Need help with WRAPS

Hi Ellis

I have done one or two in the past 9 years but all in Qld.

Not much difference so if you need any questions answered ask away.

Richard Taylor
Residential & Commercial Finance Broker
**Lodoc Commercial loans from 7.39%**
Licensed Financial Planner
Ph: 07 3720 1888
[email protected]

Hi Ellis

Your loan on a wrap property does not have to be P&I in NSW. However with most Interest Only loans it is possible to calculate what your P&I payments would be and make those payments every month. This way the differential between your wrapee’s loan and your loan will remain constant. Alternatively, if you plan to refinance your wrapees in 2 to 5 years you may continue to make IO payments but you should ensure that the value of your wrapee’s loan never drops below your loan. There are ways to structure your Instalment Sales Contract to protect yourself if you plan to continue with IO payments.

In NSW your land tax obligation for your wrapped property disappears as soon as you “exchange” your Instalment Sales Contract. This is because the NSW government considers you have disposed of a property as soon as “exchange” takes place. And your wrapees don’t have to pay land tax because the property is their PPOR.

We give most of our wrapees 30 year loans and structure our Instalment Sales Contracts with a view to refinancing them into a traditional loan in 2 to 5 years. Other wrappers structure their transactions with a view to keeping their wrapees for the long term. It’s your decision, depending on your exit strategy.

The water rates, council rates and building insurance stay in your name. You can either take a small extra payment from your wrapees each month/fortnigh/week and pay the bills out of this money or you can send copies of the bills to your wrapees and have them paid as they come in. Overall we find it very important that we’re resposible for paying these bills. We do not relish the idea of being surprised by an insurance company or council suddenly contacting us to let us know that these bills haven’t been paid by our wrapees.

We highly reccommend Tony Cordato in Sydney. His number is (02) 8297 5600.

Let me know if there’s anything else we can help with.

Cheers, Paul

Hi Ellis

As you’ll be supplying credit to your wrapees you have to abide by the Uniform Consumer Credit Code. You’ll see that Tony’s Instalment Contract complies with all the Code’s requirements.

The UCCC also reuires that you supply a loan statement to your wrapees at a minimum of every six months.

Cheers, Paul

Ellis

Technically you cannot sell something that you don’t own (Ignoring Options before anyone responds) however ever purchaser has the legal right to bring forward the Possession Date and repay your loan.

As the title holder you would need to be the one who signs the Sale Contract alternatively your purchaser can sign and advise the buyer that title will be in his name at settlement.

He would then ensure that his Transfer was registered prior to the new Transfer and the new Mortgage.

A Transfer by Direction is standard practise in many development or onsale deals.

Richard Taylor
Residential & Commercial Finance Broker
**Lodoc Commercial loans from 7.39%**
Licensed Financial Planner
Ph: 07 3720 1888
[email protected]

Hi David

Welcome to the forum.
Which State are you looking to wrap in?

Richard Taylor
Residential & Commercial Finance Broker
**Lodoc Commercial loans from 7.39%**
Licensed Financial Planner
Ph: 07 3720 1888
[email protected]

OK – If no-one knows anything about Steve’s new wrap kits then does anyone want to sell me a 2nd hand one? (If that’s allowed). I don’t mind a few coffee stains !

Rick Ottonn still sells his wrap pack. I have used his metod for 4 years now and have done well.

Dave Siacci

Hi,

Terry – send me an email with the booklet you are missing and I will print you off a master and send it to you.

Now – some comments about wraps.

First up, the notion of doing a P&I loan repayment is an indirect necessity in Vic due to the wording of the legistlation. More so though, it is good practice as you are reducing your loan.

One of the criticisms of vendor finance is the risk that should the vendor spend the cash (and not apply it off the loan) then there is the possibility that the purchaser thinks they are paying down the loan when they are not.

On settlement, they find that the 1st mortgage remains.

Really, the difference b/w I/O and P&I is peanuts in the scheme of things, so I would always push for doing that as I regard it as best practice.

Paul is right in saying that the UCCC applies. A while ago they were going to legislate that it specifically applied to VF sales, because at the time the law stated that you needed to be in the business of VF in order for the UCCC to apply.

Therefore, make sure that you follow the requirements of the UCCC to the letter.

I have heard of investors being sued for breaches, and the penalites are significant.

Be sure to gain proper legal advice and not just rely on any product you buy (mine or anyone elses).

When it comes time to sell before the final payment (at which point title transfers to the name of the purchaser), the purchaser will be able to do this pursuant to the terms of the contract.

The contract I used outlined that we would sell the property, pay ourselves out, and distribute the net proceeds to them.

That is, they had the right to sell, but they had to do it through us (i.e. with our consent) as the title was still in our name.

It was never a problem though – they picked the agent and managed the sale, however the proceeds came to our solicitor who then divided up the settlement funds as needed.

I hope this has helped.

Bye,

Steve McKnight

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