Recently came across a property in country Victoria where the existing tenant is keen to purchase but don’t have enough deposit (sounds like a wrap deal) and after performing some preliminary test, the deal looks quite promising. However, my question is:
the interest payment that the tenant pays to me, does that mean that the tenant is building equities in the property?
* what happens if the tenant pays out before the expiry of contract? how do I calculate how much of agreed price the tenant owes?
this can possibly be my first wrap deals, any help will be appreciated.[blush2]
Want to join financial independence before 31 years old, currently 25
1. Yes they do build equity in the property with every payment they make. It’s just like a standard mortgage, although they are paying off that mortgage from you not a bank.
2. With each payment the amount of money remaining on the property will reduce and you’d have some sort of spreadsheet to track this. If they want to pay you out before expiry of contract they simply pay you the exact amount owing upto to that particular date in time.
Wrapping’s a good way to go to quick the job habit in 6 years, good luck.
Hi there,
It really depends on how you have structured your papaerwork! I have wrappees that are paying interest only and know that they are waiting for the capital growth to create the equity they need to refinance. Of course I encourage them to make extra payments (with no penalties) so that they can refinance sooner. – there is flotilla of options and solutions … it is all about listening to what the persons challenges are and your job is to create a win -win out of it all so that all parties are catered for. Hope this helps- Kiwi[baaa]thanks for the replies. I’ve just been informed that if i inform the vendor that I shall be wrapping the property, they will not be keen to sell it to me because wrap has got a “bad” reputation in property market. Is that true?
Also, if I wrap the property after settlement date, will I incur more cost (legals) than if i factor in the vendor finance in the contract of sales?[blink]
Want to join financial independence before 31 years old, currently 25
It is not the vendor you need to worry about – although they might see it as a good deal and do it themselves. It is the LENDERS who do not look on them favourably.
Robert Bou-Hamdan
Mortgage AdviserM: 0414 347 771
E: [email protected]
W: http://www.mortgagepackaging.com.auFREE Finance-Related Newsletter: See – http://www.mortgagepackaging.com.au/index_files/newsletter.htm
Comments made are of a general nature and should not be construed as individual advice.
© 2004 Mortgage Packaging Pty Ltd
Hey jcls79
I’m very much a beginner with “wrapping” – I’ve just finished going through the wrap kit and haven’t yet done a deal.
My understanding is that:
– you cannot wrap the property before you have settled on the property initially – that is, until you are the legal owner.
– once you are the legal owner, you have to include the wrap terms in the contract of sale. This will be before the second settlement which will occur when the client makes their last payment.The wrappees will only be gaining equity if they are paying PI and/or if the property is growing in value.
There are various spreadsheets you can use (eg excel) to calculate their loan balance, so when they want to chas you out, you just give them the figure, and they ‘refinance’. Probably no wrap loans would go the full term as they will likely to cash you out within a few years. Most of mine lasted less than 2 years.
Terryw
Discover Home Loans
Mortgage Broker
Click below to email meTerryw | Structuring Lawyers Pty Ltd / Loan Structuring Pty Ltd
http://www.Structuring.com.au
Email MeLawyer, Mortgage Broker and Tax Advisor (Sydney based but advising Aust wide) http://www.Structuring.com.au
Thanks Terry and others for their inputs, but my question is where i find a spreadsheet or template that illustrates to me how much tenant will have to pay, if they decide to cash out the contract?
Cheers
johnWant to join financial independence before 31 years old, currently 25
There are 3 ways that Steve recommends in his Wrap Kit to calculate how much principal is owing and how much interest has been paid etc:
– An Excel spreadsheet that you programme yourself to do the numbers
– Home Loan Analyser (Deluxe) which is a software programme that costs about $100
– Wrap Around Mortgage Manager (WAMM) which is also a software programme that costs about $500.thanks for the direction. I am about to do a preliminary due diligence on tenants and wondering does anyone has a template or link to template that works out the cash flow position for an individual?
Want to join financial independence before 31 years old, currently 25
Excel the XP version has a loan amortisation spreadsheet included for free. Just set up two of these, one for your loan to the bank and one for the ‘tenant’s’ loan to you. Then at any given time you can see their payout figure and your payout figure and hence, you will know how much cash you will receive on cashout.
If you haven’t got these calcuator in your excel, email me and i can send you a copy.
Terryw
Discover Home Loans
Mortgage Broker
Click below to email meTerryw | Structuring Lawyers Pty Ltd / Loan Structuring Pty Ltd
http://www.Structuring.com.au
Email MeLawyer, Mortgage Broker and Tax Advisor (Sydney based but advising Aust wide) http://www.Structuring.com.au
Originally posted by terryw:Excel the XP version has a loan amortisation spreadsheet included for free. Just set up two of these, one for your loan to the bank and one for the ‘tenant’s’ loan to you. Then at any given time you can see their payout figure and your payout figure and hence, you will know how much cash you will receive on cashout.
If you haven’t got these calcuator in your excel, email me and i can send you a copy.
Terryw
Discover Home Loans
Mortgage Broker
Click below to email meOR you could just set up one that does both!
Robert Bou-Hamdan
Mortgage AdviserM: 0414 347 771
E: [email protected]
W: http://www.mortgagepackaging.com.auFREE Finance-Related Newsletter: See – http://www.mortgagepackaging.com.au/index_files/newsletter.htm
Comments made are of a general nature and should not be construed as individual advice.
© 2004 Mortgage Packaging Pty Ltd
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