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From: Roderick Aguilar
Hello everyone,
I have just finished the preliminaries of another WRAP and I thought that this time around I'd document what I did. Below is the order I did things in:
DEFINITION
What is a Wrap? A person (purchaser) falls in love with a house but for one reason or another the banks won't lend them the required money. I on the other hand, have a a lot of equity and a high income and can easily get a loan. In short, I take out a loan for the "purchaser" and they pay off my loan with my bank plus give me between $500-$800 per month income for taking the trouble of helping them out. You sort of like become a banker for them. You borrow money from the bank at 6.5% and sell it back to them at 9% for example. There are many other details but that's about the gist of it in a nutshell.
1) Three of us from the same investment course went to see a "WRAP" solicitor. In this meeting we understood what each line in the WRAP contract meant. At least we know what the legal "potholes" are before we start off doing WRAPS.
2) 4 weeks later, a purchaser who has fallen in love with a house but cannot get finance approaches someone in my group for help (Wrapper).
3) My friend rings me and asks if I wish to help. I do the numbers and I accept.
4) My friend (Wrapper) signs in my company's name and leaves a deposit for me which I will later re-imburse. This is where most of the Wrapper's work is done (they get a wrapper's fee for their troubles) and I take over.
5) I ring the real estate agent involved and introduce myself. I ask for nine things:
(i) A copy of the WHOLE contract of sale (not just the front page!) to be sent to my solicitor by express courier.
(ii) Fax me a letter from their property manager stating what they think the property will rent for after I have carried out some improvements (Rental Appraisal document).
(iii) Fax me a letter from the real estate agency stating what they think the value of the property will (Real Estate Agent's Valuation) after I have carried out some improvements.
(iv) Fax me the first page of the contract of sale document.
(v) ask for his mobile number.
(vi) ask for address of Real Estate agency.
(vii) Confirm purchase price over the phone.
(viii) Find out if accept 5% or 10% deposit.
(ix) Give instructions on what name I wish to appear on the contract (ie. Company as trustee for Trust).
The Real Estate agent then asked for the address and ACN number of my company. And that's it.
6) I then must lock in the purchaser to a contract as I do not wish to purchase the property and then the purchaser pulls out and I am left with a house I do not want. I fill in a contract of sale with my details and the purchaser's and fax this over to the Wrapper (my friend).
7) It took the real estate agent about 40 minutes to do all of what I asked. After receiving all the faxes from the real estate agent and after receiving the signed contract from the purchaser as well as a $10 cheque to make the contract binding, I then proceeded to get the loan.
8) Now that I have sold the house, it's time to buy it for them. I then rang my Mortgage Broker and asked for a P+I loan with minimal breakout fee after two years. Since most Wraps only last 2-5 years then I did not want to get hit with a large exit fee from the loan. It has to be P+I as I am offerring a P+I loan to the purchaser. I fax over to my mortgage broker the following documents:
(i) the rental appraisal
(ii) the real estate valuation
(iii) the front page of the contract of sale.
Mortgage Broker proceeds to get me the loan.
9) Next I needed to give my solicitor my instructions. My solicitor does WRAPs quite frequently and I don't even have to ring him. I merely fill in one of his forms with all the details and fax it over to him. On the form it tells him about the address of the property, the purchaser's name and address, the details of the purchaser's solicitors and the details of the interest rates and monthly installments. I have placed a special condition that my loan to the purchaser does not allow for accelerated payments.
I fax the form over to my solicitor who then waits for the contract from the real estate agent and he does the rest.
10) The following day, I ring the solicitor, he says he has looked over the contract and gives me the go-ahead to sign and purchase the property.
11) I ring the real estate agent and make an appointment that afternoon to sign and give him the 10% deposit. This 10% I am getting from my revolving line of credit.
12) I now just have to wait for the cooling off period of 5 days and there you have it! From this deal I will earn between $700-$800 per month without having to actually work for it. And I feel good about the deal because I've helped someone get into their dream home. Everyone wins! The owner of the home sells their house, the purchaser gets their dream home, the real estate agent gets their commission, the wrapper gets their fee and I get a passive income! Not bad for three days work on my part.
Cheers,
Rod Aguilar
Hello everyone,
I have just finished the preliminaries of another WRAP and I thought that this time around I'd document what I did. Below is the order I did things in:
DEFINITION
What is a Wrap? A person (purchaser) falls in love with a house but for one reason or another the banks won't lend them the required money. I on the other hand, have a a lot of equity and a high income and can easily get a loan. In short, I take out a loan for the "purchaser" and they pay off my loan with my bank plus give me between $500-$800 per month income for taking the trouble of helping them out. You sort of like become a banker for them. You borrow money from the bank at 6.5% and sell it back to them at 9% for example. There are many other details but that's about the gist of it in a nutshell.
1) Three of us from the same investment course went to see a "WRAP" solicitor. In this meeting we understood what each line in the WRAP contract meant. At least we know what the legal "potholes" are before we start off doing WRAPS.
2) 4 weeks later, a purchaser who has fallen in love with a house but cannot get finance approaches someone in my group for help (Wrapper).
3) My friend rings me and asks if I wish to help. I do the numbers and I accept.
4) My friend (Wrapper) signs in my company's name and leaves a deposit for me which I will later re-imburse. This is where most of the Wrapper's work is done (they get a wrapper's fee for their troubles) and I take over.
5) I ring the real estate agent involved and introduce myself. I ask for nine things:
(i) A copy of the WHOLE contract of sale (not just the front page!) to be sent to my solicitor by express courier.
(ii) Fax me a letter from their property manager stating what they think the property will rent for after I have carried out some improvements (Rental Appraisal document).
(iii) Fax me a letter from the real estate agency stating what they think the value of the property will (Real Estate Agent's Valuation) after I have carried out some improvements.
(iv) Fax me the first page of the contract of sale document.
(v) ask for his mobile number.
(vi) ask for address of Real Estate agency.
(vii) Confirm purchase price over the phone.
(viii) Find out if accept 5% or 10% deposit.
(ix) Give instructions on what name I wish to appear on the contract (ie. Company as trustee for Trust).
The Real Estate agent then asked for the address and ACN number of my company. And that's it.
6) I then must lock in the purchaser to a contract as I do not wish to purchase the property and then the purchaser pulls out and I am left with a house I do not want. I fill in a contract of sale with my details and the purchaser's and fax this over to the Wrapper (my friend).
7) It took the real estate agent about 40 minutes to do all of what I asked. After receiving all the faxes from the real estate agent and after receiving the signed contract from the purchaser as well as a $10 cheque to make the contract binding, I then proceeded to get the loan.
8) Now that I have sold the house, it's time to buy it for them. I then rang my Mortgage Broker and asked for a P+I loan with minimal breakout fee after two years. Since most Wraps only last 2-5 years then I did not want to get hit with a large exit fee from the loan. It has to be P+I as I am offerring a P+I loan to the purchaser. I fax over to my mortgage broker the following documents:
(i) the rental appraisal
(ii) the real estate valuation
(iii) the front page of the contract of sale.
Mortgage Broker proceeds to get me the loan.
9) Next I needed to give my solicitor my instructions. My solicitor does WRAPs quite frequently and I don't even have to ring him. I merely fill in one of his forms with all the details and fax it over to him. On the form it tells him about the address of the property, the purchaser's name and address, the details of the purchaser's solicitors and the details of the interest rates and monthly installments. I have placed a special condition that my loan to the purchaser does not allow for accelerated payments.
I fax the form over to my solicitor who then waits for the contract from the real estate agent and he does the rest.
10) The following day, I ring the solicitor, he says he has looked over the contract and gives me the go-ahead to sign and purchase the property.
11) I ring the real estate agent and make an appointment that afternoon to sign and give him the 10% deposit. This 10% I am getting from my revolving line of credit.
12) I now just have to wait for the cooling off period of 5 days and there you have it! From this deal I will earn between $700-$800 per month without having to actually work for it. And I feel good about the deal because I've helped someone get into their dream home. Everyone wins! The owner of the home sells their house, the purchaser gets their dream home, the real estate agent gets their commission, the wrapper gets their fee and I get a passive income! Not bad for three days work on my part.
Cheers,
Rod Aguilar
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