Reply: 1.1
From: Kevin Frey
Wrapping in very simple terms (because that's about as much as I know) is also called vendor-financing.
The scenario is that you act as the "bank" for a potential buyer, thereby financing their purchase of your property.
The profit from this arrangement stems from you charging the buyer an interest rate which is above market rate by one or two percent.
Because you still own title to the property issues such as rates, water rates, building insurance etc are usually all passed onto the buyer, or built into
the monthly repayments.
You retain title to the property until the purchasers make their final payment, or they refinance.
Now the question I ask myself about wraps is the type of people it attracts, if they are happy to pay above-market interest rates or are not savvy enough to know this is the case. This leads me to think that they are higher-risk individuals who have probably been declined home loans through traditional lenders.
(By all means, other please clarify my misinterpretations if there are any).