Note exchange for another note...

[Philip Klinck]

Have you ever exchanged a note for another note? And why did you do it? 

[Philip Klinck]

Originally posted by @Chris Seveney:

@Philip Klinck

I have not. It would be interesting to hear from an attorney if you should exchange them or keep it as two separate loan sale transactions between the two to make sure all reps and certs are covered because if someone becomes known you would need to place a value on it anyways.

Originally posted by @Chris Seveney:

@Philip Klinck

I have. When I first got started I flipped a house. We had $91k in it and the selling price was $140k. It was taking a while to sell so we exchanged that house for 5 Notes with no payments, no interest, against lots that were to have houses built on them. Each of the 5 notes was $46,000 for a total of $230,000. But, they would only pay off as the houses were built and sold 1 at a time over 3-5 years depending. The first house took over a year to build and wasn't even finished yet. We decided to get out of that deal and exchanged the 5 Notes of $230,000 for $65,000 in cash and 2 Notes at $57,000 at 5% $363 payment each against rental houses that had been paying for more than 4 years and had a balloon coming up in less than 3 years. This all took place over about 2 years.

So there were a couple exchanges going on there. 

We did each deal to try and advance our position or get out of what turned out to have been a less than stellar position. Notes are great tools in real estate because they are like silly putty. You can do anything you and the other party dream up and both agree to. And exchanging is a good part of the business because you both don't have to liquidate at a cash discount first before you buy something you want with the lesser amount of cash.