The issue of credit and collateral are something that clients are always worried about when seeking a loan from a legitimate lender.

Given the local rental rates, it should cash flow well and I understand his strategy, however, I'm concerned about how to collateralize my loan to him.  

They might want a priority equity stake, but if it gets you financed, it might be worth considering.A few more thoughts: somebody with self-directed IRA money they might lend, use equity on another property as collateral (if available) so you can buy the land free/clear?

They did mention there a few ways around like using a different asset / collateral to cash  out and then apply that cash to a purchase, etc.Appreciate any insight.

Read Garn-St Germaine, if you have doubts.The beauty of the transaction I just described is that the property, once held in the trust, can be sold or transferred - perhaps as future collateral - very easily by simply naming a new beneficiary or adding a beneficiary to the trust.

Or is it simply that with a flip you already have an existing asset, so in the case of a default or other issue at least you have some collateral to offer your lender?  

Or, the lenders giving the homeowners the finger because the homeowners are unethically defaulting on the payments that they agreed to pay, regardless of the value of the collateral being paid for?

So far I get the sense, that noone is giving construction loans these days at all, even if collateralized by the existing house.

Unless he has other collateral you can tie up as security, your only backing here is your first position loan on the house.

One is completely paid off and the other two you have 50k each in equity (so you have a 150k mortgage on each of those two houses.)Now you want to acquire a fourth property that costs 200k but you do not have 50k to put down, so you cannot get a conventional loan (which requires 25% down on an investment property.)Is there some way to use your equity in one or more of the houses as collateral to obtain a mortgage for the new (4th) house?