Can I Afford to Purchase a Home For Positive Cash Flow?

Many of the coaching clients that come to me are eager to get started on their first positive cash flow wrap property and want to dive in right away. Often I need to sit them down and ask them one very important question - 'Can you really afford to purchase a home for positive cash flow?' and it's such an important question to ask because there is a little more to it than just wondering if they can get the finance together or not.
There is so much to be taken into consideration which is why I always take the time to go through this carefully - you need to get your mathematics head on!
You will need to take into consideration, amongst other things covered a bit more in depth with my clients:
€ The asking price of the property
€ How much are they prepared to buy it for
€ Their deposit
€ Stamp duty and legal fees
€ Their lending institution's terms
€ How much they will on-sell for
€ The minimum deposit they will accept
€ Whether or not the Wrappee is entitled to a First Home Owner's Grant
€ The instalment payments of the Wrappee
Quite simply, if the maths cannot add up then this may be a deal that you have to let go of for now.
Hopefully the maths do work out in your favour though and once you have managed to sell your property on your terms, you have put in place the facility to bring in net positive cashflow for however long the contract is in place with your Wrappee.
I am all for encouraging your Wrappee to make their repayments using a direct debit facility straight into the account of your loan to make things nice and easy for you - you will need to keep a careful eye of course, on the payments being made and there are some administration factors to be taken into consideration with this kind of deal. For instance you need to prepare periodic loan statements which are needed under the Consumer Credit Code.
One other thing that you should take into consideration that protects both the Wrappee and Wrapper is the issue of insurance - if the premiums have not been paid and the home is involved in a disaster such as a fire, the Wrappee does not have a home and the Wrapper does not have an investment, so please ensure that you have included this both in your sums and in your contractual agreement with the Wrappee.