All Topics / Creative Investing / Starting Wrap Business

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  • Profile photo of danish83danish83
    Member
    @danish83
    Join Date: 2007
    Post Count: 7

    Hi everyone,

    I am an avid property investor and I currently have 5 properties. I wish to start my own investor finance / wrap business. Where do I start? I understand the basics of how the system works but how can I get information on the finer details?
    Is the Wrap Kit a good place o start? Is the information up to date?
    Does anyone know a good solicitor who can guide me through the process includng contracts?
    Any advice on business structure? Via trust or Pty Ltd?

    I can obtain finance easily and I am very confident I can source the right people and the right properties. Just want to make sure I get the right advice and information from the beginning.

    Any information or tips anyone can provie would be greatly appreciated.

    Kind regards,

    Dane Cornish

    Profile photo of Richard TaylorRichard Taylor
    Participant
    @qlds007
    Join Date: 2003
    Post Count: 12,024

    Which State are you looking at working in ?

    Richard Taylor | Australia's leading private lender

    Profile photo of danish83danish83
    Member
    @danish83
    Join Date: 2007
    Post Count: 7

    NSW – But would like to get going in all of them!

    Profile photo of Richard TaylorRichard Taylor
    Participant
    @qlds007
    Join Date: 2003
    Post Count: 12,024

    Ok have done 1 or 2 in Qld – lol
    Remember the legislation is different in each State when it comes to wrapping especially in relation to the FHOG.

    Richard Taylor | Australia's leading private lender

    Profile photo of TerrywTerryw
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    @terryw
    Join Date: 2001
    Post Count: 16,213

    Sounds like a lot of hassle for little rewards to me. It can also be difficult to get finance for wraps.

    Terryw | Structuring Lawyers Pty Ltd / Loan Structuring Pty Ltd
    http://www.Structuring.com.au
    Email Me

    Lawyer, Mortgage Broker and Tax Advisor (Sydney based but advising Aust wide) http://www.Structuring.com.au

    Profile photo of danish83danish83
    Member
    @danish83
    Join Date: 2007
    Post Count: 7

    Quick question – I have someone interested in vendor finance. We have found a number of houses that would be ideal and that are currently for sale. Since I currently do not own the home and would be purchasing for the other person do I need to pay stamp duty? Is there a way out of it?

    Thanks

    Profile photo of Richard TaylorRichard Taylor
    Participant
    @qlds007
    Join Date: 2003
    Post Count: 12,024

    No way out of it.

    You incur the duty and when you sell it to them under the instalment contract so do they.
    Difference is that they may qualify for a reduction in the duty payable under the First Home Buyer concessions.
    They may also qualify for the $7000 – $10,000 FHOG dependant in which State the property is located.

    Richard Taylor | Australia's leading private lender

    Profile photo of Tysonboss1Tysonboss1
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    @tysonboss1
    Join Date: 2007
    Post Count: 306
    Terryw wrote:
    Sounds like a lot of hassle for little rewards to me. It can also be difficult to get finance for wraps.

    what did you mean by this comment

    Profile photo of TerrywTerryw
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    @terryw
    Join Date: 2001
    Post Count: 16,213

    Wraps take a lot of work for little reward. You will make more money buy and hold – from my experience.

    Also, most lenders will refuse to lend if they know you are onselling the property on an installment contract. Even if you are using lease options you are supposed to get the lender's permission.

    Terryw | Structuring Lawyers Pty Ltd / Loan Structuring Pty Ltd
    http://www.Structuring.com.au
    Email Me

    Lawyer, Mortgage Broker and Tax Advisor (Sydney based but advising Aust wide) http://www.Structuring.com.au

    Profile photo of Tysonboss1Tysonboss1
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    @tysonboss1
    Join Date: 2007
    Post Count: 306
    Terryw wrote:
    Wraps take a lot of work for little reward. You will make more money buy and hold – from my experience.

    Also, most lenders will refuse to lend if they know you are onselling the property on an installment contract. Even if you are using lease options you are supposed to get the lender's permission.

    Wraps are to provide more cashflow into your portfolio so you can "buy and hold" more property neg geared growth property.

    so by having a few wrap deals you will be able to buy more properties, how is this "little" reward,….

    Profile photo of BootstrapsBootstraps
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    @bootstraps
    Join Date: 2007
    Post Count: 1

    Back to the original question. I too am in NSW. I have the property and the client, but don't know how to set up the deal or where I might point the client for finance. Anyone got any advice.

    Profile photo of TerrywTerryw
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    @terryw
    Join Date: 2001
    Post Count: 16,213
    Tysonboss1 wrote:
    Terryw wrote:
    Wraps take a lot of work for little reward. You will make more money buy and hold – from my experience.

    Also, most lenders will refuse to lend if they know you are onselling the property on an installment contract. Even if you are using lease options you are supposed to get the lender's permission.

    Wraps are to provide more cashflow into your portfolio so you can "buy and hold" more property neg geared growth property.

    so by having a few wrap deals you will be able to buy more properties, how is this "little" reward,….

    Wraps can eat up serviceability making it harder to get more good properties. Making $200 per month or so doesn't seem worth it for all the risk. 

    I have previously done 6 wraps, but wouldn't do anymore.

    Terryw | Structuring Lawyers Pty Ltd / Loan Structuring Pty Ltd
    http://www.Structuring.com.au
    Email Me

    Lawyer, Mortgage Broker and Tax Advisor (Sydney based but advising Aust wide) http://www.Structuring.com.au

    Profile photo of Richard TaylorRichard Taylor
    Participant
    @qlds007
    Join Date: 2003
    Post Count: 12,024

    Bootstraps

    Are you looking at wrapping the deal or have someone else who is looking at doing it instead.

    If you are are looking at buying the and wrapping the property then finance for your client is not relevant. 

    You would purchase the property in your name  / entity and then onsell the property using an installment contract to your client.

    Terry point on wrapping is very relevant. The Company I own here in Qld holds a 170+ properties so makes the monthly cash flow an income in its own right however to do less than say 10 could be more day to day trouble than it is worth.

    Richard Taylor | Australia's leading private lender

    Profile photo of Paul DobsonPaul Dobson
    Participant
    @pauldobson
    Join Date: 2003
    Post Count: 1,196

    Hi Dane

    Karen (my wife) and I started wrapping in 2004.  It's been a fantastic experience.  We now utilise all the "standard" vendor finance techniques (wraps, lease/options, second mortgage carry backs) and a few extra "more creative" strategies as well.

    We've found that the cashflow generated by our vendor finance business has helped support what we regard as our real wealth creation plan, i.e. good capital growth buy and hold property.

    We started with Rick Otton's Wrap Pack and along the way also got Steve's Wrap Kit.  I'm not sure if Steve's Kit is still vailable but I can assure you they're both great resources that will help you to get going.  Good luck.

    Cheers,  Paul

    Paul Dobson | Vendor Finance Institute
    http://www.vendorfinanceinstitute.com.au
    Email Me | Phone Me

    An alternative way to finance your home.

    Profile photo of MrFairGoMrFairGo
    Member
    @mrfairgo
    Join Date: 1969
    Post Count: 93

    Hi Danish83

    > Where do I start? I understand the basics of how the system works but how can I get information on the finer details?

    As Paul says, Steve's Wrap Pack if it is still available (I was one of the first owners of one of the early versions back in 2003) or perhaps Rick Otton's which is still available. Although I have not seen Rick's we have wrapped over 30 properties using Steve's (and John Burley's) system.

    > Is the Wrap Kit a good place o start? Is the information up to date?

    Pretty much. Some newer techniques might squeeze a few more dollars out of the deal, but the principles are the same.

    > Does anyone know a good solicitor who can guide me through the process includng contracts?

    In NSW? Sorry, can't recommend anyone from personal experience as we have worked exclusively in QLD.

    > Any advice on business structure? Via trust or Pty Ltd?

    The classic advice is: Start in your own name. If you like the business and keep it going, talk to your solicitor and accountant. We did the first couple of deals in our own names, then went to a Trust, but after attending one of Steve's seminars we saw the benefits of a company. We now have several, but this is not a cheap way to go, so make sure you will continue before you invest in that sort of structure. The advantage of a company is borrowability, and some tax concessions are easier to obtain since you don't have to prove you are wrapping as a business.

    > I can obtain finance easily and I am very confident I can source the right people and the right properties. Just want to make sure I get the right advice and information from the beginning.

    Although some have commented that some lenders don't like vendor finance arrangements – and this is probably true, especially in the retail banking area – we have not had any problem with full disclosure to lenders. In fact once we became big enough to have access to Business Banking services, they seem to welcome wrapping since we have great cashflow from every (wrapped) purchase.

    Actually, your being able to get finance easily is a bit of a red flag. Be careful. Those who start with little resources often create a better business base since they MUST make it profitable form the start.

    One of the Brisbane "Reno Kings" Geoff Doidge once showed me a neat structure (on a napkin in an aeroplane on the way back from Steve and Dave's seminar, in fact) that has the appearance of a spoked wheel. There are about 6 wrapped properties around the rim paying for one upmarket buy-and-hold in the centre. Total taxable profit is negligible. The wraps are building your wealth in the buy-and-hold. Of course there are more details; that's the back-of-napkin sketch. This is the essence of one of the comments above. The wraps are the cash generators.

    Best wishes on your wrapping. We're rapt!

    Mr Fair Go

    Profile photo of Paul DobsonPaul Dobson
    Participant
    @pauldobson
    Join Date: 2003
    Post Count: 1,196

    Hi Dane

    In my opinion, the best solicitor for your NSw wrap business is Tony Cordato.  His web site is at

    http://www.businesslawyer.com.au/news.php

    I hope that helps.

    Cheers,  Paul 

    Paul Dobson | Vendor Finance Institute
    http://www.vendorfinanceinstitute.com.au
    Email Me | Phone Me

    An alternative way to finance your home.

Viewing 16 posts - 1 through 16 (of 16 total)

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