wraps

From: Michael G


Hi,

This post is directed to those who have heard of, or are interested in, wraps.

I want to hear from everyone who has an interest in this investing niche.

I am interested to learn what questions people have? also I'd like to know what people do and don't like about this subject.

I know each sector of property investing has its share of questions and blocks. Actually its the blocks I'm really interested in, those things that induce analysis paralysis :)

And if you've wrapped and have had an experience worth sharing, then hey, I;m all ears :)

I've got a beauty, I was just told yesterday that one of my buyers has decided not to proceed and I'm left with a property and no buyer. The buyer's solicitor was unfamiliar with the FHOG Act, and caused delays, I suspect these delays frustrated the buyer and caused excess stress in their life that they didnt want.

So today I'll be putting an ad in the paper to resell the property, actually I'll probably put two ads in the paper, one to sell and one to rent. What ever comes first I'll take. It will buy me time while I focus on my other deals.

Regards
Michael G.
 
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Reply: 1
From: Colin Mills


I refuse to comment on wrapping because I am already in the cross hairs of the WRAPPER MAFIA that, unfortunately, populate this site. Its pointless trying to express a negative opinion about wrapping when these people (we all know who you are) run the agenda on this topic. The simple fact is the wrapper mafia have a vested financial interest in promoting wrapping while I am just an unbiased individual offering a humble opinion (based on real life experiences of my ex brother-in-law). Being ganged up on and having previous posts dissected point for point, almost line for line, word for word in a crude effort to falsely discredit and lampoon me has left a bad taste in my mouth. If I sincerely believed I could express my point of view about wrapping without having ten people jump down my throat because I'm upsetting their financial apple-cart I would be only too happy to share my opinion. Its somewhat sad when you think about it.
PS Michael Croft - MYOB!
 
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Reply: 1.1
From: Sim' Hampel


... and your point is ?

 
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Reply: 1.2
From: Robert Forward


Colin, Colin, Colin

Do you really have that big of a chip on your sholder???

Get over it man...

I hope Michael Croft replies just to stir you now. And I'm sure he will too.

Now, onto your gripe about wrapping, yes you've stated your opinion (and I do believe from memory rather well) but there aren't as many wrapping shysters out there that you are thinking there is.

Are you going to call companies such as Forrester Kurts, AV Jennings, Lend Lease etc bad companies cause they provide "Vendor Finance" on their properties?

If not why not? You do it to others that are wrapping professionally and correctly, and within the boundaries of the individual states laws. It's a bit like your last lot of comments on FHOG, Wrappers have found a niche within the laws and are using it to make money. I'll repeat a comment from another post I did to you.

QUOTE
If the government allows these situations to occur then why not use it. ANY true entrepreneur will always looks at what the governments regulations/laws are then they find holes in them to create a specialised market in which to open a money making enterprise.

So what is the difference here???
UNQUOTE

Cheers
Robert

The Sydney "Freestylers" Group Leader.
 
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Reply: 1.2.1
From: Yuch .


Hi Colin,

"If the government allows these situations to occur then why not use it. ANY true entrepreneur will always looks at what the governments regulations/laws are then they find holes in them to create a specialised market in which to open a money making enterprise."

I am a wrapper and I am a TRUE ENTREPRENEUR!!

Other wrappers out there, any of you is not a true entrepreneur?

If this is the issue you have with wraps, I can tell you now that wrappers have to comply with the government's regulations as well!!!

Regards
yuchun
~ The secret to success is to start from scratch and keep on scratching. ~
 
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Reply: 1.3
From: Michael Croft


Hi Colin,

I'm using MYOB already for my businesses thanks; however I assume your comment is in response to my requests for more info about you in an earlier post. Or perhaps you don't want my pearls of wisdom caste before you? Not that I am implying that I am truly wise or that you are a swine; it's merely a turn of phrase you understand.

Actually, it is my contention that a wrap is not property investment, but an investment in a financial instrument or a business.

Wrapping mafia? You really should be on stage - a bit of a drama queen aren't you. Your posts remind me a little of Eric Snow, except that he did have a certain warped sense of humour.

Anyway keep posting, we'll get something constructive and coherent out of you yet.

Michael Croft
"The best parachute folders are those who jump themselves."
 
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Reply: 1.4
From: Michael G


Colin,

I'm happy to recieve your comments privately, just email me at mgruber@bigpond.net.au and I'll respect your wishes to have such remain private.

I think there are causes for concern regarding the incorrect, or misrepresentation of what is offered.

I also know of incidents where clients of others who provide this service have been less than polite when dealing with people.

The basic thing to consider when in this niche is, "how much is YOUR time worth". That is how much are you willing to charge yourself for the time, and potential time, that is involved, with;

- setting up the deal
- maintaining the deal
- handling phone calls
- closing the deal

All that over a 25yr period, how much per deal per week, are you willing to charge. That is the figure which I use when working out the figures.

Because I use a contract for the Sale of Land, that figure is factored as a margin on interest and sale price. A fixed amount to factor 25yrs of potential labour. Without any recourse to change it later. That's longer budgeting than most Government planners do.

But I would like to hear your thoughts, especially bad scenarios, it may help me address them with future and even current clients.

Michael G.
 
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Reply: 2
From: Vicki .


Hi Michael

I'm interested in wraps but have been hit with analysis paralysis. I'm still researching my 'niche' market as living in Sydney means I have to search further afield for bargains. I know soon I will have to take the first step and advertise for interested clients but that first step is soooo hard to take. And finding a savvy accountant and lawyer is also on my agenda. Any suggestions welcome. (Thanks Nivia/Robert et al for a very enlightening night on Thurs at Sydney Freestylers with Tony's visit - I'm following that one up).

Cheers
Vicki
 
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Reply: 2.1
From: Ray .


Hi Michael,
I would like to know your method
for allowing for the loss of Real money value
over a period of time e.g. 25 years , as
occurs with fluctuating inflation and C.P.I.
forces . A $100 per month net return on a
deal today will be worth tiddly squat in 20
years time . I assume that this is covered by
tying the return to a function of the daily
variable rate of interest of the Big 4 . Thanks
in advance .

Colin--- great posts with a racing pulse
rate!
 
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Reply: 2.1.1
From: Anonymous


Michael
I am curious to see how many deals you have done during this year as I've noticed you are offering mentoring to newbies?
 
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Reply: 2.2
From: Michael G


Hi,

Finding what you need in Sydney is not going to be the problem, the problem lies with the buyer's advisors who's job it is is to protect their clients.

If you do not have a good system that allows you to back out of a deal if things get messy or provide enough information so they do not have to think or provides enough pointers to show how you're doing this, then you may run into trouble. Like I have.

Read E-Myth about business systems. Mr Croft is right, this is a business.

Michael G.
 
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Reply: 3
From: Tony L


Hi Michael,

I'm new to the forum but would like to try to respond to "what questions do you have". I see there's a lot of posts but maybe not too many answering you.

My questions/concerns are;
1. where is there a clear statement and analysis of the way a wrap works. I've heard John Burley and others but I'm a bit slow and would like firstly to see it explained in writing.

2. It seems the me the best advantage of wrapping is at the lower value end of the market?

3. Where do you find a financier who is prepared to lend on the understanding the property will be wrapped (if you need to tell them??) and where are the lawyers who can prepare appropriate contracts.

I guess they're my first hurdles - no doubt more queries will come when I understand it a bit more.

Cheers,

Tony
 
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Reply: 3.1
From: Rolf Latham


Hi Tony

On the finance side there are a number of regional banks and non bank lenders that will do finance for wraps.

It is best to disclose that you will be onselling using an installement contract.

If the lender accepts the loan with that disclosure, they cant come back to you later with "you are in default" and can you please repay your loan NOW.

Ta

ROlf
Rolf
 
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Reply: 2.3
From: Michael G


Vicky,

Actually, the trick is to think about the system. Create checklists that cover each step and each exit of your plan.

Now - you don't need a savy solicitor, what you do need is one which has the time for you, because as you start you'll have teething problems as you refine your system, and you'll need the input from them to make it work. A solicitor too busy for you, will not help you.

And when you do look for one, make sure you have their assistant in the same room, as this person will probably be doing most of the work, so make sure they understand the process too.

And you bigger problem will be your buyer's advisors, so make sure your system teaches them what you're doing.

Michael G.
 
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Reply: 2.1.2
From: Michael G


Ray,

The easiest way to offset the problem of discounted cashflow, is to ensure that the funds I get are utilised effectively. That is reinvest my income.

I believe the book "The Richest Man in Babylon" speaks of golden soliders, creating golden soliders, etc. So the idea is for the wrap income to be reinvested into something else, then have that reinvested, then spending the income from those investments. By that time the compounding effect would more than compenstate the cost of inflation.

Imagine if I did a flip and made $10k, and blew it on a holiday, that would be worst than getting $50k over 25yrs, but investing those funds in the stock market.

It may sound like a lame answer I know, but it comes down to mental perception and discipline.

The other thing to consider is, if you develop a system where you're not using your own money, then discounted cashflow is not so bad, if you know how to generate more easily, that way you're offseting the discount, by the power to generate new funds.

Michael G.
 
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Reply: 2.1.1.1
From: Michael G


Hi Anon,

My partner and I have worked on six deals, the offer for mentoring was a way to make effective use of my time, while other things occur, thought it might have been better than just watching T.V.

As for quality of presentation and attention to detail, you are welcome to scan my previous messages on this forum and gauge the quality of delivery of information. :)

Michael G.
 
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Reply: 3.2
From: Michael G


Tony,

Thanks I appreciate this...

1. I created a spreadsheet, called the "wrap table" and posted it on this forum a while ago that shows how the numbers work. I've also written a little dity that explained the process in rhyme, that I got a lot of flak for too.

2. True - If you work out the normal loan repayments for a city metro house, you'll see that the repayments would probably not be suitable for the target market of a wrap - those being the 20% of Australians that fall into the category of non-compliant borrower.

3. Its a pain, and a hassle to get finance, let a good broker do the running around. You want a put together a good team. You're job will be to advertised and answer client calls. You system (in theory) will send what info required to your broker and solicitor to let them do their job. Otherwise you'll be a one man band, and spending 2/3s of your time brokering and conveyancing, which means only 1/2 will be spent doing deals.

Michael G.
 
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wrapper mafia

Reply: 1.5
From: Brett Burt


This is a multi-part message in MIME format.

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Whatsa matta you Colostomi (sicilian for Colin) ? Da family loves dis =wrapping, better than the numbers. Forget about it !
You gonna squeal to the Feds bazoo ? Stool pigeone ! I think me and =Ralphie 'Bones' Bonezutta should take you for a littla drive to meeta my =buddies the fishes !

Signed The Don's Consigiliare

Brett 'the Butcher' Burtissimo.
(apologies to Sicilian and Italian readers, terrible accent)

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<!DOCTYPE HTML PUBLIC "-//W3C//DTD HTML 4.0 Transitional//EN">






Whatsa matta you Colostomi (sicilian for Colin) =? Da
family loves dis wrapping, better than the numbers. Forget about it =!

You gonna squeal to the Feds bazoo ? Stool =pigeone
! I think me and Ralphie 'Bones' Bonezutta should take you for a =littla
drive to meeta mybuddies the fishes !

Signed The Don's Consigiliare

Brett 'the Butcher' Burtissimo.
(apologies to Sicilian and Italian readers, terrible =
accent)

------=_NextPart_000_00DF_01C15F9E.9F71EE80--
 
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Reply: 4
From: Felicity W.


Somehow I actually saw some of A Current Affair last week, and there was a very negative story about a guy providing vendor finance. The houses that were in the deals were extremely substandard (although they only showed some of them).
The part that worried me the most was that the buyers were told they couldn't even see the houses or be given the address until they paid a non refundable deposit, usually a couple of thousand dollars. Surely that would have rung some warning bells for them?
I find it sad that these people have been taken for a ride, through their own lack of knowledge. At the same time, it was a pretty lousy public relations exercise for wrappers, which isn't going to help if the government starts looking into this area more closely in the near future.
I don't know if this helps you Michael, I just wanted to comment!
Keep smiling
Felicity :cool:
 
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Reply: 4.1
From: Michael G


Felicity,

That's scary stuff, and I've heard worst. The first thing that comes to my mind, when I hear this, is "that's stupid". In Australia consumers have massive amounts of protection, and our courts can reverse anything on a whim. So I wonder what's the point of deciving your clients?.

Its better and less hassle, to enter into a deal where the customer is happy and more importantly, they are happy to refer others to you :)

Wrapping, isnt about quick bucks, there's a lot of set up work, and the contract itself can play out for 25 years. Plenty of time for the Tribunal or customers to reverse anything if they don't like it.

Like any industry, we have our good and bad, I'm glad that the Vendor Financiers Association Mr Otton is putting together with the support of the Dept of Fair Trading will rid this niche of those bad apples.

So what do I do?, first I make sure my contracts comply with the Credit Code, I then make sure my clients seek independant legal advice, even though I know some clients will be lost by solicitors advising my buyers not to proceed, because those solicitors are unfamiliar with either certain parts of the act or the terms I use.

I rather lose a customer before they commit to a purchase, than later claiming I misled them.

These are risks, which I have to factor into my system.

Opps, almost forgot, my clients pick their own properties to buy, that's never my decision, I just make sure its at market value and passes standard pest and building inspections.

The idea is to develop a system, which allows you to back out at any point with minimal loss.

Michael G.
 
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