Wrap Turn-around Time:- How Long???

Hi everyone,

Still trying to wrap our first property... it's now been nearly 8 weeks since we took possession.

I know we have other options.. eg - rent the place out (I'm worried about the insurance not being valid anymore), but I didn't want to give in so easily. I really wanted this first wrap to work, so we will be inspired to keep on going!!

Had lots of calls initially - some had very large deposits too. But for some reason, after we give them the address and they drive past, they don't ring us again.

I've tried following some of them up... one said it was too far to walk to the train station, others don't return our calls. One said they really couldn't afford the repayments after all.

Admittedly, rent in the area is around $220 a week, and our repayments will be approx $470 a week (depending on size of deposit of course).

Do we give up, and rent it out, or keep trying? Nothing essentially wrong with the house... it's 3 b/room plus ensuite, carport. Only 6 years old, in a new area.

Anyone can offer any ideas? Have done lots of advertising, but enquiries seem to be dwindling now.

Thanks guys

Lozza

Usually with wraps we try to go for payments near the current rentals and yours is double + more, so this is the problem your facing. Perhaps reduce monthly and increase price of house, to try and get the monthly down a bit.

People see rent money as dead money, but they look at this kind of deal and they say - it's much cheaper to rent... even if we are paying dead money... An thats what your up aginst.

Otherwise more advertising! I assume you have ot those big FOR SALE bandit signs up? Also add signs to telegraph posts (those with the pull of paper), and of ciourse you can always arrange a letter box drop, which can be quite inexpensive (arrange it with the local paperboy).

So basically drop monthly down and/or advertise more.

Rgds.
Lucifer_au

Lozza, it sounds as if the property is worth somewhere between $ 220 k to $ 230 K judging by the rent.

If you are paying 7% interest yourself it would cost you about $ 300 a week.

So why the need to collect $ 470 per week ?

Pisces

Lozza, if you are concerned about the insurance plop a mattress in the house and stay overnight for at least one or two days.

Does anyone disagree with the above ?

Aslo one can have a light switched on (and off) by a timer so anyone passing by will think the house is occupied.

Pisces

That sound right Pisces,

It seems that the margin you are trying to make is too much.
It would have been better to make a smaller gain than to pay 8 weeks of interest etc. If you were to make less on the deal, then move on you would still be in front.

Lozza,
Rick Otton tries to get people throught the house while it is settling, so that they are ready to go straight away.
Once again this is to reduce the amount of time you are paying interest without the income.

Thanks Guys for all the quick responses...

I'll have to check my numbers and get back to you shortly, but I didn't think I was being overly greedy... let's see, cost price was $227,000 plus stamp duty nearly $10,000. I was working out their repayments on 8.99% P&I, but ours is on 6.99% interest only. I think the NET cashflow per week was no more than $100.. maybe I've got confused somewhere. I'll do some numbers again tonight, I promise! Reducing the sale price didn't seem to have much effect on their repayments anyway. But if I'm being greedy, it wasn't intentional!!

Funnily enough, most people in the area seem to be on a reasonable income... lots of self-employed and stuff.

MilkmanJr -- of course, I understand the principal of getting early access to the property. In this instance, being our first wrap project, I tried but failed to get this. We did advertise the week before settlement, and were ready to show people through in the first week of vacancy. I know that next time I can do better with this next time (if there is a next time!!)

We also did a letter box drop a few weeks back on bright fluoro paper... delivered to about 200 houses in the immediate area.

Maybe we shall have to try re-wording our advert.

Lucifer - what do you mean by "those with the pull of paper"?

So don't give up then?? How long did everyone else take to get their first wrap all tied up?

Thanks everyone

Lozza

Lozza,
What prices are similar places selling for in the area?
Is the purchase price itself market or above market value?

Lozza,

not sure if you'd like to, but please email me, and we can discuss your deal....

470/week seems to be your biggest problem....

Cheers

Scott

Pelican Investments
http://www.pelican-invest.com

Thanks Scott, yes I will email you as soon as I get a free minute! Thanks very much. I'll be in touch.

I didn't see $470 being the biggest issue, because I know several people (inc. first home buyers) who are paying more than that in repayments on a normal home loan! But maybe that's just my friends.....!

Milkie - another house of same description five doors down was sold for $245,000. Another one further down the road was advertised for $259,000 but it had a pool. I figured $257,000 was reasonable as a wrap price, as we have borrowed the $227,000 plus the stamp duty plus all costs.

Could drop the interest rate a bit, but I thought a 2% mark-up was pretty normal...?

Cheers

Lozza

Hi Lozza
You might also need to think about the fact that wrapping may well be a very new concept to the area you're in. Not everybody is going to see your ad or signs and immediately ring you. Sometimes the first few wraps in an area can take a while because you need to educate people about what it is and how it can be an option for some people.
I know I did that when I first did some wraps, now I seem to get a lot more people who've heard of the concept and done some research on it, then see my ad or sign and ring. One even said they'd been actively looking for a wrapper in that area!
Having said that, sometimes it just takes a while for the right buyer to come along.

Keep smiling
Felicity 8-)

Hi Lozza

I was working out their repayments on 8.99% P&I, but ours is on 6.99% interest only.

I'd just like to point your quote above. I seem to recall in one of Steve's newsletter about doing a Wrap where the wrappee pays P&I, whilst you pay IO. Please correct me if I'm wrong, but I thought he mentioned that this may be illegal.

Or I may have just misunderstood what you meant.

Just thought I'd point out a potential problem before it hits.
Take care
InCJohn

I do not know wether it is illegal, but I would suggest big time that you change your IO to P&I, esp. if you are doing 30yr wrap (the buyer could be one of those people who just refuse to re-finance with the bank, this is an important point to consider).

Although it would be good to have IO and then when you find the new buyer to move to P&I, keeps holding costs down... But you again want to put your loan to P&I.

Also I work out 8.99% on $257,000 @ 30 yrs. to equal $516.22 in repayments....

Rgds.
Lucifer_au

Hey lozza123,

Let me ask you a quick question:

How long is it between the time potential buyers ring you up off your advertising and the time they get to see the house?

Adrian

Here I go; I'll try to answer everybody's comments if I can!!

BTW, thanks everybody for all your input so far. Much appreciated.

INCJohn & Lucifer... I wasn't aware that Int.Only was illegal.. our loan is Int.Only for 3 or 5 years I think, but I think we can change that at any time.. But isn't that one way that some people "increase" their cashflow, by doing Int.Only, and then maybe revert to P&I later??
Maybe I missed a crucial point here!!

FW.. Thanks for your constant support and optimism. I need it!! I'm just a junior to this after all, I guess!! We're definitely the only wrappers in the area, far as I can tell...

Adrian... To answer your question, I'm not sure! Maybe they SAY they'll look, but never get there. I didn't want to make actual appointments with them if they then didn't bother to turn up. I just tell them to "Drive by"...

It could be the fact that the house over the road is bright blue and yellow and looks like a ship.. I know that would turn ME off!! (But I have a choice of areas I guess!) The rest of the houses in the area are all normal. It is a dead-end street, which means not much "drive-by" traffic.

Lucifer... I think your $516 repayment amount is wrong... because the figure I get using your numbers is $2066 a month, which if you multiply by 12 and divide by 52, equals $477 a week.

Lozza

Just another thought...

A lot of the callers we have had don't speak very much English. (The area is blue colour, and very multi-cultural too) I normally get my hubby to call back any phone messages that I can't understand!!

Lozza

Hi Lozza
I'm blushing!
Regarding the IO thing, it's a very grey area, and legal opinions vary. When the applicable legislation was written there was no such thing as an IO loan, so therefore it's not mentioned - so it's not illegal.
However the spirit of the legislation tends to suggest that IO loans are not smiled upon.
The legal opinion I've received is that it's not illegal, but he doesn't recommend it either.
Personally, if I use IO loans I only do it short term, and I would certainly NEVER allow my loan to be higher than my wrap buyer's loan.

Keep smiling
Felicity 8-)

In my opinion I think that your payment price is fine since you received quite a few calls when you initially put the house on the market.

I think that it could be the street appeal of the house that is letting you down. This is based on the fact that all the callers whom you asked to drive by the house never called back. Is the front yard neat and tidy? Maybe you could improve it with a few plants. How does the front entrance look? Could it use a new floor mat? What you could do is to maximise the street appeal of the house as much as possible while keeping within your budget. You may also want to try "hand holding" any callers through the house personally so you could what them through the benefits of your home-buying program and how they can own their own home NOW rather than in the distant future.

So good luck and let us know how it works out.

Adrian,

I think these are the sorts of suggestions I can work on... you seem quite knowledgable for a "newbie"! There is definitely something going wrong in between us telling them to "drive by" and them ringing us back.

Of course the front lawn is totally dead, what with the Stage 2 water restrictions down here. Maybe I should invest in some pot plants though...

I'm thinking I'll leave the street address OUT of our adverts, so we can "hand-hold" them through, as you say.

Thanks everybody. I haven't given up hope yet!!

Lozza

Lozza,

Interest only is NOT ILLEGAL...

BUT, you should always ensure from a Consumer Credit Code side, that your outstanding ballance is not more than the wrappee's loan.......

Cheers

Scott

Pelican Investments
http://www.pelican-invest.com

I thought it was illegal to have your loan higher than that of the new buyers (so it isn't illegal to use IO loans, sorry if I confused the issue here).

Using I.O. loans are more difficult because you have to work out exactly when that event occurs (the event being you owe more than the wrappe).

That is MY knowledge of it though - And could be COMPLETELY wrong and incorrect. But considering this is your first wrap, it's best to keep it simple as possible. Perhaps Felicity (wrapper extraordinaire - Your reputation proceeds you!) could help us out...

Rgds.
Lucifer_au