Forum Replies Created
Hi 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 ….
