high risk to the tenant. However I do like the strategy but surely someone has done a wrap arrangement where the terms of the wrap reduces the risk for the tenant ?

For example:
1. Instead of charging an over inflated interest rate the interest rate could only slightly be higher than the banks so the vendor can cover its mortgage repayments
2. Instead of charging a ridiculous price on the property, the price could be calculated on a realistic expected growth of the area and
3. If the vendor fails to service the mortgage, there would be a contract so that the vendor would have to pay the tenant back a portion of the rent paid?

I'm curious if anyone has or is doing Ethical wraps where the risks are reduced for the tenant ?
What do you all think about this ? Will it work for the tenant and the vendor ?

Thank you
Charlie

Hi Charlie

To ensure that you know the difference between a Wrap and a Lease/Option, may I suggest you have a look at:
http://www.propertyinvesting.com/strategies/wraps  and
http://www.propertyinvesting.com/strategies/lease-options

If we go back to your question on Wraps (Instalment Sales Contracts) you can pretty much structure them in whatever way you think is most ethical for you.  This is done by simply instructing your lawyer accordingly while she is drawing up the legal paperwork.

Another important point about Instalment Sales Contracts is, when you sell a property with an Instalment Sales Contract, you are regarded as "supplying credit".  Therefore all your legal paperwork must comply with the Uniforn Consumer Credit Code and you must abide by all the Code's requirements.  This is the same Code that Banks, Building Societies, etc have to conform with.

Another interesting resource to read concerning Vendor Finance, in real estate, in Australia is:
http://www.vendorfinancelawyer.com.au/page28.html

Good luck.

Cheers,  Paul

Paul & Karen Dobson
Vendor Financiers
http://www.NoDepositProperty.com.au
Phone: (02) 4984 9540

Talk to us about Wrap Training Joint Ventures.

As a Director of Qlds largest provider of Vendor Finance with First Home Owners Group Pty Ltd I like to thing all of the deal we have done over the last 10 years have been ethical.

Only yesterday i was checking out an interest rate for a credit imparied client wanting to go lodoc on a rural property to be quoted 14.75% by 1 non conforming lender. At a margin over the Cash Rate i think we are Angels in comparison.

One issue has been the rising price of property in most of the major towns making affordability difficult for many first home buyers. Whilst the regional towns have also enjoyed good growth over the last 5-6 years you cannot compare one with the other.

If you are starting out on your wrapping career you need to work out a business plan and how many deals you really intend or feel you can do. To do a couple is probably not worth the time or energy for you or your introducers. Just as they get warm to the idea you will be pulling the pin.

There is not much educational material written about VF arrangements so talk to a few people in your area who have offered the product and see what they have to say about the results.

Cheers

Yours in Finance
Richard Taylor
Residential & Commercial Finance Broker.
Licensed Financial Planner. Ph: 07 3720 1888
www.tayloredfinancialsolutions.com.au
richard@tayloredfinancialsolutions.com.au.
Lodoc loans from 8.63%

Thank you for all your comments. Paul & Karen Dobson - thanks for the links.!

Hi Paul, Karen

Just realised you guys are the big kahunas i met at rick otton!

charlie chandra

Charlie

Don't forget you need to make a profit too!!

Terryw
Discover Home Loans
Terry@discoverhomeloans.com.au
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Yeah, im currently overseas now and as soon as i get back to sydney i will start off with using rick's strategy to get rid of my north sydney apartment (dont know if you were at the seminar) then ill start looking for houses ..