Hi there guys… hope you are all having an outstanding new year!
My boyfriend and I are 21 and 22 years old and my partner has finished his physio degree whilst I am in my final year of a law degree. I don't want to be stuck practicing as a solicitor in the office! Our plan is to create and build a business – make the invisible become visible!
We have the issue of not being employed and only being on youth allowance at the moment. We would love to buy an investment property but realise our slim chances of obtaining finance. I came accross the idea of using vendor's finance BUT my question is…. if we can buy from a vendor, the vendor still retains title and we get beneficial interest in the property for the term of the wrap. Which leads me to ask, CAN we still rent that property out to tenants if we are being financed by the vendor??
Thanks everyone.
Xx
Having done a law degree, you will (most likely) have a substantial HECS debt, esp if you qualify for youth allowance. Why did you elect to do a law degree if you have already decided that you will not go into practice (whether it be public or private)? There are other avenues to utilise that legal mind in the corporate world however you must do the hard yards in a legal practice to become registered then you can apply your knowledge in industry. You don't know it all, just yet.
As an almost qualified solicitor, you should be able to see the down sides of being on the wrong end of a wrap – buying an overpriced property at an above-market interest rate without a registered interest on title and a greater than normal risk of losing the property should you be in default (even by one day). Having said that, there is no reason why you can't lease out the property, after all, you do own it.
Do you understand the CONcept of a wrap? How do you intend to make repayments if it is an overpriced property and you will recieve a market rent? Renters will not pay more just because of your financial arrangements.
Both yourself and your BF are in a good position to earn above average incomes, even as graduates. Why put your future earnings at risk before you even commence gainful employment?
SNM
Hi Reneeshen
Firstly Happy New Year and wlecome to the forum.
To answer your question CAN we still rent that property out to tenants if we are being financed by the vendor?? The answer is it depends on the Terms of the Installment Contract.
Having done well over 200 wraps in Qld I can tell you our standard installment contract did not allow the property to be rent out with our consent as the reasons for this are obvious when it comes to possession. In saying this if the cirumstances were right We may have agreed to it so it is a case by case situation.
Richard Taylor | Australia's leading private lender
The ability to rent out a property is ALWAYS with mortgagor consent – I should have expressed it more clearly. Thx RT
Hi Scott No Mates….. I think you misunderstood my post. I don't want to do a law degree just to do business, or just so I can do the legal work in my own business…. but to play the game, you need to know the rules…..and a law degree never goes astray, especially since for me, it pushes my level of comfort. Plus, the degree is fun and not to mention very intriguing.
As for the risk issue….. there is risk in every transaction. Yes, I do understand the concept of a wrap and yes I will be repaying above market interest AND more for the purchase price of the property so the vendor can profit. However there is always another level, there are always opportunities and I want to make myself aware of my options.
Regarding the earnings… I don't plan to work for someone else, that's the whole point. The essence of my question was really simple – just wanting to know if I can rent the property out in this situation.
thanks for your input.
I would give no power tripper the chance of wrapping a property to me!
Reneeshen, why go into a wrap if it will be cheaper, less risky and more cost effective to do it on your own ie work/save a deposit then invest.
As a law student you should understand risk/reward. Wraps are high risk for no reward if you are at the pointy end of the stick. A wrap will not give you any tenure to borrow against, no recognised credit record only higher repayments (effectively rent). Why would you want the 'vendor to profit'? this is naive, you are in it to make money, not to be the vendor's benefactor. Obviously business studies was not one of your electives which gave you any useful insights.
I would recommend that you use your degree effectively, even if it is for only a couple of years to learn from successful businesses/partners. Many legal firms have inhouse mentors, law society has student networking groups all of which will work to your advantage.
You mustn't have learnt much in your degree/have high ambitions if you think all that a law degree will give you is the ability to do save yourself the minimal expense of conveyancing, structuring and the odd bit of clause drafting. Even Meritons, Multiplex, Westfield, Mirvac & Australand all use external lawyers for their legal work (most use inhouse lawyers for advice but not transactional), and I am sure that they may have seen a few more deals than yourself.
hang on a sec….are we in here for support or arguments? I appreciate positive input but if you're going to be like this then please, keep your posts to yourself.
Plus, I dont understand why you think I wanted to save money on conveyancing! I already explained that's not why I wanted to do the law degree.
Leave room for people who won't attack my situation, this is about information, support and sharing of ideas, not to be cynical.
I'm just giving my 2 c worth – being 'wrapped' isn't a technique being used by investors – there are better ways of financing and getting security.
That's the first time you made your point clear. Instead of saying how little I must have learnt or how I don't have high ambitions, and attacking my lack of experience – that's all I needed to hear.
I think plenty of people have read this thread and agreed with your strategy, that it's a strange way to go about things. You cant help people putting forward their opinion at face value. If you wanted a simple answer to your question…why did you elaborate with everything else, including your strategy? Personally I think all these people are trying to help you….
this is a little ridiculous don't you think? Joining and becoming a member TODAY just to criticise?
on your point – steve McKnight actually talks about using the strategy I am asking about in his book (if you've read it)
Reneeshen, the reason why we point out that you are going in the wrong direction is highlighted by the example below. Before you read it, how are you going to pay for (take advantage of) any negative gearing ie additional capital if you are only on benefits?
Wrapper – buys @ $80k, 8% interest, $1400 insurance/rates/o.g, rent = $80 pw ($4k) – this gives them a loss of $3k
You buy off the wrapper, $100k, 10% interest, $1400 ins/rates/og, rent = $4k. This creates a loss of $11.4k as you are responsible for all og. The wrapper gets $20k extra for the property, $2k for the additional interest as well as not paying outgoings.
Hopefully this might dissuade you.
Reneeshen, the reason why we point out that you are going in the wrong direction is highlighted by the example below. Before you read it, how are you going to pay for (take advantage of) any negative gearing ie additional capital if you are only on benefits?
Wrapper – buys @ $80k, 8% interest, $1400 insurance/rates/o.g, rent = $80 pw ($4k) – this gives them a loss of $3k
You buy off the wrapper, $100k, 10% interest, $1400 ins/rates/og, rent = $4k. This creates a loss of $11.4k as you are responsible for all og. The wrapper gets $20k extra for the property, $2k for the additional interest as well as not paying outgoings.
Hopefully this might dissuade you.
i think what people are trying to tell you is that the wrapper and the wrappee are two very different people. Both get something out of the transaction, the question is which do you want to be.
Wrapper gets $$$, lots of it. A wrapper is looking to make passive income, a wrapper is looking for financial indepedence.
Wrappee's on the other hand are just happy to own 1 house. Wrappee's don't have thoughts of investing, the only thing they want is the great australian dream…home ownership.
What's it gonna be?
p.s. If i was Steve McNight i would also be encouraging people to purchase on vendor finance. I mean, that is how he makes at least some of his income. Telling people not to do it would be a bit counter-productive, don't you think?
thanks for the contributions guys….. explaining everything can be tough, because online posts can be misunderstood and it doesn't substitute for an in person conversation but I'm getting the idea of what everyone is saying, and I appreciate your inputs!
Hi Reneeshen,
I really think that its great that your asking for help just make sure your explain all the details so that the pro's can help you out better
YOU can add me on msn and I would love to catch up with you
Yes Reneeshen, I joined this informative board 24 hours after you! Of course I read the book…but I guess I understood it better than you. Don't be so quick to take up the defensive. I'll say it again…I think these people are trying to help you!
you must be very time rich
I'm life rich baby!
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