wrap around - Posted by T.Allen- Md

Posted by David Butler America’s Note Network on October 01, 1999 at 18:11:56:

Tim,

Is there a particular reason you are doing a wrap? I usually use them when I am the Seller so I can earn the spread on the upcharged interest rate. AITD still a second mortgage… just curious.

Otherwise, yes… just structure with a note that covers what the seller needs (and that meets your objectives), bring in the investor to purchase all or part of the note, and pocket the spread (if there is any - depends on the particulars of this deal, and the discount required by your investor on the note purchase). BTW, you can do it with a simultaneous close, or anytime thereafter.

I prefer afterwards because it is usually easier to do, and less potential legal pitfalls. Be sure to ask for a 72 hour first right of refusal on every note you write, requiring the note holder to give you the option to match any written offer to buy the note if he decides to sell it. You always want that. Of course if his objective is cash now, that’s a moot point. Also, whenever possible, try to get a preemptive first right of refusal that already includes built in discounts if YOU buy the note (just like having an option agreement for free).

But try to close, and then get the money, unless you’re double escrowing the property. Once you’ve closed, go out and find an investor, and cut a deal with him. If you can pull it off this way, you have more time, more control, and more options to strike a deal with an investor that will net you the most spread. Good Luck!

wrap around - Posted by T.Allen- Md

Posted by T.Allen- Md on October 01, 1999 at 15:29:03:

I have a seller that wants to sell me a 4 unit. He has owned it since 1979, it has a motgage balance of 27k and it appraise for roughly 90k. is there a way i can do a wrap around mortgage with owner financing and get some cash back at closing?

WHY a wrap around? - Posted by Michael Morrongiello American Note

Posted by Michael Morrongiello American Note on October 01, 1999 at 23:09:13:

Depending on the terms (interest rate, payment, term left, etc.) and loan constant in that $27K underlying lien you may NOT want to do a wrap around mortgage but see if you can assume of take title “subject to” that loan. If the underlying lien is paying down rapidly this may be the quickest way to build equity. The Seller can stilll hold a purchase money 2nd lien which can be sold to a note investor in whole or in part to raise cash that presumably would go to the seller and possibility some to you.

Michael Morrongiello
Operations Manager