How to Make Passive Income with Wraparound Deals

Creative Financing Strategy Every Smart Investor Should Know

In 2025, with rising interest rates, tight lending environments, and increasing competition in the real estate market, traditional investment strategies aren’t enough to stay ahead. That’s where creative financing comes in—and wraparound deals are quickly becoming one of the most underutilized tools in the modern investor’s playbook.

If you’re looking to generate passive income, build long-term wealth, and create win-win scenarios for both sellers and buyers (without needing perfect credit or a massive upfront investment), then it’s time to explore wraparound mortgage strategies.

💡 What Is a Wraparound Mortgage Deal?

A wraparound mortgage is a type of creative seller financing where the seller keeps their original mortgage in place, while financing the sale of the property to a new buyer at a higher interest rate. The buyer makes payments to the seller, who then continues paying the original mortgage—pocketing the difference as profit.

Think of it as “wrapping” a new mortgage around the existing one.

Example:
Let’s say the seller has a mortgage with a $200,000 balance at a 4% interest rate. They sell the home to a buyer for $250,000 at 7% interest. The buyer pays the seller monthly, and the seller uses part of that payment to pay the original mortgage—keeping the spread.

This creates built-in monthly cash flow for the seller, making it a powerful passive income strategy.

🧠 Why Wraparound Deals Work (Even in 2025)

The current real estate landscape makes wraparound deals especially attractive:

• Rising interest rates mean buyers are looking for alternative financing options.

• Tighter lending criteria make it hard for self-employed, credit-challenged, or immigrant buyers to get approved.

• Homeowners with low-interest mortgages from years ago now hold valuable financing terms others want access to.

Wraparound deals solve problems on both ends—buyers get financing, and sellers (you) generate income without a traditional mortgage lender.

🔑 Step-by-Step: How to Profit from Wraparound Deals

Let’s break down how to create passive income using wraparound mortgages:

1. Find a Property with an Existing Mortgage

Look for motivated sellers who:

• Have equity but still carry a mortgage

• Are behind on payments or need to sell quickly

• Are open to creative offers and don’t need cash upfront

You can find these leads through wholesalers, direct mail, FSBO listings, or foreclosure data. The key is to identify a seller who’s open to terms and doesn’t need a lump sum at closing.

2. Negotiate a Wraparound Agreement

Here’s what you’re negotiating:

• Purchase price

• Down payment (if any)

• Interest rate (should be higher than the original mortgage)

• Monthly payment terms

• Length of the loan

A typical structure might involve a 10-year term with a balloon payment at the end, giving you years of cash flow and time to resell or refinance.

📌 Pro Tip: Work with a real estate attorney to draft the proper wraparound mortgage agreement. This protects both parties and ensures enforceability.

3. Find an End Buyer

This is where your passive income potential really kicks in.

Sell the property “on terms” to a buyer who:

• Can’t qualify for a traditional loan

• Has a decent down payment

• Can afford a higher interest rate

This buyer benefits from getting into a home without bank approval, while you make the spread between what they pay you and what you owe the original lender.

4. Structure Monthly Payments for Positive Cash Flow

Let’s go back to our earlier example:

• You bought the home for $200,000 with a 4% interest mortgage

• You wrap and sell it for $250,000 at 7%

• Your buyer puts down $10,000 and pays you $1,750/month

• You pay the original mortgage $1,200/month

• Your monthly passive income: $550

That’s $6,600/year from one property—with no landlord headaches.

5. Automate the Payment Process

To make this truly passive, set up a loan servicing company or third-party escrow to:

• Collect payments from the buyer

• Disburse the original mortgage payment

• Send you the difference

This keeps records clean and ensures you’re never chasing payments.

6. Have an Exit Strategy

Wraparound deals don’t last forever. Always plan for the future.

Possible exits include:

• Having your buyer refinance into a traditional loan

• Selling your note to an investor for a lump sum

• Doing a second wrap with a new buyer if the first one defaults

The goal is to structure each deal so that you can exit profitably, while collecting years of cash flow in the meantime.

7. Repeat the Process to Build Passive Income Streams

Once you complete one wraparound deal successfully, it becomes repeatable.

• Build a pipeline of sellers and buyers

• Create standard documents

• Partner with wholesalers or bird dogs for leads

• Systematize your due diligence and payment process

By stacking just a few deals per year, you can replace your income or supplement your investing business with predictable monthly revenue.

🚫 Common Mistakes to Avoid

While wraparound deals offer great upside, they come with risks if not done right. Avoid these pitfalls:

• Not checking the due-on-sale clause in the original mortgage

• Skipping legal contracts or not involving an attorney

• Selling to buyers who can’t realistically pay

• Failing to disclose terms clearly (transparency = trust)

• Trying to wrap a property with little to no equity

Like any investment strategy, due diligence is everything.

🏡 Why This Strategy Matters for Modern Investors

Whether you’re a seasoned real estate investor, agent, or an entrepreneur looking for cash flow, wraparound deals offer unmatched flexibility in today’s market.

They allow you to:

✅ Profit from homes you don’t own outright
✅ Help underserved buyers get financing
✅ Create scalable, recurring income without traditional rentals
✅ Leverage creative financing with low capital

At Zaza Living, we use tools like GoHighLevel to automate our lead flow, CRM, and follow-ups—so we can spend more time closing creative deals like these.

🎯 Final Takeaway: You Don’t Need to Own Property to Profit from Real Estate

With wraparound deals, you’re stepping into the role of the bank. And banks make money no matter what.

If you want:

• Freedom from traditional rentals

• Recurring monthly income

• Low-risk, high-leverage returns

• A path to full-time real estate wealth

Then wraparound mortgage strategies deserve a spot in your toolkit.

🔗 Next Steps

Ready to make passive income through real estate without owning rental properties?

Here’s where to start:

👉 Join the Zaza Insider Group – Learn from other creative investors inside our private community
👉 Check out our Digital Playbooks & eBooks – Get step-by-step strategies for wholesaling, financing, and credit
👉 Try GoHighLevel with Our Affiliate Link – Automate your pipeline and lead flow like we do

Wrap smarter. Build wealth faster.
Let passive income do the heavy lifting in 2025.