Making Money With House Wrapping - What You Need To Know   by Paul Zalitis

in Real Estate / Building a Home    (submitted 2012-02-05)

House Wrapping is becoming a much more widely known and accepted form of property buying and investing for good reason - it suits and benefits both the Wrapper and Wrappee in a number of ways.
For the Wrappee, the main benefits are of being able to purchase a property without having to go to a major lender such as a bank who is most likely to refuse them because they may be self employed or slipped up on paying a telephone bill within the last five years (the amount of time your credit file covers). They are most likely to be able to afford a mortgage but just can't get one.
For you, the Wrapper though is the reward of profit which is made up of two major components.
Interest Margin
The first component is the interest margin - this is the difference of rate that your lender is charging you and the rate of which you are charging your Wrappee.
How much you charge that Wrappee is entirely up to you but you have to judge it to what the Wrappee can actually afford to repay - it is important that this is a win-win situation for both of you.
Because house Wrapping does carry some more unusual risks of standard property investing, this must also be taken into consideration - but this is why I also continually say how important it is to speak to an expert such as myself who has true experience in positive cash flow property Wrapping to ensure that your personal circumstances and the personal circumstances of your intended Wrappee are taken into consideration before going ahead with any contractual agreement.
Charging the wrong rate can turn a positive deal into a negative one very quickly - you need to look after yourself and the Wrappee.
Price Margin
The second component is the price margin - this is the difference of what you have bought the property for and the price in which you are offering it for sale to the Wrappee.
Again you have to bear in mind the capability of the Wrappee to make his repayments affordably. You may need to keep in constant contact with him/her to assess what 'affordability' is to them at various times - they may start a family, lost their job, separate - at times like that, you may need to readjust their payments so that they do not default on their repayments but at the same time take into consideration the differing rates of risk to you and the fact that you are covering the mortgage while the contract is in place.

About the Author

Paul Zalitis is a positive cash flow property investing expert and coach, who regularly contributes articles and ebooks designed for the First Time home wrapper.His latest Book, "Opportunity Housing Complete Guide" is available at: http://www.aussiewrapper.com or watch his latest three F.R.E.E videos at http://www.aussiewrapper.com.au.