Excellent response, MG, as usual
Kevmeister,
You posted a question before about what the difference is between using vendor finance (wrap) and a lender who charges exorbitant rates.
The lending industry is so much easier these days, with every second person seemingly able to access or sell you finance. Brokers have mushroomed (good and bad), lenders are more flexible and gone are the days when self employment meant you had to find a backyard lender with ridiculous rates, just to get a loan.
However, I'm surprised no-one has mentioned one difference here. I have been down the investigating wraps path, and, after much work and effort, decided to hold the properties instead. After all costs, two of the three places I was intending to wrap are still providing me with a small cashflow and I've enjoyed the booming cg that I've been fortunate enough to catch the best of over the last few years. The third house was sold (at a profit of $70K after holding for 14mths) to finish paying off our PPOR mortgage. Not everyone's choice, but 'twas a good move for us
At the time that I tried to wrap two of these houses, we had a sell figure of $125K and $130K on them. We had paid $100K and $103 for them respectively. In the end, we didn't get enough buyers (though we tried our guts out!) and subsequently ended up keeping them. Those properties are now worth $185K and $200K conservatively. Yes, I know the old arguments here about cashflow and how I could have taken my lump sum and run with it, but I'm much happier that I've kept these houses
Allowed me to draw down on the equity and reinvest (something wrapping wouldn't have allowed me to do).
Still, deviating from the point here...... Sorry!
One of the major differences between using a wrap and another lender is the title. See, with a wrap the actual title of the house still belongs to the wrapper until the client has either paid off the house or is refinanced to another lender. This has been discussed many times in various posts but I just wanted to remind ppl of this difference. The buyer still has other types of title, such as possessory title, to protect him somewhat from the wrapper defaulting. They can also put a caveat on the title as a further measure. However, the wrapping industry needs to work harder (and I believe that the VFA is doing just that) to overcome this so that the buyers are better protected.
Wrappers like MG and Rick Otton are very ethical, in MHO, as they've had no dissatisfied clients (none that I've heard of anyway!) and they are passionate about the services they provide. Rick's Wrap Pack was enormously helpful, outlining an almost cookie cutter system to start off. Wrapping can be a terrific way for those who can't access normal credit to own a slice of the Great Australian Dream. Don't forget, too, that the wrappers take on risks that the banks have rejected. It's a risky venture and not for everyone. It's also a business, and should be treated as such. Your profit is locked in from the beginning, you know exactly how much cashflow you are going to make, and it's an avenue for those ppl who wish to increase their cashflow and have access to easy finance (or equity partners who do!)
IMHO, WeBuyHouses is a great company, run by very experienced people who have had years of experience in property investing and trading. Rick and Jane are passionate about what they do as well, and have terrific enthusiasm and insight. QB, I'm sure you don't have to worry about their company being scammers. Interesting to know that wrapping is taking off in NZ though. Thanks for keeping us informed
