give myself a mortgage and then sell it

Rental Property Investor · Silver Spring, MD · Member since 2017 · 81 posts · 59 votes

I'm the standard BRRR investor doing a refi right now and going through the pain-in-the-neck process of doing a bank refi. I was thinking though - I know many people buy and sell notes. What if I basically gave myself a mortgage and then sold the note on one of the note marketplaces like notesdirect. Could that work?

Since the properties are owned in an llc, I would give the llc a mortgage from my personal funds with the name of the llc being the borrower. I then sell the note, and get my personal funds back. Other than the fact that I would feel ethically bound to disclose this to the potential buyer in the listing, are there any legal pitfalls to look out for?

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Don KonipolBusiness Member
Investor · The Woodlands TX / Avon, CT · Member since 2009 · 6k+ posts · 10k+ votes
7y
@Ari Bachrach
You can do this BUT
You would be selling a non seasoned note. Even if you waited until it is seasoned it represents a non arms length transaction. As such buyers would want a discount off principal balance. My opinion is that this loan would end up costing you 12% interest annually, or more when discount is figured in.
If banks lend at say 6%, then private lenders want 9-10%, more if note is less than prime.
Private Mortgage Financing Partners, LLC
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