Hi all,
Looking at it from both sides here, I have wrapped a property in the past. I charged 2% over my interest rate. My wrappees were advised to seek independant legal advice. I became a licenced credit provider, which I believe is really the only licencing you could say is "required" to wrap. Our wrappees were fully informed as to what price we purchased the property for, and what price we wrapped it to them for, and the spread in interest rate. They accepted all these details when they signed our contract. I don't feel in any way that I've ripped these people off. They were renting and getting nowhere previously. Their property has since experienced significant capital gain and they will possibly refinance shortly. I'm no snake oil salesperson.
From the other side, last year I required finance on very short notice to settle on a property. I borrowed this money at 24% interest and allowed my car to be used as security. All this and I have a good credit rating and history - but I needed the money in two days and this was the quickest and easiest way to get it. Was I ripped off? Well, the interest rate is certainly the highest i've found! But I agreed to all their conditions when I signed their contract. And, if I had to do it again, I would. And, this lender was no snake oil salesperson either, but a well known public lending company.
If I was in the position of not being able to obtain a loan in the traditional manner, I'd certainly look at buying a wrapped property too. Banks lending conditions can be restrictive and unforgiving and people's situations vary so enormously that it is unfair to say that if they can't get a loan from a bank, they shouldn't be lent any money from anywhere.
Really, when you wrap a property, you are simply acting as a bank. Banks take other peoples money and lend it out again for more than they pay for it. Lots of people complain about the way a bank carries on it's business too, but at the end of the day we all still use them. This is no different.
Kylie