Wrap finance
- Thread starter h8dk97
- Start date
Well....
The question is, what was your intention?
was it;
a) You bought the house as a buy/hold, then decided to sell it later for a high price by offering a wrap sale as an incentive; or
b) You buy the house with the intention of wrapping it, but believe if you rent it for a little awhile this will ease your conscious?
c) What the banks didn't ask, won't hurt them?
Tell ya what, here's a question for you...
If you intend to run a wrap business, that is, intend to do this repeatedly (not assuming this is a once off deal), do you accept that if you don't offer full disclosure to your lender, then your customer are then allowed to have the same benefit with you?
Just a thought
Michael G
The question is, what was your intention?
was it;
a) You bought the house as a buy/hold, then decided to sell it later for a high price by offering a wrap sale as an incentive; or
b) You buy the house with the intention of wrapping it, but believe if you rent it for a little awhile this will ease your conscious?
c) What the banks didn't ask, won't hurt them?
Tell ya what, here's a question for you...
If you intend to run a wrap business, that is, intend to do this repeatedly (not assuming this is a once off deal), do you accept that if you don't offer full disclosure to your lender, then your customer are then allowed to have the same benefit with you?
Just a thought
Michael G
Hi Michael,
Let's say my intention is to buy a property and wrap it, so what I'm trying to find out is
a) do banks generaly allow you to borrow money when they know that you are going to use it for vendor finance? and what was your experience in dealing with banks?
b) if they don't want to give you loan for this purpose and you "don't disclose", that is you borrow for IP and in reality do wrap, what are the risks here?
well, why not let them do it providing they can find someone willing to pay 11% interest (my 9% + their 2%)? ... if that was possible I guess I would charge them 11% in the first place
I've been to Westpac today and the bank manager told me that as long as I pay he doesn't care if I wrap the property or rent it out, but then again he was concentrating too much on selling me their insurance, managed funds and other stuff, so he might've missed what I was asking.
Would be interesting to hear other peoples' experiences.
Would be interesting to hear other peoples' experiences.
Hi,
Okay this is my own view, and not necessarily that of the general public:
a) do banks generaly allow you to borrow money when they know that you are going to use it for vendor finance? and what was your experience in dealing with banks?
- generally the top 4 don't, ANZ did at one time, but kept changing their minds. Why? its not about the legality of it, its a public relations issue.
For example: Bank lend you money, you buy house, wrap to tenant. Tenant is good with payments, but you mismanage the funds or something, and you default, then bank is put into an uncomfortable position. If they foreclosure you, tenant goes screaming to ACA, saying Bank kicks me out, when I make payments on time. If they take on the wrappee, then they are forced to accept a customer who they didnt personally verify. What is the wrappee's legal position in this deal now?
b) if they don't want to give you loan for this purpose and you "don't disclose", that is you borrow for IP and in reality do wrap, what are the risks here?
Well, for starters you signed a legal document (call a mortgage) with a statutory declaration that basically states to the lender you will notify them of any change in conditions that may affect their interest in the property. I guess the biggest risk, is the lender's legal advisor saying that you the borrower have breached the terms of the agreement and therefore they are no longer obligated to lend you money. In other words they can ask for their money back.
Then you are stuck with a property with no money and are still obligated to uphold the wrap contract. You may end up needing hard finance to fund the property and end up negatively geared.
Of course that a pretty nasty scenario...
Just a thought...
Michael G
Okay this is my own view, and not necessarily that of the general public:
a) do banks generaly allow you to borrow money when they know that you are going to use it for vendor finance? and what was your experience in dealing with banks?
- generally the top 4 don't, ANZ did at one time, but kept changing their minds. Why? its not about the legality of it, its a public relations issue.
For example: Bank lend you money, you buy house, wrap to tenant. Tenant is good with payments, but you mismanage the funds or something, and you default, then bank is put into an uncomfortable position. If they foreclosure you, tenant goes screaming to ACA, saying Bank kicks me out, when I make payments on time. If they take on the wrappee, then they are forced to accept a customer who they didnt personally verify. What is the wrappee's legal position in this deal now?
b) if they don't want to give you loan for this purpose and you "don't disclose", that is you borrow for IP and in reality do wrap, what are the risks here?
Well, for starters you signed a legal document (call a mortgage) with a statutory declaration that basically states to the lender you will notify them of any change in conditions that may affect their interest in the property. I guess the biggest risk, is the lender's legal advisor saying that you the borrower have breached the terms of the agreement and therefore they are no longer obligated to lend you money. In other words they can ask for their money back.
Then you are stuck with a property with no money and are still obligated to uphold the wrap contract. You may end up needing hard finance to fund the property and end up negatively geared.
Of course that a pretty nasty scenario...
Just a thought...
Michael G
Hi,
Yes, my first intro into wraps was via John Burley with his seminar Automatic Wealth. I sat through two days of that seminar wanting to know about wraps and in the end the last hour glazed over it. Not impressed.
I then did a seminar with Steve Mcknight which I found very informative.
I've also read books by Robert Allen, and read many posts of forums on the topic.
I've been actively wrapping for over 12 months. The first few deals almost cost me my sanity, but since then they have all been fixed.
Having almost been burnt, I stopped to determine why I got burnt and reworked my system to safeguard myself (learning by experience).
From my experience I found that there was little in the maket to help me comply with the credit code (ie produce loan statements) so for the last 6 months Yuch and I have been developing a program to do just that, incoporating everything we believe people who do vendor financing need to run such an activity.
I'm a member of the vendor's association (www.financewraps.asn.au) and find that the meetings are very informative and a good start for those looking to explore this field.
As for finance, I have used ANZ, Adelaide Bank and Mortgage House.
When ever I am asked about finance (these days, that's anywhere, ie at the markets, door-to-door, cold calling, etc) I always say yes and spend some time asking whether they will fund my wraps. That's when I explain what I do. To help them understand I usually offer to send a powerpoint presentation explaining the pros and cons of wraps and how as a repeat customer I can benefit them if they are willing to work as a team.
Over the last 12 months Yuch and I have been to many offices to do presentations to brokers and their funders to explain the wrap concept to them.
A thought, create a promotional package for lenders, maybe use a flowchart, or a spreadsheet, whatever you think will get the message across.
Michael G
Yes, my first intro into wraps was via John Burley with his seminar Automatic Wealth. I sat through two days of that seminar wanting to know about wraps and in the end the last hour glazed over it. Not impressed.
I then did a seminar with Steve Mcknight which I found very informative.
I've also read books by Robert Allen, and read many posts of forums on the topic.
I've been actively wrapping for over 12 months. The first few deals almost cost me my sanity, but since then they have all been fixed.
Having almost been burnt, I stopped to determine why I got burnt and reworked my system to safeguard myself (learning by experience).
From my experience I found that there was little in the maket to help me comply with the credit code (ie produce loan statements) so for the last 6 months Yuch and I have been developing a program to do just that, incoporating everything we believe people who do vendor financing need to run such an activity.
I'm a member of the vendor's association (www.financewraps.asn.au) and find that the meetings are very informative and a good start for those looking to explore this field.
As for finance, I have used ANZ, Adelaide Bank and Mortgage House.
When ever I am asked about finance (these days, that's anywhere, ie at the markets, door-to-door, cold calling, etc) I always say yes and spend some time asking whether they will fund my wraps. That's when I explain what I do. To help them understand I usually offer to send a powerpoint presentation explaining the pros and cons of wraps and how as a repeat customer I can benefit them if they are willing to work as a team.
Over the last 12 months Yuch and I have been to many offices to do presentations to brokers and their funders to explain the wrap concept to them.
A thought, create a promotional package for lenders, maybe use a flowchart, or a spreadsheet, whatever you think will get the message across.
Michael G
I always wonder why people ask whether they should advise the bank that they plan to wrap a property they purchase.
As Michael points out, the Banks require full disclosure.Simple.
Once you decide not to tell the banks some things, why bother telling them anything!!!!
As Michael points out, the bank could call in the Loan once they found out, you may also get a call from the police!!.
Look up "Obtaining financial advantage by deception" of "Fraud".
Be up front as Michael does and you will find sleeping much easier.
Wrapping is not the sort of business that you get into with 5 minutes research and a few blank contracts. wrap 10-15 properties and you have a million dollar business. Research properly, finance correctly and develop a system that is LEGAL and you will have a lot less problems.
PS..Watch what happens when the bubble bursts and interest rates go up....exit plans may be required!.
Under the UCCC the banks are warned against reckless lending but have large pockets and lots of lawyers. How many deals can you afford to go wrong??
Well...thats my 2 cents on wraps.
Better get back to the Reno.....time is money
Noddy
As Michael points out, the Banks require full disclosure.Simple.
Once you decide not to tell the banks some things, why bother telling them anything!!!!
As Michael points out, the bank could call in the Loan once they found out, you may also get a call from the police!!.
Look up "Obtaining financial advantage by deception" of "Fraud".
Be up front as Michael does and you will find sleeping much easier.
Wrapping is not the sort of business that you get into with 5 minutes research and a few blank contracts. wrap 10-15 properties and you have a million dollar business. Research properly, finance correctly and develop a system that is LEGAL and you will have a lot less problems.
PS..Watch what happens when the bubble bursts and interest rates go up....exit plans may be required!.
Under the UCCC the banks are warned against reckless lending but have large pockets and lots of lawyers. How many deals can you afford to go wrong??
Well...thats my 2 cents on wraps.
Better get back to the Reno.....time is money
Noddy
