I want to hear from anyone that has done wraps.
Where did you learn to do them? How many have you done? Are you still actively doing them? Etc
Where did you learn to do them? How many have you done? Are you still actively doing them? Etc
Who has done wraps?
- Thread starter Mick and Andrea
- Start date
Why?......
Now Aaron- don't be a dream stealer.
Some people on this forum do wraps as their full time business. Do a search on some other threads.
The rest of us know that call Options are the way to big bucks no money down no risk real estate riches!
Hi Mick & Andrea
We started our real estate vendor finance business in 2003 and now work in that business full time.
Disclosure first ;-) Rob, Karen & I started vendor finance with Dave & Julie Siacci back in 2003 and we're personal friends, so I'll try not to be too biased ;-)
I believe it is important to build a good foundation to your vendor finance knowledge and there are numerous educators to choose from. Some that spring to mind are:
Sean Summerville - http://www.thepropertyking.com.au/
Rick Otton - http://www.rickotton.com/
Dave & Julie Siacci - https://vendorfinanceinstitute.com.au/home/siacci-system-of-vendor-finance-1997/
Paul Zalitis - http://www.aussiewrapper.com.au/Cash-Flow-Investing.html
Gordon Ku - http://gordonku.com/
It is worthwhile researching all these educators and choosing one that suits your style.
We know lots of people who have attended the seminars/courses supplied by the above educators and there seems to be a common result for all seminar attendees. The urban myth about results from seminars says that 80% of attendees do absolutely nothing once the seminar is finished and out of the 20% that actually take action, only 20% of them are left after one year. It may be an urban myth but our experience shows this to be pretty spot on.
I believe all the above educators will give you the information you need to get started but it's then up to your ability to 'stick' to the task. Our experience shows that taking a lot of continuing action and not giving up so you can attend the next great 'make a million dollars easily seminar', is the only way to be successful in any business enterprise.
In short, yes, we are still doing them. Good luck with you research.
Cheers, Paul
We started our real estate vendor finance business in 2003 and now work in that business full time.
Disclosure first ;-) Rob, Karen & I started vendor finance with Dave & Julie Siacci back in 2003 and we're personal friends, so I'll try not to be too biased ;-)
I believe it is important to build a good foundation to your vendor finance knowledge and there are numerous educators to choose from. Some that spring to mind are:
Sean Summerville - http://www.thepropertyking.com.au/
Rick Otton - http://www.rickotton.com/
Dave & Julie Siacci - https://vendorfinanceinstitute.com.au/home/siacci-system-of-vendor-finance-1997/
Paul Zalitis - http://www.aussiewrapper.com.au/Cash-Flow-Investing.html
Gordon Ku - http://gordonku.com/
It is worthwhile researching all these educators and choosing one that suits your style.
We know lots of people who have attended the seminars/courses supplied by the above educators and there seems to be a common result for all seminar attendees. The urban myth about results from seminars says that 80% of attendees do absolutely nothing once the seminar is finished and out of the 20% that actually take action, only 20% of them are left after one year. It may be an urban myth but our experience shows this to be pretty spot on.
I believe all the above educators will give you the information you need to get started but it's then up to your ability to 'stick' to the task. Our experience shows that taking a lot of continuing action and not giving up so you can attend the next great 'make a million dollars easily seminar', is the only way to be successful in any business enterprise.
In short, yes, we are still doing them. Good luck with you research.
Cheers, Paul
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We did around 12 wraps - and I know people who have done well out of them - but for ourselves I do regret taking that path.
We bought them all cheaply in a rising market (around 2002) and wrapped ... the problem was that profits are locked in when you wrap them - in our case 30% of our purchase price.
The income was okay - we made around $200/mth from each property - plus the anticipation of the locked in profit.
The pitfalls were that the properties then proceeded to double in value (or more), so we missed out on 100% profit.
The quality of rent-to-owners applicants were rather dubious. We managed to pick mostly good ones, but a few duds slipped thru the gaps that caused us much grief.
We had no control over when the purchasers paid us out. We still have only one left that is lingering on 9 years down the track, and who has no intention of ever refinancing due to personal reasons. Due to that one being our first wrap, done as a joint venture, it makes a grand total of $100/mth ... but by the time you then take out ASIC and accountants costs it is severely negative. I've tried to sell it to the other JV partner at a reduced profit but they are not interested.
If we had bought them as straight rentals, we would have made 100%+ CG profit on each property, rents would cover mortgage repayments ... so we could have sold half and fully own the other half.
We bought them all cheaply in a rising market (around 2002) and wrapped ... the problem was that profits are locked in when you wrap them - in our case 30% of our purchase price.
The income was okay - we made around $200/mth from each property - plus the anticipation of the locked in profit.
The pitfalls were that the properties then proceeded to double in value (or more), so we missed out on 100% profit.
The quality of rent-to-owners applicants were rather dubious. We managed to pick mostly good ones, but a few duds slipped thru the gaps that caused us much grief.
We had no control over when the purchasers paid us out. We still have only one left that is lingering on 9 years down the track, and who has no intention of ever refinancing due to personal reasons. Due to that one being our first wrap, done as a joint venture, it makes a grand total of $100/mth ... but by the time you then take out ASIC and accountants costs it is severely negative. I've tried to sell it to the other JV partner at a reduced profit but they are not interested.
If we had bought them as straight rentals, we would have made 100%+ CG profit on each property, rents would cover mortgage repayments ... so we could have sold half and fully own the other half.
Hi Lizzie
We too have about 3 purchasers who have been with us longer than we planned and, like yours, look like they'll be with us for the long term. Luckily we structure our transactions so that when this happens, we get well rewarded for their choice not to refinance into a traditional loan within 5 years, i.e. when we look at the cash flow we're getting from each of these properties we say 'stay as long as you like' ;-)
To achieve this we build in a penalty if they stay for longer than 5 years (and it's mentioned clearly in the Contract and all our buyers must present us with a document from their lawyer, stating they've received independent legal advice).
Looking at your experience, thank heavens the wording of Instalment Contracts has moved with the times.
Good luck with that last one ;-)
Cheers, Paul
We too have about 3 purchasers who have been with us longer than we planned and, like yours, look like they'll be with us for the long term. Luckily we structure our transactions so that when this happens, we get well rewarded for their choice not to refinance into a traditional loan within 5 years, i.e. when we look at the cash flow we're getting from each of these properties we say 'stay as long as you like' ;-)
To achieve this we build in a penalty if they stay for longer than 5 years (and it's mentioned clearly in the Contract and all our buyers must present us with a document from their lawyer, stating they've received independent legal advice).
Looking at your experience, thank heavens the wording of Instalment Contracts has moved with the times.
Good luck with that last one ;-)
Cheers, Paul
Hi Lizzie
I did 6 and had the exact same experience - purchasers made much more than me and when factoring in the opportunity cost it was not worth it.
Thanks Lofty and Lizzie. I really appreciate your words.
I am in the process of onselling an option for a block of land and promised that I will spend some of the profit on education.
I have been interested in wraping for the last 15 years and came across Rick Often pitching his course.
As with all education its what you do with it that counts.
Really appreciate the links Lofty.
I am in the process of onselling an option for a block of land and promised that I will spend some of the profit on education.
I have been interested in wraping for the last 15 years and came across Rick Often pitching his course.
As with all education its what you do with it that counts.
Really appreciate the links Lofty.
Generally, but not always the experience of my clients that went down this path
Many still have a remnant recalcitrant wrappee thats sitting on a 50 k mortgage with 150 k plus equity, but wont refi out because they know that any lender isnt going to put up with their ongoing late payment dramas, only to be rectifief when the sheriff is at the door.
Like all things, some folks can make this work very well....................
And
Like all opportunities, we do the Due Diligence on the concept or the idea or the business to death........but we rarely due the diligence on the biggest risk which is often US
Can you, and are you willing to do what is required to make X work ?
ta
rolf
I found that wraps worked really well in a rising market because the "purchasers" could refinance due to the increase in value of the property once it passed the 30% add ... but ... it also meant that the wrapper missed out in the potential profit once it passed the 30%.
In a flat market - unless the "purchase" puts in some serious sweat equity, they have great difficulty getting the value of the property over the 30% add, and hence can't refinance until they get their mortgage (to the wrapper) down significantly.
Don't get me wrong - we did make some nice money - but could have made so much more if we'd not been sidetracked by the JV partner (who was a friend at the time).
In a flat market - unless the "purchase" puts in some serious sweat equity, they have great difficulty getting the value of the property over the 30% add, and hence can't refinance until they get their mortgage (to the wrapper) down significantly.
Don't get me wrong - we did make some nice money - but could have made so much more if we'd not been sidetracked by the JV partner (who was a friend at the time).
I have done one, made $30-$40k on it.
It probably took as much time and effort as each of my developments that I am making $300-$500k on. I won't be doing another one, or at least not in Australia.
I saw a great model that appears to be working in USA at the moment.
Take on the loans of a person who is about to have their house repossessed. You assume their 30 year fixed rate mortgage at 5.5-6%
You pay their outstanding repayments and they hand you the keys and do minor renos cheap as it is in USA.
You onsell the property under a wrap deal.
The figures I was being shown demonstrated that you could achieve a 40%+ return on cash invested.
It probably took as much time and effort as each of my developments that I am making $300-$500k on. I won't be doing another one, or at least not in Australia.
I saw a great model that appears to be working in USA at the moment.
Take on the loans of a person who is about to have their house repossessed. You assume their 30 year fixed rate mortgage at 5.5-6%
You pay their outstanding repayments and they hand you the keys and do minor renos cheap as it is in USA.
You onsell the property under a wrap deal.
The figures I was being shown demonstrated that you could achieve a 40%+ return on cash invested.
are wraps like long term call options on the stock market?
On a long term call option, the issuer receives a premium (ie some cash up front) but has to sell their shares at an agreed price by some future date (depending on whether european or american type call options).
Underlying all of this could the secret to being a buying or seller or wraps depend on the underlying market.
A market that has been stagnant for a while but is showing an upturn: buy the wraps.
A market that has seen a strong upturn, but is now stagnating: sell the wrap.
Forgive my ignorance on this area.
On a long term call option, the issuer receives a premium (ie some cash up front) but has to sell their shares at an agreed price by some future date (depending on whether european or american type call options).
Underlying all of this could the secret to being a buying or seller or wraps depend on the underlying market.
A market that has been stagnant for a while but is showing an upturn: buy the wraps.
A market that has seen a strong upturn, but is now stagnating: sell the wrap.
Forgive my ignorance on this area.
Yes done 1, 2 or in fact 180 all in Qld.
Whilst Yes many clients did very well out of the deal we also did very well (enough to help me retire and use the cash flow to pay down my buy and hold)more based on volume.
As an example i have one property in my SMSF which i paid $32K for and the purchaser has been in the property for 7 years. To date they have paid around $180K in loan repayments and absolutely No intension of refinancing or moving.
They will be there for next 20 years increasing my cash flow.
Certainly not for everyone and for a retail mum or dad investor obtaining finance on a wrap is not easy. We financed all of ours with a couple of the majors but was done at National Credit level given the number and size.
Whilst Yes many clients did very well out of the deal we also did very well (enough to help me retire and use the cash flow to pay down my buy and hold)more based on volume.
As an example i have one property in my SMSF which i paid $32K for and the purchaser has been in the property for 7 years. To date they have paid around $180K in loan repayments and absolutely No intension of refinancing or moving.
They will be there for next 20 years increasing my cash flow.
Certainly not for everyone and for a retail mum or dad investor obtaining finance on a wrap is not easy. We financed all of ours with a couple of the majors but was done at National Credit level given the number and size.
One of the mistakes we made when we first started was buying a property $5K under asking price and thinking we were buying at a 'steep discount' ;-) As you all know, we were buying, if we were lucky, at market price. However we were only adding 20%. Even with the smaller mark-up, capital gain slowed in NSW and we had to learn how to operate in a low capital gain environment.
This we did by learning how to actually buy at a steep discount but still only mark up approximately 20%. We prefer not to enter into an Instalment Contract if our sale price is more than 10% above market. Normally we try to achieve 5%. Even NSW's snail like capital gain ;-) then allows our buyers to refinance within our preferred 3 to 5 year window.
However to make a real business out of this process you need to compound your profits in the early days of your business. For example, let's say you put $50K into your first transaction and, when the buyer refinances, you get back your original $50K plus $50K profit. This allows you to undertake two more similar transaction, using $50 down on both properties. You use this compounding process in the early days of your business until you can afford to take the $50K profit from a property for living expenses and reinvest the $50K deposit in only one new transaction. This is how we built our business to the point where all our living expenses are now covered.
Matt, we've been using the US assumption model you mentioned, in Australia, since 2006. Most people think that it can't be done in Australia. It may not be as easy as doing it in the US, i.e. the paperwork to make it happen and minimise your risk is extensive but we now have properties in two Australian States that we've 'assumed' just prior to the mortgagee auction.
Cheers, Paul
This we did by learning how to actually buy at a steep discount but still only mark up approximately 20%. We prefer not to enter into an Instalment Contract if our sale price is more than 10% above market. Normally we try to achieve 5%. Even NSW's snail like capital gain ;-) then allows our buyers to refinance within our preferred 3 to 5 year window.
However to make a real business out of this process you need to compound your profits in the early days of your business. For example, let's say you put $50K into your first transaction and, when the buyer refinances, you get back your original $50K plus $50K profit. This allows you to undertake two more similar transaction, using $50 down on both properties. You use this compounding process in the early days of your business until you can afford to take the $50K profit from a property for living expenses and reinvest the $50K deposit in only one new transaction. This is how we built our business to the point where all our living expenses are now covered.
Matt, we've been using the US assumption model you mentioned, in Australia, since 2006. Most people think that it can't be done in Australia. It may not be as easy as doing it in the US, i.e. the paperwork to make it happen and minimise your risk is extensive but we now have properties in two Australian States that we've 'assumed' just prior to the mortgagee auction.
Cheers, Paul
Thanks everyone for there responses. Really appreciate it.
Where did everyone learn there skills from? I know Lofty said they learnt from Dave & Julie Siacci.
Nice Qlds! 180 properties is a great score.
Where did everyone learn there skills from? I know Lofty said they learnt from Dave & Julie Siacci.
Nice Qlds! 180 properties is a great score.
Hi Mick and Andrea
Just a quick correction. We didn't study 'under' Dave & Julie but Rob, Karen & I did start our VF eduction at the same time as D&J.
Rob, Karen & I spread our education out among Steve McKnight, John Burley, Rick Otton and Joe Arlt. With the benefit of hindsight, I'd probably stick with the Australian educators if I was starting out again.
Cheers, Paul
Just a quick correction. We didn't study 'under' Dave & Julie but Rob, Karen & I did start our VF eduction at the same time as D&J.
Rob, Karen & I spread our education out among Steve McKnight, John Burley, Rick Otton and Joe Arlt. With the benefit of hindsight, I'd probably stick with the Australian educators if I was starting out again.
Cheers, Paul
