Should I do a wrap?

[GotHope]

I have an investment property that I purchased 1 year ago in Georgia.  I have now had two tenants that have come and gone and am thinking of another course for the home.  When I purchased the home it was appraised for $124,000 and I paid $92,000 for it.  In today’s market, I don't even know if it would be worth the appraisal price from a year ago.

Regardless, I was looking at different routes and thought a wrap might be a good way to go.  If I could sell the house for $115,000 and get 5% down for $7,500 and then finance the rest at 9 or 10% with possibly a balloon after 5 years I thought I might be better off.

I currently have a mortgage at 6.750% on $92,000 for a payment of $596.00 a month.  At 9% on $107,500 that would be $865.00 a month plus $7,500 in my pocket.  Does this seem like a good idea or is there a better way to go about this?  Also, should I escrow the taxes and insurance or is it better to leave that alone.  Sorry for all the questions, just trying to learn and make good decisions.  Thanks for any assistance!!!

[MichaelQuarles]

Good to meet you

On your wrap inflate the sales price 6% per year on your call. So a 36 balloon is an 18% increase. Require a minimum of 5% -10% down. Add 1.25% to your existing mortgage interest rate. Set a few payments in a savings account along with John's U-Haul money and do your thing...

You may consider a Contract for Deed or Land Contract.. However I think the wrap is nice.

Good luck

Michael

[GotHope]

Michael,

It is nice to meet you as well.  Thank you for replying and thank you for the advice. 

In this case, if I chose to go with a wrap, should I actually call the mortgage company who is holding my note and “okay” it with them or should I just do a wraparound and see if they call the note?

[furnishedowner]

Michael Quarles,
Would you expand on your post?  I don't know what a "36 balloon" is, and maybe some other readers don't either.

Could you spell it out for us in a little chart or something?  We are grateful for your knowledge in this specialty.

Thanks, Furnishedowner

[GotHope]

Furnishedowner,

Michael, please correct me if I am wrong on this…

A “36 balloon” is a three year balloon payment.  This means after three years, the full amount of money would be due on the note from the buyer of the property plus the 18% increase of sales price.

Example:

Sales price of $100,000
1 Year and 1 day Sales Price of $106,000 (6% increase)
2 Year and 1 day Sales Price of $112,000 (12% increase)
3 Year and 1 day Sales Price of $118,000 (18% increase)

This increases my ROI every year the buyer decides to keep the original mortgage in my name yet puts the pressure on him/her to refinance into their name and pay me off.  In reality, if the buyer cannot make the balloon payment at the end of the 36 month term then I as the original mortgage holder (lender to buyer) have the full right to “foreclose” on the buyer since they did not keep up with their end of the contract. 

[MichaelQuarles]

Hello again

I think you have something there... However you probably wont have to foreclosure...

Happy house hunting

Michael

[TonyDiCorpo]

Michael,

should I actually call the mortgage company who is holding my note and “okay” it with them or should I just do a wraparound and see if they call the note?

would u tell a hit man how to off u?  the odds are high that they will not call a note due if it's performing so make sure the pmnts are made and on time.  heck, banks aren't calling notes due on defaulting notes much right now!