To Wrap or Not to Wrap....

[paulzag]

Reply: 2.1.2.1.1.1.1.2.1.1
From: Paul Zagoridis


What is the markup on the broker's cost-of-goods-sold? A broker's margins are astronomical -- almost all profit. They need to cover their overhead.

But the question becomes 3% of what?

Yes a broker who makes 3% of the loan value would be dancing in the streets. A distributor who carried stock, freight and debtors would go broke on 3%.

My quibble was in the disbelief that 100% markups happen in the business world. I believe retail clothing starts at 100% and moves up. Maybe I misunderstood the post (serves me right for answering when I'm tired).

Over the years I've passed on investing in several interesting businesses. Most failed, some succeeded. All the businesses that competed on price by cutting their margins ran out of money when things got tough.

I didn't mean to insinuate that you didn't understand the real world.

Unrelated to you personally, I find people underestimate the markups in most industries and overestimate the profits being made.

Paul Zag
Dreamspinner
The Oz Film Biz site is archived at...
http://wealthesteem.dyndns.org/

 

[DaleGG]

Reply: 2.1.2.1.1.1.1.2.1.1.1
From: Dale Gatherum-Goss


I'll vouch for that, Paul!!

Dale

 

[Sim]

Reply: 2.1.2.1.1.1.1.2.1.1.1.1
From: Sim' Hampel


I pumped petrol in a servo while in highschool... I think oil and accessories where marked up around 100-200%, whereas the petrol was sold on about a 2-5% margin.

Nice markup on the snackfood, drinks and cigarettes too.

 

[geoffw]

Reply: 2.1.2.1.1.1.1.2.1.1.1.1.1
From: Geoff Whitfield


Probably a standard business practice.

Travel agencies. Flights- 2 - 3%. Travel insurance- perhaps 50% or more. Because people do not shop on that.

An agency might make more out of insurance than out of the flight.

Mrs W is a travel agent. People spent huge amounts of time comparing flight costs. And then accepted all insurance at face value.

Insurance is highly recommended for travel. But the last time she travelled with an agency discount- she bought insurance via NRMA online.

That's not a product endorsement- just expanding on the topic.

 

[always_learning]

Reply: 2.1.2.1.1.1.1.2.1.1.1.2
From: Always Learning


Dear All
<p>
Sorry I missed the issue, my joke was not that 100% profit happens, just try to buy some opals at a tourist duty free shop. My attempt a humor is was that anyone could set up of a big thick never endingg pipeline of supply and sales, and then retire, I was trying to compare such an perfect sales situation with that of WRAP's.
<p>

<table border="0" cellpadding="0" cellspacing="0" >
<tr>
<td rowspan="4">

</td>
<td colspan="2" align="center">
<p align="left"> Investment Laws</td>
</tr>
<tr>
<td align="right" >1st Law:</td>
<td>"What ever you don't invest you forfeit."</td>
</tr>
<tr>
<td align="right">2nd Law:</td>
<td>"What ever you reap is what you've sown"</td>
</tr>
<tr>
<td> </td>
<td><p align="right">Jim Rohn;</td>
</tr>
</table>

 

[michaelg]

Reply: 2.1.2.1.1.1.1.2.1.2
From: Michael G


Hi,

I think I can name a few downsides...

* wrappee pulls out after contract goes unconditional

* wrappee skips town in the middle of the night on Christmas

* lender fails to settle loan for 3 months, have to pay for house in cash

* house is damaged (same as any other investment)

* interest rates are sometimes higher than other investments

* legal fees are higher (due to set up costs)

* developing a system that covers ya butt, takes a while

* developing your margins and risk profiles from trial and error (hehe , thats fun, not)

* ensuring your legal and tax obligations are in line with the law

* finding good solicitors and accountants (not as easy as you think, again trial and error)

* managing the paperwork

* developing people skills (very necessary)

* working out how you'll grow (Rick has already made some suggestions)

* getting burned, getting frustrated, getting annoyed, losing sleep, losing money, losing hope, the list goes on

The upside?

* you have a choice, whether you wish to do it or not

* you get out of it, exactly what you put into it (think about that ALOT).

Rick has had I believe over 10 years experience in this field of investing, in a market that is more mature than ours. So remember that this requires, not just skill, but experience too and alot of patience.

Here's one last thought...

Compare the experience in learning to negotiate between buying 1 $250k house and 5 $50k houses?, roughly 5 times as much. That's what wraps will give you, multiple opportunities of experience. At the beginning the profits may not be as large and the stree may be more, but you'll become a seasoned investor faster (I believe), than buying 1 property every couple of years.

Then as your experience grows and confidence grows, you'll do bigger and better deals.

Just a thought

Michael G