In case you are a little confused as to what a positive cashflow property WRAP is, let me give you a brief but concise outline.

You as a wrapper have purchased a property with the intention of making it a positive cashflow investment for yourself. In order for it to become a WRAP property, you then must sell it to another person (the wrappee) with an agreed instalment plan over an agreed timeframe.

For this purpose, you have become the Vendor Financier, you are acting as the financial institution to the other party and the majority of your profit is earned on the interest you gain from this.

Because it is your decision whom to become the Vendor Financier too, you will attract the multitude of people around Australia who would otherwise be unable to get a mortgage through the normal route of a lending authority.

This does not necessarily mean that the other party has defaulted on payments in the past or is a huge risk to you. We all are aware of how strict the guidelines are within financial institutions and it could simply be that they are self-employed or retired but do have the funds available to make the required payments on the property.

Your positive net cashflow occurs when the wrappee's instalments on the property are higher than your own loan repayments.

There are certain regulations that you must follow of course and that is why you must find a good lawyer with experience in conveyancing and ideally Vendor Finance to ensure that the deal remains within the law (you must follow the Sale of Land Act (or equivalent) in each state for instance) and the risks of the deal are minimised on both sides.

You also may want to consider how you receive your instalment repayments. For this, you may want to establish a direct debit facility with your client's bank as it is far easier to track and manage all round. This isn't absolutely necessary but is often the best solution all round.

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To Your Success
Paul Zalitis
The Aussie Wrapper