I have 5 loans through Wells and had until January 5 through Citi. The “5” seems to be a hard fast rule with some lenders. WAMU however looks at the dollar value of what is loaned to a single borrower and cycles the loan off the list every 18 months. There are local lenders that will do the same kind of thing.
If you doi a wrap, will you be recording a change of ownership with the County? I’m sure there will be those who disagree, but read your DOS clause. Change of Title except to a Living Trust (which they have to allow by Federal law) violates the terms of most mortgages. They may not do anything, or they might. The issue is that unless you get permission in writing from them in advance you are in breach of contract and they have the right to call the loan due and payable.
A lender is not going to consider a wrap an asset. If you package it as a lease it won’t matter either. They have their own formula for calculating vacancies and rents that may have nothing to do with what you’re getting (I spent a couple of days arguing the formula with Citi and the would not budge).
Further if you have a wrap and the lender finds out, the additional income may be enough for them to call the loan due and make an offer with your buyer. You would not have a legal leg to stand on since a change of title breaches the contract.
I have been buying/fixing/selling homes for the last few years and have made a nice income from the work, but make no mistake I found out very quickly rehabbing was work so I am now exploring other options to create more cash flow and hopefully in the long run less ?hammer to nail? type work for myself. An option that I have read about, and extensively researched on this board is that of a wraparound mortgage, and creating cash flow with the wrap. My question is this?up until now I would only have 1-2 loans open with lenders while I was doing my rehabs, and I?ve never had a problem getting the loans. My credit is good, and my cash on hand usually enough to get a second loan or even a 3rd on occasion without the lenders becoming too concerned. If I start buying and then selling using wraps, how will this affect my ability to obtain new loans? For example (and I am making these numbers up) lets say I have a loan on a property with a lender for $100,000 @ 7% so my payment is roughly $665. I rehab and remarket the property for $130,000 with 5% down at 8.5% for a payment of $950 coming in. So I am cash flow positive $285?and lets say I get 3 loans and do this 3 times in the first year?now I have debt with the lenders of $300,000 yet $855/month cash flow. Would lenders look favorably at my position, or would I stop being able to get loans because my ratios would start looking a bit high? Are my wraps considered an asset in the lenders eyes, do they look at the additional income, do they see only the debt and discount the rest, or is it a combination of the three?
Hope this makes sense; I look forward to hearing your thoughts. I would really like to hear from those who do multiple wrap type financing and any struggles they had in the beginning.