Question on Note Structure

[Lindsay McLaughlin]

Hello BP community....I have a few properties I'm discussing with another investor to sell them to him with owner financing.  They are turn key rental properties, cash flowing.  I would allow the note to season and then be looking to sell the note down the road.  The terms of the note would be 8.5% interest, 30 year term, with 10% down payment.  However, he has other rental properties nationwide, and he is requesting the 10% down payment be put into another note for a short term...like a 3-5 year note at a high interest rate.  Would this benefit me?  Could I still sell my first note on the rental properties showing 10% down payment?  Would this decrease the value of this note?  Could I sell the note on just the down payment, and at what kind of a discount and would it be considered a 2nd lien on these properties against him?  I would love to make this deal work for him and I, but it certainly makes me nervous....any insight would be greatly appreciated.  I've been active in notes for over a year, but not in this situation and for some reason can't wrap my head around it to know for sure it would be a profitable sell.  Thanks!

[Darren Eady]

So, you would like to sell your properties no money down so you can receive an interest rate of 8.5% and allow this person to control the properties so that if they do not make payments to you, you are left having to sue and foreclose to get them back?  I'm sure it is not sitting right with you because there is no "skin in the game" for the buyer, which makes them more of a lease-optioner than a buyer with you holding all the risk of non-performance on his part.  

I would definitely NOT do this deal as it is currently presented.

IF it were a lease option, sub-lease deal, I would only consider it IF they put down a minimum of 10% and I would NOT give them title so you are left foreclosing if the deal doesn't work out.