Newbie would like an explanation on Sub2 and wrap

I came across this deal with the following:

Seller’s adjusable rate payment is killing them! Their current payment is $1700. They love the house, put a lot of $$$ into it and do not want to sell and move! They are looking to do a 2-year lease back at $1400/month and subsequently re-purchase at Market Price in 2 Years. The home is worth $250,000 and can be purchased NET ZERO to seller at $230,000 (sale price covers their mortgage and closing costs). The mortgage can be “wrapped or taken subject to” then refinanced thereafter.

Is this worth considering?
Can I get into an issue with usury if the seller re-purchases this?
What exactly is “wrapping” a mortgage?


I would not consider it. The negative cashflow for 2 years will cost you a lot, and there is no telling they will purchase it after 2 years.

What if I put enough down to create a positive cash flow? If they don’t purchase it in 2 years, is won’t be a big deal. I could always sell it or rent it out.

You sound like a motivated buyer who found a house for sale rather than an investor who found a motivated buyer.

You asked if it is a good deal, and I don’t see it as such. If you are going to put enough to create positive cashflow, then find better deal and put your money on it.

What do you see so special about this deal that would make it worth the investment?

You might be right. The buyer does seem motivated though, they don’t want to lose their house to forclosure.

What I’m looking at, is that there are tenants (original owners) in place that have purchased this house new and don’t want to move. They just got a lousy ARM that they’re in some trouble with.

My train of though is that they’ll be good tenants and will allow me to get my feet wet starting out with rentals. Also, I wouldn’t wrap or Sub2 the mortgage, I would just get my own loan. One of the reasons I’m a tad anxious is because I’d like to get something done before school starts, I’ve heard it is a little tougher to find renters once the school year starts. Maybe I’ve heard wrong.

Thanks for the input. As you can probably tell, I’m new at this.

There is a golden rule in investing, NEVER EVER leave a home owner who is in foreclosure in the house. It is a recipe for failure. I am not an expert on this, but I believe if you buy it from them, keep them in the house, then sell it back to them, you might have legal issues to consider.

So you want to become a landlord? if so, you need to get good cash flow. If expenses total to $1400/month, then your payment should not be more than $1000 to $1100 per month. This doesn’t mean you tie in most of your cash in the house to generate the cash flow though, otherwise you won’t be able to buy more houses.

You will find renters, don’t worry. If your rent within market price, then there are always renters out there.

within 2 years the value of this house will be 200k or less…

investors need to wake up…do your homework,the economy is tanking,we are in recession…the lending has freezed up for investors in most cases unless u want to use high interest HMLs…WE HAVE A NATIONWIDE SURPLUS OF HOMES,when the peak of the ARMs reset next year these sellers will be begging for us to take these houses,


i have folks calling me all the time now to unload their overpriced homes…they seem really great deals but you need to add in the market economical conditions…unless u HAVE A BUYER LINED UP and PRE-APPROVED …watch out,

i am looking for holders with mega cash flow now,the appreciation days are gone for at least 7 years,do the math/research folks…its right in your face

hehe lol,

my 2 cents

Robert A. Doncaster, Jr.
Import/Export Entrepreneur & Investor

Chicago Illinois USA
& sometimes Salzburg, Austria

OK, I’m going to pass on this one. I disagree that the house will be worth $200k in two years. Not in Phoenix.

I’d love to find a holder with mega cash flow. If you find any you don’t know what to do with, send one my way. :slight_smile: