Originating Loans W/ "In House" Capital to Resell

[Brandon Laughridge]

Up front caveat: forgive me if this has been discussed at length already or if I word some things wrong :). I did some searching in the forums and couldn't find anything quite along the lines of this idea.

Right now I borrow money from a few private lenders at pretty favorable terms. We do what amounts to all of acquisition costs plus fixup at a simple 1% a month. No points. No minimums. Interest only. Term of two years. All in all it's a good deal and friendly terms but naturally it's not an exit strategy--more of a tread water strategy.

My idea it to change things up a bit and instead of creating notes under those terms, create a note with more realistic mortgage terms (albeit nothing close to what a bank would offer...has to be attractive to an investor). The goal then would be to resell the notes and slowly grow our portfolio this way and recycle the cash for more purchases.

An example:

We buy a house for $35k in a $75k neighborhood. We put in $15k. We have borrowed a total of $50k to make it cash flow neutral (in terms of the investment, not in terms of monthly cash flow). We lease the house and resell the note. Terms would probably be something like 10-15 years at 8-12%. Loan to an LLC for business purposes so usury laws don't apply (if my understanding is correct).

I understand many active lenders that are on BP would balk at the long tie up of cash...this is aimed at those that aren't as active in their lending and might appreciate the ease.

So, some questions:

Is this logical or am I crazy?

What % of face would something like this sell for considering the fact that it's 67% LTV? Is a discount necessary if the yield is good as-is?

Is a personal guarantee required or is it reasonable to leave that off assuming LTV is good?

Sorry for the marathon post and I appreciate the help in advance!