Wraps

[stevedonnelly]

Hi guys,

I am currently buying some property with Wraps. I have a local who is buying property and we are buying them from him in a wrap environment.

I know that this has some downsides however it fits well into our strategies. I am seeking others who are buying properties to wrap. We will make a nice middleman for them. We will onrent them out and guarentee the consistant income they seek.

Do any of you know anyone who provides wrap properties or where I can search for some?

Cheers
Steve

[JohnL]

I'm not sure what you are doing. Normally a wrapper is 'on-selling' to a home buyer (one of the advantages of a wrap is to have a home owner in the house, rather than a tenant).

Also the weekly payments are usually well above the rent for that type of house, so how would you, as a middle man, be making any money?


John

[Scooby]

Wraps

Normally a wrapper is 'on-selling' to a home buyer

Sounds like Steve is using a concept that Dorien & Rineke Forster learned in the States called "Sandwich Lease Option". Basically this is a "leasing arrangement in which an entity leases property from one party and leases that same property to another party...the entity is both a lessee and a lessor, so it both pays and collects rent on the same property" Source: Unlimited Magazine: Getting properous from property. See http://sharechat.co.nz/features/unli...e.php/adff7805 for actual article. This makes a great read and also has Graeme Fowler (Orion) as one of contributors discussing his strategy to success.

Basically from what I can gather is that the "Sandwich Lease Option" requires no cash, equity, mortgage or bank qualification to turn a profit. Does this sound about right Steve?

By reading the article above it may lead you in the right direction to gaining more information about this strategy.

Cheers
Scott

[Josko]

Let me try this....

I have no money, we buy a property, you get the loan, you pay the interest, I pay you the interest + additional%, I control the IP, I refinance in whenever years, I pay you back the original purchase price and take over the property.

Is this nutshell close?

[Scooby]

Wraps

Let me try this....

I have no money, we buy a property, you get the loan, you pay the interest, I pay you the interest + additional%, I control the IP, I refinance in whenever years, I pay you back the original purchase price and take over the property.

Is this nutshell close?

Hi ivi (have enjoyed reading your posts on PT)

ummmmmmm...I think that this would still be classed as a wrap . But if you had no money etc etc you could be "wrapped" by becoming the lessee. You then become a lessor by providing a wrap to another lessee, basically becoming the "meat in the sandwich". How you make money on this I'm uncertain, but the property would have to be purchased at a "Bargain" for it to be economical for all parties involved. I haven't done one, and am only going on what I have read and understand of the concept myself. Hopefully, someone will clarify the strategy, if I have misunderstood it.

Cheers
Scott

[stevedonnelly]

Well firstly thank you both for your input. I am new here and although I have made a couple of contributions this if the first time I have had an exchange of opions and I appreciate it.

Firstly yes you could call it a sandwhich wrap. I haven't heard that title before and I didn't know anyone else was doing it but that describes what I am doing well.

It works when you are bullish about capital gains. I know that the emotional feelings in NZ is that we have hit the slump period but in certian parts of the country you are still very much undervalued. I have over 6million in morgages at this stage and I am keen to invest further but am hitting a wall on what I can borrow, at least in the short term.

You captured in it one IVI, I am buying a wrapped property. The vendor has probably bought it for 70,000 6 or 12 months ago. It is now worth maybe 80,000. He sells it to me at maybe 82,000. He gives me a fixed payment per week. Maybe $200,000. Out of this he pays rates and insurance. The property remains in his name.

He is seeking a guarenteed return. Someone who will pay on time and fulfil his cashflow requirements. He has build in his margine and if the truth be known he is probably pocketing 30-40.00 per week. As long as the money arrives each week he doesn't care who buys it.

From my point of view, I am able to take this offer up with no deposit. I might be able to rent the property out for 135.00 per week and reclaim some of my costs. In this equation I am spending about 3,500 per year (plus vacancy and minor repairs, pehaps 5,000 per year.

I am however riding his capital appreciation. If the property becomes worth 95,000 to 100,000 over the next year or two, I am able to fund the mortgage in my own name or simply onsell.

If I ride this house for two years and it doesn't look like it is going to rise in value, I can always walk away. I have wasted more than 10,000 in my lifetime I can tell you.

But you are right the vendor holds the bank loan and rates and insurances while I take advantage of the capital gain. You also must remember that if the prices do rise at all the rents are also likely to rise and the amount I have to contribute is reduced.

This can work a treat. It is not my only strategy but it is running along side what we are doing as a great add on.

I am now seeking people who are vendors for wraps as I present a good risk and answer to their bad tennants.

Cheers
Steve

[Josko]

Re: Wraps

Hi ivi (have enjoyed reading your posts on PT)

Hey thanks Scooby, do appreciate that encouragement.

You captured in it one IVI, I am buying a wrapped property.

I thought I had ballsd it up; I did however take the angle of being the bullish one.

So, let me play the cheeky little devils advocate here and ask, why would you? I mean...ah hang on.

This would make any IP chashflow +ve, so would not all the proponents of +ve cashflow take this on, or maybe they are really capital gains speculators dressed up in cashflow +ve drag.

[stevedonnelly]

Yes Ivi,

I make no appologies for being a capital gains speculator. I have other parts of my strategies that is looking for positive cash flow but as you would be aware you are up against a lot of competition in that environment.

Yes this is the bull market manipulation. Do keep in mind however Ivi, we are not NZ residents and the banks are not keen on lending at 90% overseas clients. We have to put down at least 20%. Now when you take into account upfront legals and 20% deposit, to get into this 70,000 house we are staring at 15,000 in capital tied up. With wrapping, it is 5,000 a year. By the time I have to pay legals for the purchase it is 3 years down the track. Now I don't really think expecting a 20% increase in hot spots over 3 years to be ambitious.

They are my thoughts anyway.

Cheers
Steve

[Josko]

It is an interesting challenge stevedonnelly,

do you have properties available for this structure or would you expect one to be located once you identify a co-wraper?

[stevedonnelly]

I have a vendor Wrapper that is providing this already, I am seeking more of them.

cheers
Steve

[Josko]

Thanks stevedonnelly, Ok, let me get my head around this a bit better and get the terminology sorted. I am currently awaiting settlement on my first IP so will be out of action for a few months.

Thank you for sharing this strategy.

[stevedonnelly]

Congratulations IVI, that is great.

Look forward to chatting with you again.

Cheers
Steve