Sub-To + Wrap: Anatomy of a Real $170K Deal (Pace Morby & Gina Case Study)
Gina Wyel lives on Bainbridge Island near Seattle. She runs a real estate operation 2,000 miles away in Florida without visiting properties, spending zero dollars on maintenance, and without borrowing a single dollar from a bank. In 2025 her team closed 50 deals. That is roughly one house per week.
The strategy is called sub-to into a wrap: buy a house subject-to the existing mortgage (you take over the seller’s loan without paying it off), then resell that house on a wraparound to a family that cannot qualify for bank financing. You become the bank in the middle. You keep the spread.
Pace Morby documented one of Gina’s live deals on his YouTube channel in the video “Real Estate Wraps Explained (With Real Deal)”. The numbers are in the transcript. This case study dissects them honestly — what is smart, what is thin, and where the model breaks.
- The model: buy sub-to at 3.5%, resell on a wrap at ~12.5% effective, pocket the monthly spread.
- This deal: $170K purchase, $23K entry fee, $20K ops cost, $180K resale price, $35K buyer down payment, ~$150K seller-financed over 30 years.
- Monthly cashflow: ~$500/month on this deal; Gina’s portfolio average is ~$800/month.
- True cash-in after collecting the $35K down: ~$8K still out of pocket (entry + ops exceeded the down payment).
- The smart part: the LLC/equity-sale structure sidesteps traditional foreclosure and may reduce due-on-sale exposure.
- The shaky part: $20K in per-deal operational costs against $500/month is a 40-month payback on ops alone — before accounting for any vacancy between acquisition and buyer placement.
- Viability verdict at scale: the model works as a business only if ops costs drop significantly per deal, if average cashflow stays near $800/month, and if investor capital is managed carefully. For the solo operator, the per-deal economics are thin.
What Gina Does: The Sub-To Into a Wrap
The strategy has two legs:
Leg 1 — Buy sub-to. Gina sources deals from wholesalers. The wholesaler finds a distressed seller (behind on payments, facing foreclosure, motivated to leave), puts the property under contract with a subject-to clause, and sells the contract to Gina’s team. Gina takes title to the house but does NOT pay off the seller’s existing mortgage. That loan stays in place, still in the original seller’s name, and Gina keeps making the monthly payments. This is sub-to (subject-to the existing financing).
Leg 2 — Resell on a wrap. Gina finds a family who wants to own a home but cannot qualify for a conventional mortgage — self-employed, irregular income, no W-2, ITIN-only. These buyers can afford a down payment and a monthly payment; they just cannot walk into a bank. Gina becomes their bank. She sells them the house at a higher price, takes their down payment, and seller-finances the balance. Their monthly payment to Gina exceeds Gina’s payment to the underlying bank. She keeps the spread indefinitely.
Why it is called a wrap: the new loan Gina creates “wraps around” the original underlying mortgage. One loan sits inside the other.
Gina’s unique structure — the LLC equity sale. Instead of a traditional wrap note (which creates a lender-borrower relationship with formal foreclosure requirements), Gina puts the deed into an LLC and sells the buyer shares of that LLC over time. The operating agreement specifies that if the buyer stops paying, Gina can take the house back without a foreclosure. This also avoids directly triggering the due-on-sale clause on the underlying mortgage, since there is no recorded second mortgage. The buyer builds equity in the LLC and eventually owns it — and therefore the house — outright.
The Real Deal: Numbers From the Video
This specific property: a house in Florida, minimum 3 bed/2 bath, sourced from a wholesaler, already occupied or shortly to be.
Acquisition Side
| Item | Amount | Source |
|---|---|---|
| Purchase price (sub-to) | $170,000 | Stated in video |
| Cash Gina paid to acquire | $0 toward the $170K | Sub-to: mortgage stays in seller’s name |
| Entry fee (down to seller/wholesaler + closing + arrears) | ~$23,000 | Stated in video |
| Operational costs (acquisitions person, TC, attorney, docs) | ~$20,000 | Stated in video |
| Total cash Gina paid out of pocket | ~$43,000 | Entry + ops |
| Underlying mortgage rate | 3.5% | Stated in video |
| Underlying PITI (principal, interest, taxes, insurance) | ~$1,000/month | Stated in video |
| Underlying mortgage term remaining | ~25 years | Stated in video |
Resale Side
| Item | Amount | Source |
|---|---|---|
| Resale price to end buyer | $180,000 | Stated in video |
| Buyer’s down payment | $35,000 | Stated in video |
| Amount seller-financed (note Gina holds) | ~$145,000–$150,000 | $180K − $35K = $145K (video says ”~$150K”) |
| Term of seller-financed note | 30 years | Stated in video |
| Stated interest rate | None (equity sale structure) | Stated in video |
| Back-calculated effective rate | ~12.5% | Stated in video (Pace calculates on air) |
| ARV (after-repair value per Pace) | ~$200,000 | Stated in video |
| Gina’s spread above purchase price | $10,000 | Stated in video |
Monthly Cashflow Math
| Item | Amount |
|---|---|
| Buyer’s monthly payment (30-yr at ~12.5% effective on ~$150K) | ~$1,600/month (estimate) |
| Underlying PITI Gina keeps paying | −$1,000/month |
| Net monthly cashflow (this deal) | ~$500–$600/month |
| Gina’s portfolio average cashflow per house | ~$800/month (stated in video) |
The video states this deal cash flows “a little over $500 a month.” Gina’s portfolio-wide average is ~$800/month — meaning better deals (lower underlying PITI, higher buyer payment) bring the average up. $500/month appears to be a below-average deal in her portfolio.
True Cash-In After the Down Payment
| Item | Amount |
|---|---|
| Total cash out of pocket | ~$43,000 |
| Buyer’s down payment collected | $35,000 |
| Net cash still deployed (not yet recouped) | ~$8,000 |
| Months to recoup remaining cash at $500/month | ~16 months |
| Total payback including ops costs ($20K) at $500/month | ~86 months (7+ years) |
The $35K down payment covers the entry fee and some of the ops costs but does not fully return Gina’s $43K all-in. She notes in the video: “our entry was still a little higher than that $35,000 altogether.” She has ~$8K still deployed after the down. More critically, the $20K in operational costs must be absorbed by cashflow over time.
Returns Calculated
Cash-on-Cash Return
Formula: Annual cashflow ÷ True net cash still deployed after down payment
With ~$8K still in the deal after collecting the $35K down:
($500/month × 12) ÷ $8,000 = 75% cash-on-cash (estimate, on remaining deployed capital)
That number looks impressive but is misleading. The $20K ops cost has already been spent and is gone — it is part of the $43K out-of-pocket. If you treat the full $43K as the denominator (before collecting the down):
($500/month × 12) ÷ $43,000 = ~14% cash-on-cash (on full capital deployed)
At the portfolio average of $800/month:
($800/month × 12) ÷ $43,000 = ~22% cash-on-cash (on full capital deployed, estimate)
Back-End Value: The Note
Gina holds a ~$150K note at ~12.5% effective over 30 years. The total payments received over 30 years on such a note would be approximately:
$1,600/month × 360 months = **$576,000 in total buyer payments** (estimate)
Meanwhile, the underlying sub-to mortgage at 3.5% (25 years remaining) will be paid off in full by Gina’s $1,000/month payments. At payoff, the property is free and clear — and 100% of the LLC is owned by the buyer (or Gina gets it back if the buyer defaults and she exercises the operating agreement).
Principal paydown on the underlying 3.5% mortgage accelerates over 25 years, providing a back-end equity accumulation even if Gina never touches the property again.
“They pay us, we pay the underlying bank, we keep the spread, and that’s the wrap.” — Gina Wyel, as quoted on Pace Morby’s YouTube channel
What Is Smart About This Model
1. No bank financing required. Gina never applies for a loan. No credit check, no DTI ratio, no appraisal. She uses other people’s existing mortgages.
2. No property management. Because the end buyer has a path to ownership, they behave like owners. They fix their own toilets, replace their own floors, sometimes renovate before they even move in. Gina mentions a buyer who replaced an entire floor because he owned a tile business. Her portfolio of 50 houses generates zero maintenance calls.
3. Serving an underserved market. The non-bankable buyer pool — self-employed, ITIN holders, recent immigrants, contractors — is large, motivated, and has real money. These buyers often have $35K in cash but no W-2. They are grateful for the opportunity and tend to be reliable payers precisely because this is their only path to homeownership.
4. The LLC equity-sale structure. This is the most sophisticated element of Gina’s model and what separates it from a naive wrap. By selling LLC shares instead of a traditional wrapped note:
- No recorded second mortgage = lower due-on-sale exposure
- No formal foreclosure required if buyer defaults = faster resolution
- Buyer’s credit is not affected (neither built nor destroyed)
- Clear equity tracking via the operating agreement
5. Scalability via wholesalers. Gina outsources deal sourcing entirely. She looks at ~100 deals per day, pays a finder fee to wholesalers, and her team handles acquisition and transaction coordination. She does not need to knock on doors.
What Is Risky About This Model
Risk 1: Due-on-Sale Clause
Every conventional mortgage contains a due-on-sale clause: if the property transfers ownership, the lender can demand the full loan balance immediately. Sub-to technically triggers this clause. Gina’s LLC equity-sale structure is designed to reduce this risk (no recorded deed transfer in the traditional sense), but this is legally complex territory. Lenders can and occasionally do call loans when they discover the original borrower no longer occupies the property.
This is the tail risk. If the underlying 3.5% loan is called, Gina must refinance or sell the property immediately. In a rising-rate environment, replacing a 3.5% mortgage with a 7%+ mortgage could eliminate all cashflow — or worse, make the deal cash-flow negative.
Risk 2: End-Buyer Default
The LLC operating agreement allows Gina to take the house back without formal foreclosure. In practice, “taking it back” still involves legal process, potential for the buyer to contest, and time during which Gina must cover the underlying $1,000/month with no incoming payment. If a buyer defaults in month 6 and the resolution takes 4–6 months, Gina absorbs $4,000–$6,000 in payments with no income — on a deal where her buffer was thin to begin with.
Risk 3: The 80-Day Vacancy Window
Gina states their average days-on-market to get a signed contract is ~80 days. During those 80 days, Gina is paying the underlying $1,000/month with no buyer payment coming in. That is ~$2,667 in carrying costs (80 days ≈ 2.67 months × $1,000) absorbed on every single deal before cashflow begins.
Risk 4: Thin Per-Deal Cash Margin vs. the $20K Ops Cost
This is the central tension in Gina’s model.
Does It Pencil at 50 Deals a Year?
This is the critical question. Gina is not doing one-off deals — she is running an operation. Let’s look at the unit economics.
| Metric | Per Deal | 50 Deals/Year |
|---|---|---|
| Entry fee (cash to wholesaler + closing + arrears) | ~$23,000 | ~$1,150,000 |
| Operational costs (team, TC, attorney) | ~$20,000 | ~$1,000,000 |
| Total capital deployed per year | ~$43,000 | ~$2,150,000 |
| Buyer down payment collected | $35,000 | $1,750,000 |
| Net capital still out after downs | ~$8,000 | ~$400,000 |
| Monthly cashflow per deal (this deal) | $500 | — |
| Portfolio average cashflow per deal | $800 | — |
| Total monthly cashflow at avg $800 | — | ~$40,000/month |
| Annual cashflow (portfolio avg) | — | ~$480,000/year |
| Of which goes to investors | — | Majority (Gina: “by and large”) |
The investor capital dependency. Gina is explicit: the ~$40,000/month in cashflow “goes to our investors — by and large.” She raised capital through five investment clubs in 2025, giving investors a percentage of the cashflow in exchange for the capital needed to deploy deals. This is a legitimate fund model, but it means Gina and her partners do not personally keep most of the cashflow from these 50 houses. Their income comes from the GP carry (their percentage of the cashflow above the investor return) and from building the asset base over time.
The ops cost math at 50 deals/year:
- $20K × 50 deals = $1,000,000 in annual operational costs (acquisitions team, TCs, attorneys, docs)
- These are real costs that must be covered either by the buyer down payments or by cashflow
- At $35K down × 50 deals = $1,750,000 collected in down payments
- Entry fees ~$23K × 50 = $1,150,000 paid out
- Net from down payments after entry fees: $600,000
- This $600,000 must cover the $1,000,000 in ops — it does not
- The gap (~$400,000) is funded by investor capital or operating cashflow reserves
The honest viability verdict: This model works as a fund where investor capital subsidizes the ops cost ramp. It does not work easily as a solo bootstrapped operation at 50 deals/year. The $20K ops cost per deal is large relative to the $500–$800/month cashflow. The payback on ops alone is 25–40 months. At the portfolio level, the cashflow is real ($40K/month is real), but much of it belongs to investors, and the ops machine costs $1M/year to run.
For the solo or small-team operator doing 5–10 deals/year, the math changes if you can reduce ops costs significantly by handling acquisition and TC work yourself. At $5K–$8K in ops per deal instead of $20K, a $800/month cashflow deal becomes far more attractive.
How to Do It Right: Corrections and a Leaner Structure
Flaw 1: Ops Cost at $20K Per Deal Is the Primary Constraint
The fix: For operators not yet at scale, internalize the transaction coordination and the acquisitions function. Build wholesaler relationships directly. A lean operator can run this model for $3,000–$6,000 per deal in true third-party costs (attorney docs, closing, arrears only). At $5K ops cost and $800/month average cashflow:
| Item | Standard (Gina) | Lean Operator |
|---|---|---|
| Entry fee | ~$23,000 | ~$23,000 |
| Ops cost | ~$20,000 | ~$5,000 |
| Total cash out | ~$43,000 | ~$28,000 |
| Buyer down collected | $35,000 | $35,000 |
| Net still deployed | ~$8,000 | ~−$7,000 (cash-positive at closing) |
| Monthly cashflow | ~$500–$800 | ~$500–$800 |
| Payback on ops (at $600/mo) | ~33 months | ~8 months |
| Cash-on-cash (full capital) | ~14–22% | ~26–34% (estimate) |
At this lean ops level, the deal becomes genuinely compelling. The investor capital dependency also shrinks dramatically.
Flaw 2: No Reserve for Underlying Payment During Vacancy
The fix: Budget $3,000 per deal as a vacancy/carry reserve. This covers 3 months of $1,000 PITI if the buyer search takes longer than expected or if a buyer defaults early. This reserve comes out of the buyer’s down payment before you count profit.
Flaw 3: Due-on-Sale Risk Is Not Zero
The fix: Use an attorney specializing in sub-to and wrap transactions in your specific state. Gina’s LLC equity-sale structure is more protective than a bare recorded wrap note, but it is not bulletproof. Have a contingency plan: what do you do if the bank calls the note? At minimum, maintain enough liquidity to refinance or pay off the underlying on one or two deals in your portfolio at any given time.
Flaw 4: End-Buyer Vetting
The fix: Treat buyer qualification seriously even though these are non-bankable buyers. Verify:
- Documented source of down payment (no borrowed funds)
- Stable income (self-employment documentation, bank statements — 12 months minimum)
- Payment history on rent or other obligations
- Reserves: can they cover 2–3 months of their payment if income dips?
A buyer who defaults in month 3 costs you more than the monthly cashflow. Underwrite them like a lender.
Flaw 5: No Third-Party Loan Servicer
The fix: Use a licensed mortgage servicer (e.g., Dovenmuehle, Allied Mortgage, or a specialized sub-to servicer) to collect the buyer’s payment and automatically make the underlying payment. This creates a paper trail, protects you legally, and removes the operational risk of missing the underlying payment if you are busy or traveling.
The “do it right” checklist:
- Sub-to-friendly attorney in your state — docs written correctly before closing
- LLC equity-sale structure (not a bare wrap note)
- Third-party loan servicer from day one
- Vacancy reserve: 3 months of underlying PITI budgeted per deal
- Buyer due diligence: income docs, bank statements, payment history
- Know your exit: what happens if the loan is called? Have a refinance lender pre-identified.
Frequently Asked Questions
What is the difference between a wrap and subject-to?
Subject-to (sub-to) describes how you buy the property — you take over the seller’s existing mortgage without paying it off. A wrap describes how you sell the property — you create a new seller-financed loan that wraps around the existing one. Gina does both in sequence: she buys sub-to, then sells via wrap. You can do sub-to without a wrap (e.g., renting the property instead) and you can theoretically do a wrap without sub-to (if you owned the property free and clear). In practice, creative finance practitioners often combine them.
Can the bank really call the loan? How often does this actually happen?
Yes, legally they can. Under the Garn-St. Germain Act (1982), conventional mortgage lenders have the right to accelerate the loan if ownership transfers without their consent. In practice, lenders rarely enforce this — especially when payments are being made — because calling a performing loan causes more headaches than it is worth. The risk is real but not high-frequency. It is elevated when: (a) the lender discovers the occupancy change during an escrow inspection or insurance claim, (b) the borrower notifies the lender, or (c) the lender sells the loan to a servicer that runs stricter checks. Gina’s LLC structure reduces the visibility of the transfer.
Why does Gina use an equity sale instead of a traditional seller-finance note?
Two reasons. First, if the buyer stops paying, a traditional wrap note requires a formal foreclosure process to recover the property — this is slow (90–180+ days in many states), expensive, and during that time Gina must cover the underlying mortgage. The LLC operating agreement lets her recover the property via a simpler member-removal process. Second, a traditional recorded wrap note makes the sub-to more visible to the underlying lender. The LLC equity-sale structure keeps the arrangement off-title.
How does Gina find non-bankable buyers?
She lists properties on Zillow, the MLS, Craigslist, and Facebook Marketplace as “for sale by owner, seller finance available.” Her average days-on-market to a signed contract is ~80 days. The buyer pool for wrap/seller-finance properties is deep but requires marketing. She does not rely on one channel.
What happens if the end buyer defaults?
Under Gina’s LLC structure, the operating agreement specifies that non-payment entitles her to take back the house without foreclosure. In practice, this still involves a legal process (and the buyer can contest it), but it is faster than a traditional foreclosure. The buyer’s credit is not affected — positively or negatively — during the LLC ownership period, since there is no reported mortgage account. The risk to Gina is the months of underlying payment she must cover while resolving the situation.
Is this legal in all states?
Sub-to and wraparound transactions are legal in most U.S. states, but the specific documentation requirements, licensing rules (some states require a mortgage license to originate seller-financed loans), and consumer protection regulations vary significantly. Some states have specific wrap-mortgage disclosure requirements. Work with a real estate attorney licensed in the target state before closing your first deal. This is not a DIY-from-YouTube strategy at the legal and documentation level.
This guide is educational and is not financial, tax, legal, or investment advice. Programs, lender policies, and tax rules change. Consult a licensed attorney, CPA, and lender before acting.