Using Secured Notes against the equity in your real estate to purchase more real estate1

[Lee Schaeffer]

I have been a big fan of avoiding institutional lenders and their fees and requests for detailed information that I want to keep private. If you have any equity in real estate you can create a Secured Note against that equity. Then, you can use the Secured Note to purchase real estate. Property owners who want to retire are prime candidates for taking your Secured Note as payment for part or all of their equity. Also, several Secured Notes can be created against the same mortgage, allowing for a seller to give Secured Notes to heirs,  or to split up a partnership, or to split assets in the event of a divorce. The Secured Notes can be created now or at the time that you buy the property. This approach  allows for a real rapid sale. For those who are flippers, the Secured Notes allow you to conserve your cash to do the rehab. For properties that make real good investments, the Secured Notes can have a short term due date. For example, if you want to buy a $100,000 valued house for $70,000, and have equity in your residence of $35,000, you could offer in the $35,000 Secured Note against your property and ask the Seller to carry back $35,000 against the house you are buying. The term could be 12 months. The interest  could be 10%. THe payment could be one payment of $35,000 plus the $3,500 interest. This allows you as a flipper to use your cash to rehab the house. Hopefully, the house is rehabbed and sold before the due date. You could start out offering a Secured Note with 18 months or longer term. I have found that it is better to get as long of a term as you possibly can. When the dust settles, you have bought your fixer for nothing down, and hopefully made some income on the sale to the new buyer.