WRAP DEAL Good OR bad? - Posted by Gil

import · March 10, 2002, 4:14pm

Posted by Gil on March 10, 2002 at 19:19:05:

Three Words:

You are awesome!

import · March 10, 2002, 4:14pm

WRAP DEAL Good OR bad? - Posted by Gil

Posted by Gil on March 10, 2002 at 17:14:09:

Hi,
I purchased Joe Arlt’s ‘WYWTW’ from johnrburley.com (plug) and got to tape 3 side A where he is describing some different type’s of deals. If I could use the examples in my area and maybe get some feedback it would be GREATLY appreciated.

Scenario:
3/2 House 1450 SQFT in decent neighborhood – Vista California (Northern San Diego)
Price: 200k
Rents in area: 1500 to 2000 for 1145 SQFT to 2100 SQFT – 3/2 HOUSES

Would I be correct to assume:
New Investor Loan ( 200k - 5% down = 192k financed (9.25%) = 1685 Mo. + 210 (Taxes) + 45 (PMI)
This is w/ 2k carried back on loan for all fees ( don’t know if this is accurate)

So, total PITI = $1940.00 Mo.

I would then wrap it to someone for:
Price: 225k
DOWN: 5% = 11,250.00
Rate: 8.5%
Payment: 1730.00
PMI: 50
Insurance: 235.00
PITI: 2015.00

ROI:
2015 - 1940 = 75 Mo. * 12 Mo. = 900 Year

Gross Investment:
10,000.00 (down payment) - 11,250.00 (new owner) = 1,250.00 (Positive)

900.00 / +1250.00 = INFINITE = REALLY GOOD INVESTMENT?

Questions:

What is the typical % rate on ‘hard money’ when doing a new investor loan? It seems in my area(which I am sure I am off a little) the rates are around 10% w/ 5% down.
What variables would you change or are incorrect?

Example: (WHAT % WOULD I WANT TO WRAP IT AT?)

Also, from what you have seen, what tends to be the typical time for a WRAP to be REFINANCED?

Any guidance would be greatly appreciated.

Best Regards,

Gil

import · March 10, 2002, 4:37pm

Re: WRAP DEAL Good OR bad? - Posted by JohnBoy

Posted by JohnBoy on March 10, 2002 at 17:37:33:

First of all, WHY would you take out a new loan in your name at 9.25% and then turn around and sell it on a wrap at 8.25%???

Anything I sell on contract I charge at least 10% - 11%.

Second, I would not pay $200k for a $200k home where I was having to get new financing in my name! I would only buy by getting any loans in my name if I were getting a good DEAL! That would mean I was able to buy a $200k for at least $160k if I were having to get any new loans in my name! If I have to pay more than that then I have to buy on TERMS! That means NO new loans in MY name! If I can’t get the deal buying that way then, NEXT!

As far as structing the numbers go you have the basic idea down, except I wouldn’t charge that low of a rate selling on a wrap. I would want at least 10%. Now I could go lower than that rate but then I would make it up on the price or number of years I amortize it over if that’s what it took to make the buyer feel better about it!

So instead of taking out new loans in your name to buy at retail, look for motivated sellers that have little to no equity and take over their existing loans. They will probably even have lower rates on their loans in the 6% - 8% range. Then you don’t have to put up 5% of your money to buy, you just take over their loans, sell on a wrap at 10% - 11%, keeping your buyer’s down payment as all profit (minus advertising cost to find them), create nice cash flows with nice back end profits and no personal liability on your end!

That’s the way you buy properties when paying retail!

Here’s a good example of how this works if you haven’t read it yet in the money making ideas section at this link:

http://www.creonline.com/mm-53.html

import · March 10, 2002, 5:37pm

Re: WRAP DEAL Good OR bad? - Posted by Gil

Posted by Gil on March 10, 2002 at 18:37:03:

Hi John,

Thanks for the quick reply. I am being cautious on my estimates due to my lack of knowledge in this arena. If you say it can be done, I will find out and do it!

Also, you talked about taking over existing loans?

How can you do that besides old VA/FHA fully assumable’s?

Are many loans assumable w/o qualifying?

Thanks for your great insight!

Gil

import · March 10, 2002, 5:55pm

Re: WRAP DEAL Good OR bad? - Posted by JohnBoy

Posted by JohnBoy on March 10, 2002 at 18:55:16:

Most loans are not assumable but we take them over without qualifying through the lender anyway. We just don’t tell the lender about it and do it anyway!

For starters read Bronchick’s 2 part article on, How To Beat The Due on Sale Clause at these links:

http://www.creonline.com/articl53.htm

http://www.creonline.com/articl71.htm

Then after reading those do a search in the archives on “subject to” and you will get over 64,000 posts on the subject to learn more about doing these.