Took a house sub-to at 3.25%, sold it on a wrap at 6.75%

I hold land and I am slow about everything, so selling a house eleven weeks after buying it is out of character. The arithmetic was better than holding.

Acquisition. 1,340 square foot three bedroom in a first-ring suburb, loan balance $196,100 at 3.25%, 25 years left, payment with escrows $1,286. Seller was relocating and had $11k of credit card debt she wanted gone. I paid $12,000 for her equity, all cash at closing, plus $2,400 of closing costs.

As a rental it was fine. $1,725 rent against $1,286 all in, so maybe $180 net after management and reserves. Not interesting enough to take on a loan in someone else's name.

So I sold it on a wrap. Buyer was self-employed, three years of good income, bank statements that no lender wanted to read, $29,000 saved. Sale price $289,000, $29,000 down, $260,000 note at 6.75% for 30 years, payment $1,686 plus taxes and insurance escrowed with the servicer. My spread is about $400 a month and the $29,000 down covered my $14,400 basis twice over.

What nearly killed it. Two due-on-sale exposures now sit on one property, mine on the underlying loan and my buyer's interest under my wrap. Everyone signed acknowledgments saying so. Her title company also refused to insure the transaction at all and she had to use another one, which took three weeks and almost lost her. Wrap and installment-sale rules vary a lot by state, some states put real restrictions on wrapping a loan you don't own, and I paid an attorney to write the note rather than pulling a form off the internet.

What I'd keep. Third party servicing, no exceptions. My entity named as additional insured on her policy with the servicer receiving the notices, because if her insurance lapses the first lender force-places and my spread disappears. And a reserve of six underlying payments that I do not touch, which is the only reason I sleep with two acceleration risks stacked on one roof.