Advice structuring a subject to exact wrap, seller financing

[Blake Gastelum]

Hello,

I have a deal in place and I am looking for advice on the contract and what documents I need in South Carolina. This will be my first deal and I appreciate the help. I have a seller who doesn't have a lot of equity in the property. I want to structure a subject to where an exact wrap is created and seller financing is in place for 5 years. At the end of the 5 years the buyer can seek traditional financing, buy outright, or renegotiate with the seller. A title company will service the payments and send statements. If I can get some advice on the documents I need and if anyone has some thoughts I would appreciate them.

I have heard this strategy from Sean Terry for homes that do not have a lot of equity but the seller is motivated.

Regards,

Blake[b]

[Rick H.]

I like Aaron's comments to you, as well. For most people, the investor's objective is to either acquire (or tie up) equity or cashflow at a discount.

If you're trying to control property to some extent now to receive benefits that probably won't occur until the future, the are other techniques. Using an option to either purchase the property or the equity later for terms you agree to today seems to fi your objectives.

The original question revolved around documentation. Here's a good habit (from the guy who had to learn to makes things simple after 30 years of making them complicated:

Just write down on a piece of paper the basic terms that apply:
The price
Components of the price
Down payment
Funds due upon at possession
Other Consideration
Existing loan to remain
Amount of Secondary financing (equity of carry back note, wrap, etc)
Other non-cash consideration (car, boat, ugly yellow motor home, etc.)

Addressing your original post, I believe, is that you keep the offer simple, can show the initial equity of the wrap 2nd either separate from the 1st, or since there really isn't ANY equity in your example, show the existing 1st as a component of the wrap 2nd your are creating.

Another matter that you will need to document is : who will receive the benefit of the equity created by the amortization of the underlying 1st mortgage? It will be different, depending on which side of the transaction you are on. If you are the buyer, you want to gain the benefit of the reduced unpaid principal of the underlying 1st.