A couple of years ago wraps (wrap around mortgages) were the flavour of the month (and then years). It now seems rare to hear of anyone still involved in wraps. Is anyone still actively involved with the wrap business? If so, has the fall and flattening of the property market affected the wraps industry?
Hi Take Stock i still have a few clients that are active wrappers Their property selection is more difficult these days compared to a few years back Nickm
Careful property selection would be the key with wraps now, as there would be a real danger of negative equity occurring when your clients come to refinance a year or two down the track (a la Rick Otton style). It has been quieter on the usual wrap circuits, but I'm sure that hasn't stopped the serious wrappers coming up with other money-making techniques. For those true entrepreneurial types, there's always another way
Wrappers Jacque, I have some friends who are still wrapping. I have been dealing in lease options for the past 5 years. I have a real estate searching for purchasers and then I buy a house and give the purchasers three years to buy it. I factor in a cg of 5percent per year which is pretty conservative. Steve is not overly excited about these as I lose equity, so I am not purchasing any more Bob
Ah, perhaps the biggest downfall with wraps and LO's- the loss of your equity So how has your strategy changed now Bob?
Hiya Finance is much more of a challenge than it was a few years back too. Most (not all) wrap clients of mine lament the growth they have given away. Many hope that their wrappees will default so they can have another bite at the new equity. On the other hand some are also VERY happy with having helped some not so fortunate people into a home and making a few dollars in the process. ta rolf
lease options Jacque, Future strategy is to borrow against my buy and holds and invest into Steve's fund... Bob
I personally got out of wraps over two years ago when I found that there was very little profit to be made any more as rental yields had halved in a 12 month period (I also found out how much problem's it can cause for serviceability as well). At least one good thing came out of it - I was able to help 2 families get into property before it boomed in outer Brissie. Just missed out on most of that capital growth for myself thems the breaks !!!
Serviceability can be a real factor- good point. I guess the thing to remember with wraps is that you're taking your capital growth all up front (either when your client refinances or pays you out) so it's a set amount. In a non-boom market, this could also be beneficial. However, in a rising market, I would prefer the unpredictable (but usually higher) cg anytime!
