Remember also that the interest on the loan is taxed at ordinary income rates.So for example lets say you have 100k and were making 8% in the markets - 8k per year and say you are in top bracket, you will pay $1600 in taxes per year or netting 6400.Now lets say you did a loan and were at 5% you are earning $5k per year (actually less because principal is being paid down and some of money goes into essentially a 0% checking account).

But a lot of my clients that can get these better deals are now refinancing and keeping these and stacking inventory and when market conditions are such they can exit they will start selling and it makes sense hold them over 12 months and now you have a performing asset and you have cap gains instead of ordinary income.  

Flipping is considered ordinary income.

At a very high level a property has a “tax basis”, once you exceed that basis you are subject to taxes, whether that happens when sold and paid in full or paid over timeThe loan provided by seller financing is like any type of loan where the interest is taxed at ordinary income rates.

@Eric Lunsford  Generally the interest income from private lending is taxed at the ordinary income tax rate, just like earned income from a job or interest on a bank savings account is taxed.

Because one of the best things about investing in real estate is the tax benefits. when you invest with your SDIRA, you do not get to take advantage of those benefits. but with notes, where income is interest income and typically taxed at ordinary income rates - that is huge if you can defer or not pay taxes on that income.

You would then hold the loan on a 90-95% LTV product at 5% (Which is taxed at ordinary income).

Those are for rental properties, not for flips.What you normally have on flips is ordinary income plus 15% self-employment tax.

We have our own fenced in backyard and a nice patio area.

For those who use their PAL along the way to offset rental income (for example) they would benefit more since rental income is taxed as ordinary income.