Writing own note on a investment property

[Ericka Mizuta]

Does anyone have experience with writing my own note on equity that is in an investment property? I have a few rentals that all have equity (as well as my primary residence). I would like to use this equity to re-invest into other deals. I am exploring options such as HELOC and potentially note writing. Does anyone have any experience in this area? Also three of my investment properties are in my Roth IRA so I am not sure if this makes a difference.

[Matt Devincenzo]

Do you have someone to lend against these properties already? Often a private lender will have their own attorney or standard not that they would prefer to use since they know what it contains.

It sounds as if you are trying to just create your own note on the properties? I'm not really sure I understand what you mean by "note writing"? In order to create a note there must be a borrower (you or your IRA) and a lender (the person actually giving you the money). An attorney will generally draft the note and then it would be signed and recorded against the collateral property and you would receive the funds due to you. It seems as though you want to create a note without any actual lender, and then using that somehow to fund additional investments?

For the properties in your IRA it makes a huge difference on how the loan is structured. The majority of loans are "recourse" meaning there is a personal guarantee for repayment should you default. With IRA investments the loans made to the IRA must be "non-recourse" meaning they can only take the property nothing else, and there can be no personal guarantee. Also be sure you understand UDFI (unrelated debt financed income tax) and the taxation structure your IRA will be subject to due to utilizing leverage on a tax advantaged account.