WRAP advice please

Hey guys,

We've had a bit of a drama trying to get people. We placed an ad in a few local papers and havn't had much of a response. It seems as though we are not reaching our target and ppl aren't grasping the concept. The ad we used was:

"Owner needs to sell tidy 3br home now and will provide finance. No banks-easy qualifying. Low deposit & affordable monthly payments. Minor repairs."


8 people rang in total and most just wanted to know the price, desposit and/or repayments. We would give them the address so that they can have a look, but noone has called back.

I beleive that the people aren't clear on the benefits.

We are placing another ad in next weeks paper:

"Tired of losing money on rent every week?

Low on Savings?

Can't get a bank loan?

Keep your savings.

Enjoy easy & flexible financing(rent to buy)-No bank rules or fees

Choose to own this tidy 3br home. Make it happen. Call to inspect"

As always any suggestions on how we could improve our chances of getting through to the right buyer are v. much appreciated.

Cheers,

Arthur
 
I must admit I've never liked the idea of wraps very much, though I know some people have used them successfully. It's a business and not investing to me, very different things, and very different risks involved.

What are the risks to the buyer? - this sort of ad. smells like 'rip off' to me.

What is the actual monthly repayment and how does it compare to if the person bought the property outright themselves in the normal fashion?

Actually...isn't this sort of arrangement illegal in some states now???

If you could change my opinion on this, you might be able to come up with a better ad!

GSJ
 
Hi GSJ,

I can appreciate where you're coming from and the reason we want to wrap this house is because it is negatively geared and the pain of paying $200 per week has gone past threshold.-It's very debilitating.
In terms of the benefits for the potential buyer, the list is quiet long:

1) They get to own their own home now, when they have been refused traditional finance
2) They don't have to have much of a deposit
3) The rates are lower than non-conforming lenders rates
4) They keep any capital appreciation (its their house)
5)They can refinance and buy us out any time they are able to

These are just a few off the top of my head. It really can be a win-win outcome. Depends how you choose to look at it I guess.

If it works out, the people move into their new home and I stop losing money every week.

Arthur
 
I think you need to make sure you are selling the benefits rather than what it is.
Wraps are all about the deal not the house and if you find that angle your success will follow.

Where is the house, what is the average prices for similar houses in the area?

Perhaps you can finance the deposit as a 2nd mortgage carryback rather than a straight forward WRAP.

Advertise that you will supply the deposit if the buyer brings the bank loan. Try a few different ads and go from there.

Best of luck.


Don Christie
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Hi Arthur,

Could you not just sell the house and invest the money in something else?
I'm just wondering what the overall difference would be in the long term.


Good Luck.
 
Hey guys,

Chef, we're definately considering running a few different ads. We'll wait to see how things go with this one first.

BlackSpider, the reason we don't want to sell is because the market has taken a slight downturn and we would have to sell for (at highest) what we paid for it and surely lose the repayments we've been making over the past 6 months.
Of course, waiting it out is an option..but I don't want to keep seeing $$ taken out of my account every week for the next 3-5 years. Rather fix this now, and have more $$ for other investments- I've learned a lot more about investing since we bought the house.

Cheers,

Arthur
 
Arthur

It's intersting that you havn't got much advice . 3-4 years ago the forum was full of people full of the praises of wraping and discussions about the pro's and con's of a Steve McKnight or a Rick Otten approach ...

but it seems that it's fallen out of favour.

You might get more joy looking through posts from that time , or , if you havn't already checked it out , go to Steve McKnights site .

Cliff
 
Actually...isn't this sort of arrangement illegal in some states now???

Hi,

Actually I've posted about this before, the only state where installment contracts are banned is South Australia.

There is a misconception that it is also illegal in W.A. that was due to a publication issued by the W.A. government, however that item said it was illegal to run a business as a vendor financier without registering as a financier and paying a fee.

Just like its illegal to drive a car without a license.

In Victoria you have to be registered, but no fee is involved.

Marx,

You may want to sit down and think of every reason why people want to own their own home.

For example, its cheaper to rent then to buy, but people buy, the question is why?

e.g.

- stability, how would you feel being in a place you like then being told the landlord needs vacant possession because they are selling?

- control, how would you feel if you wanted to repaint the walls, but you can't, or if you can, you won't get the benefit of it.

- pride, how would you feel if you lived in a nice house but couldnt tell people you owned it?

- opportunity - what if your cashflow is great - run a business, but unable to qualify for a loan

- timing - what if you are applying for residency, it will take 2 years and you want to settle into a place you like and stay there once you become Australian. What if you could lock in a price, then convert that into a sale later on?

Maybe you could ask people you know, what they choose to buy rather then rent and add those reason to your list.

Then you can pick some and turn them into ads.

Just a thought
Michael G
 
Hi GSJ,

I can appreciate where you're coming from and the reason we want to wrap this house is because it is negatively geared and the pain of paying $200 per week has gone past threshold.-It's very debilitating.
In terms of the benefits for the potential buyer, the list is quiet long:

Arthur

Arthur,
Perhaps the people didn't think that it was such a good deal.
Finance is not hard to obtain these days, affording the repayments
is the tricky part and everyone knows that if you can't afford the repayments
it doesn't take long for the banks to auction the place.
How much is their weekly payment and how does that compare to the rent
they would have to pay if they rented a similar property in the area?
Cheers
 
Loving the feedback guys...I forgot to ask one thing- How long does it usually take to find some genuine buyers? I'm hoping to get all this over with withing the next 2 months tops :)

Just to make a point-I'm not getting into the wrapping business. My investment strategy is more along the lines of buy/improve/ then rent or sell...
I'm trying to wrap this one property because it was bought in a rush with a friend in the hopes of making some capital gain in the next few years However, now that we have each felt the pain of not seeing our money every week, we want to fix the situation. Wrapping, for me at this point, is only a strategy to resolve this negative cashflow problem.

Cheers,

Arthur
 
8 people rang in total and most just wanted to know the price, desposit and/or repayments. We would give them the address so that they can have a look, but noone has called back.
Cheers,
Arthur
Arthur, it seems from what you have said above, that no-one has done an inspection, so they haven't actually seen inside the house. If that's the case, I'd advertise an "open for inspection", just like the agents do. Then I'd have a handout sheet with all the details on it, to give the people who come and look.

There's also a few websites where owners can advertise their own homes for sale.
 
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Did you do a course, or buy a course on wrapping? The ad sounds fairly generic based on the ads I see in my area. Why dont you go back to the person who sold you the course and ask their advice? Let them know the ad didnt work and what do they suggest you try?

They'll probably appreciate the feedback.
 
G'day Marx,

Sailor said this:-
Then I'd have a handout sheet with all the details on it, to give the people who come and look.
Thinking further, since they are BUYING the property, why not a copy of a Pest Inspection, Building Inspection (yes, you'd need to pay for it, but probably better that it's paid for ONCE rather than several times - and would put their minds at ease).

Bear in mind I've never done a Wrap, but just thinking of what I'd like to see if I were a prospective (but not guaranteed) buyer....

Good luck with it,

Regards,
 
Hi Oscar,

As you know from my post, I'm having a little drama finding some buyers :confused:

Thanks for helping me out mate.. much appreciated

Arthur
 
If all your worried about is the negative cashflow from this particular property, perhaps you could look at some kind of cashflow mortgage, or similar set up re-finance. If this wrap is a once off, it seems a lot of trouble to go to just to avoid a short term condition of negative cashflow. Sometimes its better to sell, and take a loss. Both the oportunity cost of the money and time and emotion invested aren't worth it. I faced a similar problem last year when I had an old house in need of repairs, which I wasn't able to gear as highly as I thought. I tried to sell first, and whe the market didnt meet me, I gritted my teeth and spent money on the repairs. I finally have a tenant, and the yeild is 10%. I wont make the money I spent on the reno back for 5 years, and it was a bit tight last year paying the mortgage and the builder, but it taught me a valuable lesson, and now the property is in a much better position to re-sell or re-finance.
 
Hi Tobe..thanks for your post. "Cashflow mortgage"- are you referring to a line of credit?

The negative cashflow is the main reason, yes. However, this is a great opportunity to try out my luck with wraps as I've known about the strategy for years. I want to give it a go! Also, a few grand payout from the deposit would be nice if it all works out. Not to mention the weekly cashflow for a few years.
Also..I don't have the capital to do any repairs at this time.
Wrapping seems to be the best option for us.

Cheers,

Arthur
 
Cashflow mortgage is a bit like a honeymoon rate for the first 4 years where the rate you make repayments on is 4%, and another 4% or so is capitalised to the loan. Its a bit contrived, and you could set up something similar for yourelf with a LOC. I in no way recomend it, just putting it out as a short term option. Last year I used a personal loan to help with the repayments and the builder while the property was empty.
Good luck with the wrap. From what I have read, its about people not houses. Perhaps you need to look in specific places. I see a lot of non conforming clients turned away as they meet serviceability but have little equity. Perhaps a mortgage broker in your area may have a similar list of leads he couldnt place? Perhaps you could chat with a property manager for a letter drop/mail out to current rentals (this is a long shot) Good luck.
 
Hey guys..quick question that may seem like "dahh" but I didn't realise I wasn't 100% sure until it came up while a potenial buyer asked me over the phone :eek:
Stamp duty in NSW..when does the buyer have to pay it-As soon as they move in or after settlement in 30 yrs? How does it work?

Thanks,

Arthur
 
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