CashFlow is of course the most important thing to me. But if you want to protect creating equity then raise the price of the house and leave the payment the same, reduce the interest that way if an early payoff comes then you still have your equity and they still have a livable payment.
Example:
95,000 7% 360 632.04
Wrapped with 95k 11% 360 904.71
or to keep the equity structure it as 360 months at 904.71, 7%, 135,984.76 (136k)
Posted by Keith Bracker on October 22, 2000 at 11:04:22:
Terry, I purchased a couple of your books and was trying to reference one of the examples of an investor that was wrapping, I believe, properties she bought and making roughly $300.00/mo on the spread. Can you direct me to the book and page of this example. Thanks.
Wrap Example - I found it! - Posted by Terry Vaughan
Posted by Terry Vaughan on October 24, 2000 at 11:39:55:
Keith:
The example you are talking about is Concept #4 (page 36 of book II)
That idea is great when you have very little equity in the collateral and make your profit on the “spread” between the underlying note and your “wrap”.
Posted by Terry Vaughan on October 23, 2000 at 13:17:54:
I am currently back ordered on Paper Into Gold (Jeanne has a copy) as soon as I can look at it, I will give you the page number and talk about the example.
Re: Wrap Example - I found it! - Posted by Keith_TX
Posted by Keith_TX on October 24, 2000 at 13:37:52:
Thanks Terry for the ref. to the wrap example. Since you wrote the book, have you followed up on your friends progress with this investment technique? Has she modified her approach to help her profit on the front end, like getting a 5K to 10K dn pmt or include prepayment penalties in the likely (natl. avg. of 7 yr payoffs) event of a refinance?
You prefer the fully assumable loans, which I don’t believe there are many anymore, how about taking the property subject to…? Any pointers to avoid pitfalls?
Re: Wrap Example - I found it! - Posted by Terry Vaughan
Posted by Terry Vaughan on October 25, 2000 at 07:40:07:
Keith:
No, haven’t seen that lady for several years, now. However, have several other friends who are “killing” them out there with this type of deal, especially arround “Military” towns!
We’ve been doing these deals all the time in fact have done one a week for the last three. I usually prefer equity in mine but on occasion when there is a 6.5% loan on the underlying You almost dont care.
It’s hard to pass when someone says they owe even close to market and your just given 100k at 6.5% money to Invest with, sometimes you just gotta take the deal.
Re: Wrap Example - I found it! - Posted by Keith_TX
Posted by Keith_TX on October 25, 2000 at 09:35:19:
Terry,
Thanks for the reply. Did you have a chance to consider the other questions?
*Same deal, low to no equity, but taking subject to…if assumables not available?
*Any pitfalls to taking subject to…what do you recommend to work around subject to pitfalls?
*Are your other friends able to get 5 to 10% down on these deals to make up for early payoffs and/or property neglect? The cashflow on the interest spread is great, but it would be nice to ensure an upfront profit or buffer for any costs incurred in the event of a repossesion, ie. damage, clean-up, paint, theft, vandalism, etc.
What percentage of eviction/repossesions would you say end up costing alot to prepare for resale?