Reply: 1.2
From: Michael G
Wrap: short for "wrap around mortgage".
How:
1) Find Solicitor who understands lease-options, vendor finance and installment contracts.
2) Write an ad (Own your own home, easy finance)
3) Answer phone
4) Create a database of callers, take down details.
5) Send out application form (ie who are you, what's your current financial situation and why, etc)
6) Calulate your margin, tell them how much you can fund them. Tell client to go look for property in this price range.
7) Buy property (normal contract exchange). You now own house, you get normal mortgage.
8) Next day you sell house to caller/client/wrappee using a special contact (installment contact)
9) Set up direct debit system. Client, pays you an installment, into your account, bank takes out their mortgage repayment, remaining cash is yours.
10) Goto to Step 1, repeat.
You will need:
- a savy Solicitor (and one that has good time manangement, and can act quickly).
- a good Mortgage Broker (not every lender likes wraps)
- a good accountant (to tax you how to best structure for tax and capital gain).
Use:
Used to invest in areas for CASHFLOW where there is NO GROWTH.
Warning:
Wraps will eat into your DSR (debt serviciablity ratio) and reduce your borrowing capacity for potential capital growth deals.
IT IS BUT ONE METHOD of investing.
Why me?:
they are "small deals", get's me into the market, lots of small deals means I get to practice buying properties (and each some cashflow at the same time). Practice on the small things so you are ready when the big deals come along.
I get to practice talking to - clients, solicitors, agents, lenders, etc. For me, its a great "hands-on" training program in real-estate and property investing. Which gives me $$$, instead of my paying $$$$ to learn
Michael Gruber