WRAP’s- Starting out

[nairnoMember@nairnoJoin Date: 2004Post Count: 5]

October 19, 2004 - 3:32 am

Dear all,

I have recently been doing some research on WRAPS and vendor financing. It seem to be a very intersting area.

With a mortgage broker who has done some and is up on them in the office i am intersted in starting out.

Was wondering if anyone had experiance with the WRAP Pack, is it beneficial or should i look at other areas of learning before i purchase something like this.

How did others start.

Would be great to get some feedback.

Thanks

Chris

[AdministratorKeymaster@piadminJoin Date: 2013Post Count: 3,225]

October 20, 2004 - 8:21 pm

Hi Chris

I suggest you start by:
1. Buy Steve’s Wrap Pack (was $2,195 a few months ago, BUT NOW ONLY $695…BARGAIN!)

2. Go to Rick Otten’s http://www.webuyhouses.com
http://www.rent2buy.com

3. Get yourself to one of Rick’s “Boot Camps” asap. The money “invested” is really invested.

Do these 2 things, and you won’t ever look back with regrets.

Cheers
Greg

[techaMember@techaJoin Date: 2004Post Count: 79]

October 20, 2004 - 10:30 pm

Ever considered wrapping Commercial Property/developement.

Domestics had its run.
Commercial has more upside IMHO

tech

Humans are the DUMBEST of creatures.
They do the same thing day in day out and expect a DIFFERENT result.

[nairnoMember@nairnoJoin Date: 2004Post Count: 5]

October 21, 2004 - 12:11 am

Thanks for the replies

The WRAP pack looks to be the go.

Interested in commercial but i think i should do a few residential to get the hang of it.

Thanks

Chris

[pelicanMember@pelicanJoin Date: 2003Post Count: 454]

October 21, 2004 - 2:20 am

You should also check out the VFA

http://financewraps.asn.au

You may know the cost of everything…. but what about the value ????

[JuliaMember@juliaJoin Date: 2004Post Count: 217]

November 10, 2004 - 2:12 pm

If the Vendor Finance arrangement has the following features the income stream received, once the wrap arrangement has begun, is considered to be principle and interest by the ATO. The income stream received before the wrap arrangement is entered into is considered rent. Reference ID2003/968.
Typical Features of a Wrap (Vendor Finance Arrangement)
1) The purchaser pays a deposit at the time of entering into the arrangement.
2) The settlement (change of the title deed to the purchaser) does not take place for several years after the arrangement is entered into.
3) The purchaser has the right to occupy the property prior to settlement
4) The purchaser pays a weekly amount (regardless of the name it is given in the arrangement) for the right to occupy the property
5) As part of the arrangement the purchaser pays the rates, taxes and insurances on the property.
6) The balance of the purchase price to be paid on settlement of the arrangement is reduced by the weekly instalments.
7) If the purchaser fails to complete the arrangement the deposit and weekly instalments are forfeited.

Now what about the profit on the sale of the property? Is that normal income or capital gain and when is it taxable? Assuming an agreement similar to that described above the answer to this question revolves around whether the vendor is in the business of selling houses or an investor just realising an investment. The key issues in differentiating here, according to ID2004/25, 26 & 27 are:
1) The Vendor did not use the property for any other purpose than to enter into the wrap. A straight rental of a property before entering into a wrap arrangement would avoid this point.
2) The property was sold at a profit
3) The wrap arrangement was entered into within 6 months of the vendor purchasing the property.
4) The Vendor is in the business of purchasing properties to resell. It would be difficult for the ATO to argue this case if the Vendor only bought and sold one property.

If you are caught by all of the above then CGT cannot apply to the sale of the property as the profit on the sale is revenue in nature. If a transaction is caught as income, CGT does not apply or in other words CGT is the last option if income tax doesn’t catch it. But even if you weren’t caught by the above and CGT applied there would be no discount if the property was held for under 12 months. If you did hold the property for less than 12 months before entering into the wrap it is better to argue that you are in business and caught by the above because the profit on sale would be revenue in nature and as a result not assessable until settlement which could be 25 years away (ID2004/27). If you hold the property for less than 12 months but it is subject to CGT you don’t qualify for the discount but would be assessable on the profit when entering into the wrap.
Section 104-15(1) of ITAA 1997 states that a CGT event happens when the owner of a property enters into an arrangement with another party to allow them to live in the property and title may transfer at the end of the arrangement. Section 104-10(3) states that the time the CGT event happens is the time of entering into a contract for the disposal of the asset, not when settlement (title passes) takes place.
For example this means that the vendor who enters into a wrap on a property that has been previously used as a rental and held for more than 6 months will be subject to CGT on the property in the financial year the wrap agreement is entered into. Accordingly, if at this stage the property has not been held for 12 months no CGT discount will be available even if they eventually end up holding the property for 25 years under the arrangement.

Disclaimer: Please note this information is general in nature and constantly changing so please don’t act on it without consulting your Accountant.

Julia Hartman
[email protected]
http://www.bantacs.com.au

[Richard TaylorParticipant@qlds007Join Date: 2003Post Count: 12,024]

November 11, 2004 - 12:20 pm

Chris

You mention you have spoken to a mortgage broker that is au fait with wrapping and has done some himself.

I would make sure that he is fully disclosing to the lender that you are wrapping the property otherwide you will be a party to fraud and that doesn’t bode well in starting off your wrapping career.

If in any doubt talk to Terry, Stephen or any of the regular mortgage brokers who contribute to this site

Cheers Richard
richard at fhog.com.au
http://www.fhog.com.au

There is no such thing as a problem.
Just a solution waiting to be found

Richard Taylor | Australia's leading private lender

[Richard TaylorParticipant@qlds007Join Date: 2003Post Count: 12,024]

November 11, 2004 - 12:22 pm

Chris

You mention you have spoken to a mortgage broker that is au fait with wrapping and has done some himself.

I would make sure that he is fully disclosing to the lender that you are wrapping the property otherwide you will be a party to fraud and that doesn’t bode well in starting off your wrapping career.

If in any doubt talk to Terry, Stephen or any of the regular mortgage brokers who contribute to this site

Cheers Richard
richard at fhog.com.au
http://www.fhog.com.au

There is no such thing as a problem.
Just a solution waiting to be found

Richard Taylor | Australia's leading private lender

[nairnoMember@nairnoJoin Date: 2004Post Count: 5]

November 12, 2004 - 12:22 am

Thanks for all the contributions.

I have found them all to be very helpfull.

Regards

Chris