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WRAP as an investment tool... wraparound mortgage
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2022 Dec 8, 7:13am 886 views 8 comments
by krc ➕follow (0) 💰tip ignore
Comments 1 - 8 of 8 Search these comments
1
RWSGFY
2022 Dec 8, 7:53am
RWSGFY
2022 Dec 8, 7:53am
krc says
What could go wrong?
Seller puts house up for sale, Buyer can't afford it and seller offers to finance.
What could go wrong?
2
HeadSet
2022 Dec 8, 1:33pm
HeadSet
2022 Dec 8, 1:33pm
krc says
That is correct. That is why the wrap craze that happened in the 1980s was limited to VA loans, as VA loans are assumable, while FHA is not.
One caveat I see is that most mortgages make payment due on sale
That is correct. That is why the wrap craze that happened in the 1980s was limited to VA loans, as VA loans are assumable, while FHA is not.
3
HeadSet
2022 Dec 8, 1:37pm
HeadSet
2022 Dec 8, 1:37pm
RWSGFY says
Ah, but you must think like "Monthly Payment Man." It ain't that MPM cannot afford the $300,000 house, it is that he cannot afford the payments at 7%. Same price home at 4% fits his monthly nut capability.
krc says
Seller puts house up for sale, Buyer can't afford it and seller offers to finance.
What could go wrong?
Ah, but you must think like "Monthly Payment Man." It ain't that MPM cannot afford the $300,000 house, it is that he cannot afford the payments at 7%. Same price home at 4% fits his monthly nut capability.
4
Shaman
2022 Dec 8, 1:47pm
Shaman
2022 Dec 8, 1:47pm
Seems like a raw deal for the seller.
I think they’d only do it out of desperation and no real qualified buyers available.
I think they’d only do it out of desperation and no real qualified buyers available.
5
HeadSet
2022 Dec 8, 3:05pm
HeadSet
2022 Dec 8, 3:05pm
Shaman says
The seller benefits by getting full price for the house.
Seems like a raw deal for the seller.
I think they’d only do it out of desperation and no real qualified buyers available.
The seller benefits by getting full price for the house.
6
Shaman
2022 Dec 8, 3:18pm
Shaman
2022 Dec 8, 3:18pm
HeadSet says
Do they? One of my cousins “bought” a house with owner financing. She walked away two years later.
Shaman says
Seems like a raw deal for the seller.
I think they’d only do it out of desperation and no real qualified buyers available.
The seller benefits by getting full price for the house.
Do they? One of my cousins “bought” a house with owner financing. She walked away two years later.
7
HeadSet
2022 Dec 8, 3:48pm
HeadSet
2022 Dec 8, 3:48pm
Shaman says
Good point. The wraps I knew about were when a low interest VA loan was wrapped with a current high interest VA loan. The seller did not do any financing.
Do they? One of my cousins “bought” a house with owner financing. She walked away two years later.
Good point. The wraps I knew about were when a low interest VA loan was wrapped with a current high interest VA loan. The seller did not do any financing.
8
1337irr
2022 Dec 8, 5:01pm
1337irr
2022 Dec 8, 5:01pm
@krc
I have receive payments for wraps from an investment I made with a friend. A fair amount of homes are owner finance. Generally as long as they make payments, I'm happy. I haven't done a wrap mortgage per se, but I am looking at doing one for a house I own in Robinson, TX.
In general with a wrap mortgage what you said is correct with pocketing the difference on payments, but you can also ask for a wade of cash upfront.
I have receive payments for wraps from an investment I made with a friend. A fair amount of homes are owner finance. Generally as long as they make payments, I'm happy. I haven't done a wrap mortgage per se, but I am looking at doing one for a house I own in Robinson, TX.
In general with a wrap mortgage what you said is correct with pocketing the difference on payments, but you can also ask for a wade of cash upfront.
Seller puts house up for sale, Buyer can't afford it and seller offers to finance. Say the first mortgage rate is 3% and current rates are 6% today - the house is "sold"
to the buy for whatever with say a 4% finance charge. Seller continues to pay the first mortgage, usually with funds from the buyer, and pockets a gain as well.
One caveat I see is that most mortgages make payment due on sale - so not sure how these get around that fact. Maybe they just hope company doesn't notice - and I guess why would they if the payments keep coming. I think when title transfers can depend on the agreement...
Anyway, new to this. So anyone have some experience? I have some cash sitting around and some friends have thought about starting a side company to specialize in these types of opportunities. But seems a bit risky to me...
Just curious....