G’day everyone,
Im brand new to this forum so I apologise if Ive posted this in the wrong place.
Ive also just read Steve’s book and am left with a question mark about wraps. Lets say you sell a property to someone under vendors terms. They pay the agreed installments over, say 20 years out of a 25 year contract. But before the contract expires they decide to buy you out. What price do they buy you out at? This is a little fuzzy (actually very fuzzy) for me and I didnt think it was well covered in the book.
Regards
Hi coast2coast
Welcome to the forum and good luck.
When your wrapees first move into the property they probably owe you the purchase price, less the deposit they’ve paid you. You then set up some form of software to monitor their loan to you. Whenever they decide to refinance or buy you out, you simply go to your software and see what they owe you at that point. This figure, plus any early discharge fees you may have in your contract with them (usually none this far down the road) is what they pay you to complete the contract.
I hope this helps.
Cheers, Paul
Paul Dobson | Vendor Finance Institute
http://www.vendorfinanceinstitute.com.au
Email Me | Phone MeAn alternative way to finance your home.
Hi Coast2Coast
Welcome to the forum.
As Paul explained imagine the intallment contract repayments being exactly the same as a mortgage loan. Interest is added and repayments are deducted.
Over time the loan balance reduces assuming that repayments have been made on time.
The mechanics are straightforward.
Enjoy your time here as we are a friendly bunch
Cheers Richard
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http://www.yourstatefinance.comIP funding and US property finance
our specialityRichard Taylor | Australia's leading private lender
I suppose the question remains, that if the wrappee wants to buy the house after paying for a fair time, say 10 years the likelihood is that the house will have appreciated significantly, but you as the owner will not get the increase, the wrapee wil. Right?
Right. [biggrin]
Hi Geoffrey
That’s correct. At the begining of the process, you, as the wrapper have set the level of your positive monthly cashflow and your final capital gain (sometimes called “backend profit” by wrappers). You have, to a large degree, fixed your cashflow and capital gain and the wrapees take their chances in the market and accumulate any capital gain, over and above the price you sold them the property for.
Cheers, Paul
Paul Dobson | Vendor Finance Institute
http://www.vendorfinanceinstitute.com.au
Email Me | Phone MeAn alternative way to finance your home.
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