Hi,
In any investment there is risk, in obtaining finance there is risk.
My parents purchased through HomeFund, a "government" finance deal to help the "disadvantage", it was a debarkle and my parents had to fight legally to discharge their debt because HomeFund wanted them in to support those who couldn't pay as well as they. (Bad experience #1).
There are many ways to look at wraps, consider the viewpoint of a worker on the poverty line, their income is split 30% tax, 30% living and 30% rent. Its possible such people may never be able to save a deposit fast enough to jump ahead of the captial growth. In such cases these people may always have to rent. Are they considered better off, renting forever than given the opportunity to get a foot in the door. If they can manage to tie the property to them, then given time they can build equity and finally manage to ride the growth train everyone else is riding.
Now its all about choice, and the freedom to act.
First, before they enter into a wrap, they must seek their own independant legal advice, where they will be informed of the normal costs of owning a property (ie they not the landlord will cover repair costs and rates). So they will need to consider their cost of living.
Next they can choose whether to service the mortgage or walk, or buy "doodads". These choices are the same for everyone.
Also consider what they are buying when they pay for a more expensive property under a wrap. What they are buying is time. Instead of them having to save a deposit, they swapping that for the "foot through the door opporunity".
Do defaults happen, yes, can you evict them at a moments notice, that depends on the contract, in most cases credit code compliance requires 60 days before eviction, though there are other means.
Talking about evictions, I had one couple purchase through mean, previous bankruptcy, small deposit, offer on a 3bed house.
One month after settlement, they dissappeared. They story?
The business they were running on the side, racked up a lot of debt to alot of people, they had fled to QLD and owed not only their customers, but the solicitor doing the conveyancing on the wrap for them. Who's choice was that to make?
They did put $2k into the deal before they left, and a few months later (ie no income) that same property was resold to another couple, who's parents helped them with the deposit. They've been in that house now for near a year, and I'm sure if they chose to check it would have grown in value since this property rise. Did I advertise the resale?, no they asked a solicitor to check the title, they then looked me up in the white pages and asked to buy the property. Who's choice was that to make?
Now we have another client, how?, well the people of the house I just mentioned had friends come over, and they told their friends how they bought this house (or are buying this house), their friends have since called us, and are now going through the process of buying their own home through us. Who's choice was that to make?
There are always two sides to every story, and yes either can be taken to the extreme, personally I can't trade shares, its too risky for my liking, can I sleep at night?, yes, with full disclosure (and yes the buyers know exactly how much I buy the properties for) and with independant legal and property drafted contracts, I know they buyers are completely informed and the choices are theirs to make.
Just some thoughts
Michael G
