A bank that lends against promissory notes...

[Collin Corrington]

I've used one particular local bank (San Antonio, TX area) to "leverage"  real estate notes I've created.  But during this weird time, they have gone radio silent on me.  This is making me realize I've put a little too much faith in this one institution. 

This is a huge part of my owner finance strategy. Basically it's a BRRRR strategy but instead of the second "R" (rent), I sell the property owner finance. I then take the promissory note (all created by an RMLO, lawyers, and closed at a title company with insurance) and borrow against it to pay back the money used to create the note (Purchase and rehab costs). P&I cover more than the 10 yr loan cost. So I create a little cash flow for 10 years, and then the last 20 years of the mortgage are all gravy for me. Basically an infinite return and a cash flowing property (for 30 years) that I don't have to manage.

Typically they lend between 70-80% of the value of the note.  

Does anyone know of a bank that would consider lending with a note as the collateral? 

[Chris Seveney]

@Collin Corrington

Outside of times like we are going through right now, on the commercial side there are banks that would hypothecate a note but for owner occupied that is extremely rare due and if you could find a lender it would need to be specific to a certain geographic area. I have yet to find a lender who would lend on an owner occupied owner financed note.

I do something very similar with my performing loans in my own portfolio where some call it a collateral assignment or selling a partial. The major difference is the cost of $ is greater as banks may lend at 4-6% and investors want more than that. During times like this if you have assets with good borrowers with long pay histories and substantial equity I believe it could be the safest place to invest and many people would be happy in 6-8% when the market is so volatile.