Forums / Property Investing / Creative Investing / Wrap Example, Does this work???

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  • Profile photo of delboydelboy
    Member
    @delboy
    Join Date: 2003
    Post Count: 80

    Hi All

    I am doing lots of homework on wraps and trying to work out the figures. I have an example of a property I found which I done the figures on and just want to run them by anyone who has done wraps to see what you think. Here it is.

    Property for sale $167,000
    Closing Costs $ 5,000approx.
    Total purchase $172,000

    10% Gain to this +$ 17,200
    Price for Wrapee $189,200

    My interest rate 6.56%
    Wrapee rate 8.56%

    My repayments P&I on $164,000($172,000 – $8,000 deposit from wrapee) = $278/week

    Wrapee’s repayments on $189,200 = $311/week

    Weekly cash flow of $33

    The house is currently rented at $200/week

    1: is it viable to get someone to pay $311/week when usually rented at $200

    2: $33/week does not seem like alot, is that about average or am I missing something?

    I would really appreciate any comments

    Regards

    Delboy[cap]

    Profile photo of FFCommFFComm
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    @ffcomm
    Join Date: 2004
    Post Count: 627

    I would want to make at least $40. Also can you afford to have it non-performing for at least a couple of weeks (if you can’t don’t do it…). Also how mauch are you putting in for a deposit???

    Rgds.
    Lucifer_au

    Profile photo of pelicanpelican
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    @pelican
    Join Date: 2003
    Post Count: 454

    Dellboy,

    Depends on your strategy, but would suggest you markup by about 20-25k ( this is entirely up to your comfort level ) and interest rate by 2.5-3%

    You want to be getting more than 30/week return….

    Lots of people are happy to pay that sort of money per week to have a home….

    Scott

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

    Profile photo of delboydelboy
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    @delboy
    Join Date: 2003
    Post Count: 80

    Hi Guys

    Firstly, I would be using equity in another property for deposit, so I would be lending the whole amount.

    Working out the figures that you guys are talking about, it looks something like this:

    Add $20,000 to cost of $172,000 = $192,000

    Up rate by 2.5% to 9.06% for wrapee

    Wrapees weekly payment would be $404/week.

    Is that not too much considering the rent is $200/week.

    ( calculated wrong on the first example, made repayments for wrapee as interest only, which of course would not work)

    As for being able to afford a few weeks vacant, yes that shouldn’t be a problem.

    Any thoughts??

    Delboy

    Profile photo of delboydelboy
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    @delboy
    Join Date: 2003
    Post Count: 80

    Hi Guys

    Sorry, what am I thinking, too many figures going through my brain.

    Of course it doesn’t matter how I work out the wrapees payments so long as it covers my costs and puts money in my pocket.

    So their payments would be about $340/week.

    Giving me a weekly csh+ of about $60.

    Still, your thoughts, do you guys get people willing to pay that much of difference from rent of $200 to payments of $340/week

    Anyone.

    Delboy[cap]

    Profile photo of FFCommFFComm
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    @ffcomm
    Join Date: 2004
    Post Count: 627

    It’s a bit of a stretch. I don’t deal with houses this expensive so I can’t comment, but if the house is a nice one it could be potentially worth it.

    Rgds.
    Lucifer_au

    Profile photo of FWFW
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    @fw
    Join Date: 2002
    Post Count: 478

    delboy
    I sell houses for as much as $360 a week in areas where rentals are $180 a week.
    So yes, it works. Most people (in metropolitan areas, anyway!) accept that it costs more to buy than to rent.

    Keep smiling
    Felicity 8-)

    Profile photo of delboydelboy
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    @delboy
    Join Date: 2003
    Post Count: 80

    Hi guys

    Just want to say thanks for your comments.

    I guess what I take from that is their are better profits to be made from cheaper houses, where the repayments will be a little closer to the actual rent.

    Thanks Again

    Delboy[cap]

    Profile photo of FWFW
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    @fw
    Join Date: 2002
    Post Count: 478

    Hi Delboy
    I wouldn’t draw the same conclusion at all! [blush2]
    Your level of cashflow profit is dependant upon the difference between your loan (and repayment) and the wrap buyer’s loan (and repayment).
    So it’s not the price range of the house you buy that matters, it’s how well you buy that house that makes all the difference.
    As a very rough example, take a house with a “market value” of $200k.
    Option A – you buy the house for $190k and wrap it for $220k.
    Option B – you buy the house for $170k and wrap it for $220k.
    In both cases your wrap looks the same – $220k at 9% say for 25 years.
    But your cashflow will be quite different! There is a difference of $20,000 between Option A and Option B, and that $20,000 would be at least $50 a week more profit.
    Hope that makes sense.

    Keep smiling
    Felicity 8-)

    Profile photo of delboydelboy
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    @delboy
    Join Date: 2003
    Post Count: 80

    I hear you, negotiate negotiate negotiate and look towards the actual cashflow figures rather than the actual house price, within reason.

    Thanks

    Delboy[cap]

    Profile photo of Kiwi-FullaKiwi-Fulla
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    @kiwi-fulla
    Join Date: 2002
    Post Count: 371

    Hi all…. at the end of the day it is really the market that determines what they will and will not pay.

    If you are asking too much the market will let you know… how? nobody will take the opportunity you are offering.
    Cheers,
    Kiwi

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