When we bought Rick Otton’s ‘Wrap Pack’ in 2002 and Steve McKnight’s ‘Wrap Kit’ later, both manuals talked about two ways to setup your transactions. In Rick’s case he summarised these two setups as:
- ‘Sell on a Wrap to Keep Monthly Payments’, and
- ‘Sell on a Wrap to Have Buyers Refinance’.
The Favourite – Setup to Have the Buyers Refinance
Right from the beginning we were impressed by the back-end profits involved, so we setup our transactions to access this back-end profit.
Over time we realised that accessing the back-end was not always as straightforward as we’d hoped. In fact we have one property that’s been sold with vendor finance four times! We call it the ‘boomerang house’ 🙂
Our Path Out Of Jobs
While the back-ends really appealed, it was the cash flow that got us out of our jobs. We were pretty conservative about giving up our jobs but, when each vendor finance transaction started bringing us $500 to $1,000 per month, it didn’t take too long to realise it would be the steady monthly cash flow that would make us feel confident enough to quit our jobs.
Needless to say, our monthly cash flow target arrived and our jobs departed 😉
We now view the arrival of back-end profit cheques as exciting bonuses. We live well off our continually growing monthly cash flow but it’s the back-end cheques that spoil us.
Our Simple Focus
We now write our transactions for 30 years with the aim of growing our cash flow. Our JV Partners also focus on the cash flow but understand the buyers can refinance and give us access to our back-end at any time. Our buyers love that it looks just like a traditional 30 year home loan.
A Growing Pool Of Cash Flow Buyers
Since 2010 and the introduction of the National Credit Code, Vendor Finance Management has noticed the hard time mature age, home loan borrowers are getting from traditional lenders. While some are getting rejected, a lot are being offered loan terms so short the monthly repayments are ridiculously high.
A Cash Flow Market Niche
This leaves vendor finance as the Industry that can truly serve the mature age homer loan buyer. I wrote about this great cash flow market on a separate post.
Two observations from our business are:
- we’ve found the mature age buyer to be more ‘stable’, and
- they generally seem to have less ‘dramas’.