I have 5 years experience in rentals so I should be able to get a collaterized line of credit somehow, is there anything else I can do with this?

Remember, the Mortgage is the security instrument that places the house up as collateral, executed by the owners of the collateral...it is not the loan/debt instrument(the Note).  

In a contract for deed legal title has not passed to the buyer, and hence the buyer has no security to pledge to collateralize a note, which is done either through a mortgage or deed of trust.In the past some note buyers would also purchase contract for deeds.  

So currently we don't actually have any physical collateral for loans, but what we do have is some money in the bank, excellent credit, and decent income from our day jobs.  

Even family notes being collateralized by real estate and recorded on title can be a good practice and avoid complications in the future.  

Banks generally are not going to want to lend for investment property with you below 680, and you really want to be 700+.Apart from the small loan size, banks just don't want to have $10-30k homes as collateral.

Are you saying the lender/bank will allow them to do another loan to make up the difference, if they have collateral, that might happen, they may need to get that loan first and pay down the mortgage and then sell.

He has a project in another state, and needs to use your property as collateral on his loan.

If you guys think the loan at 9.99% is a decent deal than I may go with it (I have nothing for collateral).

Private through a company has always been a collateralized loan to the subject property.