What happens in a wrap

What happens

I am curious to know what happens "legally" in a wrap transaction.
In a normal transaction, the buyers name goes on the property title with a caveat for the mortgage taken to finance the transaction.
If that buyer decides to "wrap" his property, do the new buyers go on the title as well - and if not - what security do they hold for their loan from the vendor?

My head hurts.
 
Re: What happens

Hi Andrew

In Australia, most wraps are done using an installment contract. This is basically a normal contract with a delayed settlement and a series of payments over the life of the settlement. The property settles once the last payment is made (or the wrap is paid out early).

The wrap buyer's security is often protected by a caveat on the title. Sometimes the wrap buyer does not bother as they have so little equity for the first few years.

Why do you ask?
 
Thanks Paul

I was curious to know because some time ago, maybe around 1999 when I first read Rich Dad Poor Dad, someone told me vendor finance wasn't possible in Australia because of the way our legal/tax system was structured. Then I found out about "wraps" thru this forum... no that's not correct... I found out about this forum and wraps from a "realestate investment" thread on StockCentral.

I've been trawling this forum of late (which is fantastic by the way) because my wife and I are seriously thinking of relocating to Brisbane, joining forces with my mother and brother-in-law, and buying, renovating and renting properties. I see "wraps" as potentially a useful instrument in the financial toolbox -- for the right properties of course (uncertain or turbulent rental demand, low capital growth prospects or just a quick +ve cashflow transaction).

A little history... I've basically cashed out after 10 years in the workforce with little to show for it really. We've made all the wrong investing decisions in the past -- investing in property when the market was stagnant then into shares at the wrong time. So now... after working myself silly and throwing all my hard earned cash down the toilet, I just opted out of the workforce. With the bit of capital that we have, we started a company and are trying to get a new product to market. But on the side, we'd like to start working properties -- and doing things a bit smarter.

When I get to Brisbane, I just might drag the clan along to a Freestylers meeting. What do you think of the group?

Andrew.
 
Originally posted by AndrewC
Thanks Paul

I was curious to know because some time ago, maybe around 1999 when I first read Rich Dad Poor Dad, someone told me vendor finance wasn't possible in Australia because of the way our legal/tax system was structured. Then I found out about "wraps" thru this forum... no that's not correct... I found out about this forum and wraps from a "realestate investment" thread on StockCentral.

It really annoys me whenI hear people being told something is not possible. Vendor finance has been documented in NSW since at least the 1920's.

I've been trawling this forum of late (which is fantastic by the way) because my wife and I are seriously thinking of relocating to Brisbane, joining forces with my mother and brother-in-law, and buying, renovating and renting properties. I see "wraps" as potentially a useful instrument in the financial toolbox -- for the right properties of course (uncertain or turbulent rental demand, low capital growth prospects or just a quick +ve cashflow transaction).

Good for you. Especially as you sound like you know what you want. I believe wraps are one way of achieving a result. They are not the only way or even the best way. Many armchair experts have trumpeted the benefits of wraps, I try to listen to people who have done a few as beginners enthusiasm can be dangerous.

A little history... I've basically cashed out after 10 years in the workforce with little to show for it really. We've made all the wrong investing decisions in the past -- investing in property when the market was stagnant then into shares at the wrong time. So now... after working myself silly and throwing all my hard earned cash down the toilet, I just opted out of the workforce. With the bit of capital that we have, we started a company and are trying to get a new product to market. But on the side, we'd like to start working properties -- and doing things a bit smarter.

I think you've learned a wide range of skills and grown a lot from the experience. It takes 10-15 years to become an overnight success.

When I get to Brisbane, I just might drag the clan along to a Freestylers meeting. What do you think of the group?

hehehe :cool: I was the Sydney North Coordinator until last month, so I'm biased. I like the idea of meeting with like minded individuals and forming friendships and a brains trust.
 
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