Reply: 1.1.1.1
From: Tom Cleary
Hi Ron
I agree with Sim' Hampel that what you are looking at is basically a wrap, but with a difference. Generally with a wrap, you would purchase a property by putting down a deposit, usually 20% and borrowing the rest from a prime lender. You would then find a buyer who is unable to come up with a 20% deposit, but may be able to manage a 5% deposit (i.e. on a 200k property instead of 40k can only manage 10k)you would then add say 20% and 2% above prime lending rate over say a 5 year period. In this way you would guarantee capital appreciation of 4% per year and a return higher than your borrowing costs.
With superannuation the situation is different in that there is no margin (you cannot gear or take a charge, everything has to be paid 100% up front)
With the Australian market awash with liquidity now is probably not the best time to use this strategy. However things are tightening, at least one major lender has stopped lending in the 3000 post code area, and a lot of lenders are reticent to lend in rural areas, so cash is king. You as the bank can buy in these areas (Make sure you have a buyer to on sell to first) and then act as the bank for that buyer. Because banks are not lending you should not have too much trouble buying wholesale as there will not be too many buyers in the market.
P.S Forget about unit trusts tied to a super fund, the Government has closed that loophole, sorry
Regards
Tom