Our initial cost is usually paid off in 5-7 years so the rest is an REI annuity of sorts.

The LTV is probably 40%, so were good with it & we have another little annuity.

With that in place, you can offer the seller more than their asking price, you can offer them a deal that works like a long term annuity, you can offer it as retirement income (think second social security check for 30+ years)  You can even offer to send their family on annual vacations or pay for a college rental for their children. the only limit n this technique is your own creativity. 

They need to consult with an elder attorney who can help with a spend down plan, or create the proper trusts or annuities, or set up service contracts to somewhat protect those funds.

I don't really know what would be the best option (buying notes, bonds, annuity, etc.).  

Once the mortgage is paid off/down this becomes a huge annuity for you as you will be paying only taxes and insurance (i.e. about $1,000/month). 

And another issue, these will be commercial loans, with similar debt coverage ratios required and showing the ability to manage/service, so that will be a hill to climb for most small investors.Accounts receivable financing is another issue and a specialized arena, some banks do and there are financing companies that deal exclusively in A/R, leases and other annuity or cash flows, such as mineral rights and royalties.Any time there is a stream of cash from any credit worthy source, there will be a present value and a market for investing in or based on that stream.

A security is any investment instrument besides insurance or annuity.

NNN is more passive but you need much more cash to play.As shown above a Walgreens you can get in as little as 5% down on a new build 25 year lease.To make the numbers work sometimes it is closer to 7 to 10% down.Price is about 4 to 6 million.This means with due diligence you need about 300k or more liquid cash to play.Cap runs about 6 to 7 on a new build.The 25 year lease has no rent bumps at all but does in the option periods after the 25 year firm term.Most buyers buy a Walgreens or CVS for a tax shelter and have a non-recourse loan with a credit rated invested grade tenant.After the 25 year term you are throwing off great cash flow free and clear for your retirement.So many see it is as an annuity of sorts.

Fkln Spees,You are correct in that the 1035 exchange is exclusively for annuities.