Viewing 13 posts - 1 through 13 (of 13 total)
  • Profile photo of DANIKODANIKO
    Member
    @daniko
    Join Date: 2006
    Post Count: 32

    I am not sure if I completely understood method of investment called wrapping.
    If I am interested in buying property, but I dont have enough money to invest and I am not willing to pay high interestes rate to the bank,  I am doign arrangement  with landloard. We set price of the property, for instance in 10 years time and I am calcuating, what would be weekely rent considering agreed price in 10 years time. Is that what wrapping means?
    I hope I am not making you laugh asking the questions.
    Please advice.
    Cheers

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

    Hi Daniko

    May I suggest you read both the following links:
    https://www.propertyinvesting.com/strategies/wraps
    and

    https://www.propertyinvesting.com/strategies/lease-options

    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 Daniko

    Paul's links are excellent.  Read them over and over, then perhaps ask more questions here.

    You say  "I dont have enough money to invest and I am not willing to pay high interest"…  These two things are usually mutually exclusive.  If you don't have good credit and a substantial deposit (i.e. 20% plus Stamps and Legals) you are likely to have to pay dearly for the money: to a bank as interest, or to a private investor (JV Partner) as interest or a large share of the profits.

    Having said that, if you find a JV Partner who will put up the money, you can get a few deals under your belt with no actual investment of your own.  It doesn't matter that you give the partner 50% (or more) of the profits, because your investment is probably quite small, if anything.  It is only fair though that your agreement with the investor is to share the profits AND any potential losses.  Most JV Partners would rightly expect that to reassure themselves that you will put in the effort to make the deal work profitably for all.

    Hope this helps

    Mr Fair Go

    Profile photo of Tysonboss1Tysonboss1
    Participant
    @tysonboss1
    Join Date: 2007
    Post Count: 306

    If you enter into a wrap aggreement you will be paying more interest than you would be if you bought it and loaned the money from the bank,

    for the simple reason that the investor has loaned the money from the bank to buy the house for about 8%, so he will want to charge you 9% or 10% because the interest margin ( the differance in the interest his is being charged and the interest he is charging you) is where the investor makes his money in the wrap deal.

    as "mr fair go" said, if you have enough money for a deposit and a good credit rating and a steady high paying job,you can get cheaper interest from the bank,…

    however if you have no deposit, questionable credit rating and income is not steady you are a higher risk, so anybody giving you money will want a higher return as a reward for accepting the higher risk,

    Profile photo of Tysonboss1Tysonboss1
    Participant
    @tysonboss1
    Join Date: 2007
    Post Count: 306

    Another thing to think about is that you said you have no money to invest but you wish to start investing,

    why is it that you want to invest in the first place?

    why don't you have any money?

    I think before you start to invest you need to find out the real answer to these to questions.

    Profile photo of Kiwi-FullaKiwi-Fulla
    Member
    @kiwi-fulla
    Join Date: 2002
    Post Count: 371
    Tysonboss1 wrote:

    If you enter into a wrap aggreement you will be paying more interest than you would be if you bought it and loaned the money from the bank,

    for the simple reason that the investor has loaned the money from the bank to buy the house for about 8%, so he will want to charge you 9% or 10% because the interest margin ( the differance in the interest his is being charged and the interest he is charging you) is where the investor makes his money in the wrap deal.

    as "mr fair go" said, if you have enough money for a deposit and a good credit rating and a steady high paying job,you can get cheaper interest from the bank,…

    however if you have no deposit, questionable credit rating and income is not steady you are a higher risk, so anybody giving you money will want a higher return as a reward for accepting the higher risk,

    Hi There … this is true in some cases …. however this is not the only way to make money in wraps….. if the buyer is all about the interest rate …. then match the banks….. and adjust he price or exit fee or some other way to softly make your profits back…. all is in the ability to flex where you can to create the win win and give the buyer what they need to get it across the line … the big one is to make sure they can service the repayments…. if there is any doubt…. then find another buyer….. or Lesae option it for say 20% above market rent .. .but for only a short term….. you'll figure it all out.
    Cheers
    Kiwi

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

    Tyson,

    Some wrapees are able to pay lower rates than they would with a bank or other lender.

    eg. Someone with a bad credit record would be paying up around 11% with one of the non conforming lenders, not to mention all the fees such as risk fees, application fees, legals, valuations, and exit fees when they want to leave for a cheaper product (one charges 4%!!!). Plus they will need at least 10% deposit.

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

    Lawyer, Mortgage Broker and Tax Advisor (Aust wide) http://propertytaxbook.com.au/

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

    Good Point Terry…

    I just completed a Lease option here IN NZ (Today!) with $235/week nett cashflow….. and for various reasons the lenders were only going to give me finance at 14.75%… which would have cut me out of over $5,000/annum in interest…. So I went hunting and got a good main stream lender to gimme a business invesment finance for 8.6% …. Nerver Ever Take No For an Answer….. I have my Wife To Thank for that one!
    Cheers and good investing out there
    Kiwi
    http://www.rent2ownnz.com

    Profile photo of DANIKODANIKO
    Member
    @daniko
    Join Date: 2006
    Post Count: 32

    Dear All;

    I really appreciate all your comments.

    Summarazing, the less money I have the more interests and extra fees I will have to pay?

     Is the best option to  take mortgage from the bank?

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

    I have just completed a Wrap in my SMSF with a $25,000 balloon payment at the end of the wrap period.

    There are many many ways of creating the solurion to suit both you parties.

    Richard Taylor | Mortgage Broker helping investors build their wealth thru property
    http://www.mortgagecapitalaustralia.com.au
    Email Me | Phone Me

    0-40 Properties in a decade with a unencumbered portfolio value in excess of $40M. Ask me for a copy of my API Interview.

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

    I Just completed a Purchase to Lease Option Just last week 17th Oct.

    NO MONEY DOWN ……. Lease Purchaser paid for my deposit on my finance!!

    Net Cashflow of $235/week and $20,000 deposit paid to me straight off…. total projected profit (before Taxes …. $69,000 … give or take!

    Cheers,
    Kiwi
    http://www.rent2ownnz.com

    Profile photo of hschmidhschmid
    Participant
    @hschmid
    Join Date: 2007
    Post Count: 87

    what about those 100% loans

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

    Dont help you Hans when you have a $106 Optus default or any form of credit impairment whatever it is.

    Richard Taylor | Mortgage Broker helping investors build their wealth thru property
    http://www.mortgagecapitalaustralia.com.au
    Email Me | Phone Me

    0-40 Properties in a decade with a unencumbered portfolio value in excess of $40M. Ask me for a copy of my API Interview.

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