Mortgage Wrap question?

[James McClincy]

A friend gave me a lead on a property.  Basically an older lady became cat lady and hoarder lady.  Family finally moved mom out of the house and they are looking to sell.  I haven't seen the house yet but from what I gather it's worth about 100k and she owes 146k.  The mother doesn't have cash to come to the table and I was thinking a wrap around the existing mortgage.  

Home needs new kitchen cabinets, floors throughout, paint, etc. I'll know more once I go through but I'm imagining 40k in work. The home would be worth about 180k when done. Rents in the area are about 1250-1400 for similar properties. She must have an ARM cause the payment is only about $600 per month right now. This house is in Myrtle Beach SC btw.

I've bought and renovated plenty of houses over the years but have never done a wrap and not even sure if people still do them?  I remember after the crash people were doing them all the time.  

[Account Closed]

Originally posted by @James McClincy:

Originally posted by @Account Closed:

Originally posted by @James McClincy:

A friend gave me a lead on a property.  Basically an older lady became cat lady and hoarder lady.  Family finally moved mom out of the house and they are looking to sell.  I haven't seen the house yet but from what I gather it's worth about 100k and she owes 146k.  The mother doesn't have cash to come to the table and I was thinking a wrap around the existing mortgage.  

Home needs new kitchen cabinets, floors throughout, paint, etc. I'll know more once I go through but I'm imagining 40k in work. The home would be worth about 180k when done. Rents in the area are about 1250-1400 for similar properties. She must have an ARM cause the payment is only about $600 per month right now. This house is in Myrtle Beach SC btw.

I've bought and renovated plenty of houses over the years but have never done a wrap and not even sure if people still do them?  I remember after the crash people were doing them all the time.  

 I still do Wraps when it's warranted. But buying a home with a $146,000 loan on it and adding $40,000 in rehab, to make it worth $180,000 isn't what I would say warrants it. This one doesn't float my boat.

 Well, my goal would be to assume the mortgage through a wrap at 146k.  Then use as a rental until selling or refinancing out down the line. We also have family who vacation quite often in that area so using as airbnb might be an option as well.  

With your wraps how often do the banks call the loan due?  

 Right. You can probably pull off doing the wrap. That will cost about $2,00 to $3,000 dollars for closing depending on local costs. 

So let's look at the numbers. You take over the $146,000 put $2,000 in for closing put $40,000 in for rehab have $2,000 in carrying costs and your $180,000 house has cost you $190,000 - somehow that doesn't sound too exciting. You could use the $40,000 to find two house by putting $20,000 down on each house, sell to tenant buyers, get $10k or $15k back from each tenant buyer, put $20k to $30k back in your pocket, and be far ahead of the game.

If you can drop your $40k rehab to $10k it might be worth doing.

If you tie up your resources and time on this one, it prevents you from doing a project that comes along that is much more beneficial to you.