Noel Whittaker sinking the boot into wrappers

[NigelW]

Hi All

Did anyone else read Noel's column in the Saturday Courier Mail (Qld)? He took the moral high ground suggesting that anyone who offers vendor finance like wrappers ie. putting a mark up on the on-sale price plus taking a margin on the interest is a shark and should have trouble sleeping at night.

What a load of CRAP!

Whilst I don't wrap myself, I've met quite a few wrappers now. Like all investors they want to make themselves money. BUT they actually do permit people who perhaps couldn't otherwise get a loan, to buy their own house - the "great Australian Dream".

Sure they make more money that a bank would if it lent to these people and sure the wrapper sells the property to the person for what is probably above market price. But in exchange they have a much higher risk profile than a bank would be willing to accept.

Noel also forgets the time value involved. If the instalment sale (which is how wraps are done in some states) is for 30 years settlement then there needs to be some mark up in the price to compensate the wrapper for the lost capital gain compared with a straight buy and hold rental. Also, the wrap buyer gets the benefit of any capital gain and could (once they've got enough equity and a track record of regular payments) refinance the loan with a regular financier (such as those moral, kind institutions called Banks! )

Comparing wrappers to payday lenders who charge astronomical interest rates to lend to people for consumption and living is just patently wrong and unfair.

The wrappers I know operate in an upfront ethical way. Everything is disclosed and the potential buyer gets independent legal advice.

Shame Noel! Shame!

N.

 

[darren b]

The silly old bugger got suckered into buying a Gold Coast property 10 years ago that dropped in price after he bought it and has been anti property ever since. Read his articles, shares, super, managed funds etc etc etc. Advice for the below average investors.

 

[NigelW]

Originally posted by darren b
The silly old bugger got suckered into buying a Gold Coast property 10 years ago that dropped in price after he bought it and has been anti property ever since. Read his articles, shares, super, managed funds etc etc etc. Advice for the below average investors.

Yes I heard that too. He has definitely been very pro-managed funds for some time, altho the fact that at least half his questions each week are "we want to buy an investment property..." he has had to give some comment to that "other" asset class

Cheers
N.

 

[Sunstone]

Dear guys,

Actually on an ancient real estate tape that he made he actually said he had been a real estate agent for a couple of years.

Agree he is not my cup of tea. Whenever I drive past his office I wonder why he wasn't more businesslike in his phone number selection. At the same time however he does have a high public profile. (Speaking of which......... I wonder when Margaret Lomas will next visit us???)

Cheers,

Sunstone.

 

[Les]

True, Sunstone,

In my early Brissie years, I visited "REA Noel Whittaker" in Underwood (Brisbane).

In fact, back in those days, I agreed with a lot he had to say...

Times change.....

Regards,

 

[Sunstone]

Dear Les,

Yes it is important to be adaptable whilst at the same time sticking to ones strategy and fundamentals.

Cheers,

Sunstone.

 

[Duane (Fitman)]

Re; Noel Whittaker

Hi All,
This is my first post here in this forum.
I was given his book `Borrowing to Invest, the fast way to wealth?'. I was able to use this as part of my strategy of what NOT TO DO!!!!!. Please hes not teaching people to gear it, he's showing you how to park it! crikeys... I didn't realise that you could still write a book like that...let alone sell it!. heheheh. Needless to say it was a fast read & a lesson in what to watch out for if you start thinking that way. Still, even though he never said it I new by 5 pages into the book that he had bought a property that he got burnt with!.... Still if he can get some people interested in his style of investing then thats a good thing too.
Nice to talk to you all
Cheers,
Duane

 

[Simon]

I remember buying his first book in 1988 when boarding a flight and reading it from cover to cover on the flight. He opened up a whole new world to me. I bought my first property a few months later. He kicked started my investing life. Much the same way as I hear people descibe Kiyosaki as getting them switched on to the possibilities.

He was really the first of the authors to write in this genre that I saw and I am grateful for that book. I still have it and he signed it when I subsequently met him.

But I think I have moved on since and become a little more sophisticated, what he has to say is no longer aimed at me.

There are some unscrupulous wrappers out there as there are dodgy brokers, free flight investment property marketers etc. I wonder if he feels an obligation to warn those who might be vulnerable to unscrupulous marketers?

I freely admit the wrappers I know are very very honest and fair even to their own detriment. But I have heard of stories where wrappers churn purchasers in and out of properties keeping deposits along the way.

Just my two cents worth in defence of Mr Whittaker.

 

[michaelg]

Hi,

I for one know there are some bad eggs out there, I've discussed this with the Government and the Vendor Finance (WRAPS) Association is working with the Government to help them in this matter.

Nigel, could you post the link to the article for me? thanks.

I guess until the media starts contacting the Association to obtain both sides of the story these kind of articles will continue.

Regards
Michael Gruber
President
Vendor Finance (WRAPS) Association

 

[brains]

Theres nothing wrong with shares, super or managed funds as an investment. In fact they are a very valid form of wealth creation and you need diversification.

Super and managed funds have been copping it lately as they have been going through a slump the last couple of years. In 2-3 years they will be flavor of the month again with the stock market rally and everyone will be praising them just as they were a few years ago. You need to take a medium - long term view of these things.

I cant understand why a lot of forum members criticise successful people who have gained their success differently from the formula espoused on the forum.

Originally posted by darren b
The silly old bugger got suckered into buying a Gold Coast property 10 years ago that dropped in price after he bought it and has been anti property ever since. Read his articles, shares, super, managed funds etc etc etc. Advice for the below average investors.

 

[NigelW]

Originally posted by michaelg
Hi,

I for one know there are some bad eggs out there, I've discussed this with the Government and the Vendor Finance (WRAPS) Association is working with the Government to help them in this matter.

Nigel, could you post the link to the article for me? thanks.

I guess until the media starts contacting the Association to obtain both sides of the story these kind of articles will continue.

Regards
Michael Gruber
President
Vendor Finance (WRAPS) Association

Sorry I actually read it in the physical newspaper version *shock horror Gasp!

Why not give Noel a call in your official VFA capacity to put your side of the story?

 

[carswell]

Hi all,

I have read the article and actually sent an email back to him telling him that he was generalising and focusing on a very small group of wrappers out their, who are giving the majority of wrappers a bad name.

Michael Gruber, I am a Vendor Finance Association member and follow the code of ethics display on the web site. I think the point you made on one of your post about providing members with a membership number and tightening the membership process is a great idea. Any steps to stamp out unethical people in our industry is a step in the right direction.

My first investment book was one of Noel Whittakers as well and to say I was disappoint in his views on wrappers is an under statement. I also used to read a lot of his newspaper articles and valued his points of view, I no long value his views.

Any way just my comments on Mr Whittaker and his article.

Regards,
Matt

 

[Gill Bates]

in his newsletter dated Mon 7th July,
NW says:


I'm not anti property, I'm just being realistic. So of course, I got a chuckle when a friend sent me that following comment about me that appeared on one of those chat session websites.

“The silly old bugger got suckered into buying a Gold Coast property 10 years ago that dropped in price after he bought it and has been anti property ever since. Read his articles, shares, super, managed funds etc etc etc. Advice for the below average investors.”

The facts are I bought the property at Mermaid Beach in May 1990, 13 years ago for $425 000 and have spent $100 000 on it since. It is now worth around $900 000 so I’d hardly say that I got ‘suckered’. However, those of you who know the rule of 72 will know that’s a gain of about 5% per annum. It’s a reasonable return but certainly not over exciting.

end excerpt

 

[Gill Bates]

I was at a presentation he did about 5 years ago for St George bank , I think, At that time NW had a property in or around Logan/Brisbane. He mentioned that it had performed poorly for him so he was selling it.

I have to agree with a previous poster , when i was a beginner i found his books good. But i find his anti-property bias annoying. I beleive he is a expert in managed funds , super etc. but not property.

I find it annoying that ( not necessarily refering to NW here ) most experts will not admit their lack of knowledge and say to consult some one else.

Years ago , I found what i class as a excellent book , by a guy called Austin Donnelly , it was titled somethink like "How to choose a Financial adviser". The book pointed out interesting things to ask an adviser , like asking for how good their investment recommendations had been in the past. Refer to http://www.donnelly.com.au/publications/books.html I've used the themes in it interview advisers and decide whether they could help me.

If I want advice I go to someone like Doidge / Eslick who i judge have been very successful in their RE investments. Conversley , if i want advice about shares/ managed funds I would go to a specialist in this area. If it was a commission adviser I would take particular care and preferably i would deal with a "fee for service " advisor.

Lastly,
since this thread started about NW bashing some bad vendor finance examples, I wonder if NW has dealt with something a bit closer to home in his Sunday Mail column. This was what i think was the very poor performance of financial planners in the "Choice magazine" financial planner survey.

The survey found 30 % plans where "poor" or "very poor".

OK’ plans (29%) may be good in most areas but still had weaknesses, while some plans in the ‘borderline’ category (24%) had major deficiencies. So there where not to many plans in the very good category.

Anyway i found all the above "very interesting.

 

[jahn]

OK I give up.
I know I've heard it before, but forgot.
Whats the 'rule of 72' ? please
jahn

 

[mmerlin]

rule of 72

Jahn,

The rule of 72 helps you determine the number of years it will take you to double your money at a particular interest rate.

You simply divide the number 72 by the interest rate to determine the number of years required to double your investment.

For example, if you have an investment making 6% a year, divide 72 by 6, which gives you 12 years, which is how long it should take to double your money.

If you have an investment returning 10%, then it will double in value every 7.2 years. This is where the "rule of 72" gets its name from (I think).

It's a bit confusing how NW describes using the rule of 72 in the earlier post by Gill Bates.

 

[jahn]

mmerlin
Thanks for the reminder. Don't think I've ever used it before.

"It's a bit confusing how NW describes using the rule of 72 in the earlier post by Gill Bates."

I think he's done the reverse calculation and divided the number of years for the IP to double, into 72, to calculate the interest rate !?
jahn

 

[Les]

G'day Jahn,

It's the rule by which you determine how things "double" when interest is compounding.

Example:- If you have a property (or other investment) that gains 7% per annum - to find out how long it will take to double in value, just divide that % into 72. i.e. In 10 years (plus a bit) a 7% return will double your original investment.


It is not completely infallible, but it's pretty close !!! Even if you were to say "I have an investment that makes 72% per annum. HOW can it DOUBLE in just one year?" The answer there is that this investment is probably making 6% per MONTH - and, if it is compounding monthly, that WOULD double your investment in just one year !! (72 divided by 6 = 12 - months, that is...)


And, you'll probably hear of property doubling every 7 years - guess what, that's the long-term average of 10% per year !!!


To work it out (just try it) take an amount (say, $1000) and allow a specific %age growth (say 8%).

Date    Simple Int (8%)    Compound Int (8%)
year 0  1000.00   80.00     1000.00   80.00
year 1  1080.00   80.00     1080.00   86.40
year 2  1160.00   80.00     1166.40   93.30
year 3  1240.00   80.00     1259.70  100.80
year 4  1320.00   80.00     1360.50  108.85
year 5  1400.00   80.00     1469.35  117.55
year 6  1480.00   80.00     1586.90  126.95
year 7  1560.00   80.00     1713.85  137.10
year 8  1640.00   80.00     1850.95  148.10
year 9  1720.00   80.00     1999.05  159.90

So, at 8% compounded, the investment doubles in 9 years (72 divided by 8). If compounding is not present, it would take 12.5 years (100 divided by 8).


I noted that mmerlin has already answered this for you - but figured I'd still post as the extra "numbers" just might mean something to you. (I hope the "php" thing makes it easy to see....)

Regards,

 

[jahn]

Les
Thanks
Yes it certainly did 'improve things'
Easy numbers to use eh
I have done the 'compounding' interest thing on the speadsheet many times to keep myself amused with possible outcomes for future wealth. but now for the really silly question. What is the 'php' thing?
jahn

 

[Les]

G'day Jahn,


Re the "php" thing - you'll have to ask Sim', or Mike, or Aceyducey about that - I just use it (and it seems to work good with columns of numbers)

But, I can tell you HOW to use it - if you want to display columns of numbers, put php at the front (in square brackets) and /php at the end (also in square brackets) and that will display the numbers in pretty columns (... hehe.. except when it DOESN'T...)

e.g.

   1   2   3
  10  20  30
 100 200 300

The only difference between these is this line of text !!!
   1   2   3
  10  20  30
 100 200 300

For some reason, the very first line after the php doesn't count the right number of spaces before the first column. So, by adding the extra text, the following columns appear "in sync".

Regards,