Empty Wrap(-per)? - Posted by Bo (GA)

Posted by Reif on March 24, 1999 at 11:11:26:

I was at Bill’s Cash Cow seminar in January and we talked about this. I’m pretty sure he said it was a gray area, but he thought you COULD do it.

Maybe Bill can jump in here and enlighten us.


Empty Wrap(-per)? - Posted by Bo (GA)

Posted by Bo (GA) on March 24, 1999 at 09:45:14:

Hi, everyone!

I and a fellow investor friend have a friendly disagreement over what is possible in the world of wraps, and I was hoping that somebody on this site could give me some insight so we can settle this once and for all:

My friend believes that it is possible/legal to create a mortgage i.e. a wrap on a house he is leasing with an option to purchase.

My (weak) argument against it, is that he is wrapping something that does not exist, i.e. an underlying mortgage for my friend (since he only has an L/O).

W. Bronchik mentioned this as a no-no one one of his tapes (the Nuts&Bolts course), but did not elaborate on the reason why.

Can anybody shed some light on this?

Bo (GA)

Re: Empty Wrap(-per)? - Posted by Davil

Posted by Davil on March 24, 1999 at 19:33:25:

In order for someone to give you a mortgage for a property, don’t you have to have title which you convey to the mortgagor in exchange for a loan secured by the property?
Since you only have the option to take title, and don’t really have it to give, what is your buyer pledging as security? Neither you, nor they own the house… the lessor does. What if, after months of payments, your option period expires and you haven’t exercised? Your buyer is left high and dry. If you fail to renew the lease, they face eviction from a house they thought they owned! I think a sandwich l/o accomplishes the same goal. As long as you have “wrappable” financing arranged for yourself when you exercise your option, you’d take a wrap from your buyer when they simultaneously exercise their option.

my $.02