“Work” the note by offering a smaller discount for payoff to the debtor, or by enticing an increase in monthly payments for a decrease in interest rate, which should if structured correctly increase you yield.I have successfully used all these techniques and many others to enhance my returns.

@Daniel TorresWhen you mention “investors” that plural means in most instances you would need to file for a sec exemption unless it’s one investor for one deal (or in CA can do trust deeds).It’s up to you whether you offer debt or equity.

@maurice grantWhen a home is sold at a sheriff s Sale the HUD partial claim will be paid off from the proceeds of the sale so the claim will no longer encumber the property.If the home is sold through a short sale, the HUD partial claim will be paid out of the sale proceeds.In regards to your  3rd question, filing for bankruptcy will have no impact on the HUD partial claim.What filing bankruptcy will do is grant an automatic stay to prevent creditors from collecting a debt from the debtor.

Any reduction in debt or cash received may be treated as taxable boot, resulting in potential tax liabilities.

Now there is a hybrid you do the rentals but your also flipping homes  building homes Trading paper and or making commission as an agent or wholesaling type activities this gets you self employed and you can bring in the cash flow you need to live so all your rental income just pays down debt or you use to buy more doors.. 

Any reduction in debt or cash received may be treated as taxable boot, resulting in potential tax liabilities.

@Kyle Church are your private investors providing non-recourse debt or are they providing equity?

For example, I am a little concerned about some aspects of the business cycle recovery and a potential for a double-dip so I lean toward the safest part of capital stack which is debt (or low-debt equity).

However, having no money at all and having no debt or assets,IMO, s*cks.

Debtor always wants a way to get paid :)