Help... L/O on a Wrap - Posted by Kevin(OK)

Posted by JPiper on April 23, 1999 at 24:15:14:

Yes, you could lease/option from a seller with a land contract or two. But I probably wouldn?t.

First, the question arises as to how confident you are that you will get a deed if you exercise that you can pass on to your tenant buyer if he exercises. The answer is that you have no assurance that there won?t be a problem. And if there is a problem, you can?t deliver to your buyer. That?s what they call a “mess”.

Next, this deal has no equity. Taking the above risk for no equity would be foolhardy in my view.

Finally, you have a deadbeat tenant occupying the property, who someone has to evict. If that someone is you, that means you have a carrying cost and eviction costs, which will partially offset any upfront option consideration that you may receive from your tenant/buyer.

If I attempted anything in this deal…I would attempt to offer the seller a deal where I take over the contracts, subject to my approval of the contract. I would then try to discount the value of those contracts with the original seller. If I could get a serious discount the deal might interest me.

Your chances of this however don?t appear bright. It sounds like the original seller knew exactly what he was doing.


Help… L/O on a Wrap - Posted by Kevin(OK)

Posted by Kevin(OK) on April 22, 1999 at 23:30:35:

I am using Joe K.'s L/O strategy and I received a call today from a friend of a person I sent a post card to, here is the deal. As soon as I got off of the phone with the “friend”, I went to the CH to put together a “package” on this seller. Well, bad news. This house has two wrap around mortgages. It sounds like the seller would be happy with me taking over payments (the tenant is 3 mos. behind in rent), the FMV is $38K, the wraps are for $36K to the same, local L.L.C (they paid only $22K for this one, I wish I hadn’t seen that). My question is: can you do a L/O on a wrap(s)? I plan on selling on a L/O myself, so is this too many obstacles? Since the L.L.C. is local, isn’t there a greater chance of them finding out about the L/O? Please help!!!



I agree with JPiper… - Posted by Sean

Posted by Sean on April 23, 1999 at 10:49:50:

…for the most part. One of the biggest problems in doing a wrap, or an L/O is knowing that the other person is going to pay. The more people you put into this picture the more people you have that might not pay.

A sensible tenant/buyer is going to look at this thing and think:

  1. What if I pay my rent, but Kevin doesn’t pay his?
  2. What if I pay and Kevin pays, but the wrap doesn’t pay?
  3. What if Kevin, the wrap and I pay, but the other wrap doesn’t?
  4. What if Kevin, both wraps and I pay, but the LLC pockets our money and defaults?

On many properties this isn’t a problem because everyone has equity that they’re not likely to walk away from. Where no equity is involved people have the ability to gain by pocketing your payment for 3-4 months and not passing their share of the payment on.