Tired Landlord looking to create a Note.

8 Replies

Hey, I've been looking into and reading as much as I can about this form of investing in real estate. So I plan to sell a property with a Morgage & Note (Indiana) but I am trying to plan my Exit accordingly. My goal is to sell For example a 100k Home With 10%-12% Down  & a 9.5-10% for 30yrs And exit either by Making a 1st and 2nd mortgage or selling a partial using a note to recoup around 70% of my Equity leaving the 20% on the 2nd for me as long term cashflow. Does anybody see anything wrong with any of these Numbers with how I'm thinking of structure in this note? please scrutinize this for me for whenever I go and try to find a buyer later. And also couldn't I even exit by Borrowing against my Note to get my 70% out that way also? I just Really Need to make a solid exit and Keep some for me to get paid at the same time that the new note buyer will be. Not a fan of waiting for 10yrs for my payments to revert back to me.Thanks, guys. Looks like you guys are a great group as well. You now have a new member. I learned a lot just reading all of you guys' posts over the last 30days or so. 

Why not do a cash out refi and keep the property as a rental? You would have your cash and have rental income to cover the mortgage plus some cash flow and tax deductions.

You could still offer owner financing and sell the property if you like. Sell with a bond for title or land contract with a decent downpayment. Use the payments to cover your mortgage and possibly cash flow some too.

Hi Tevin:  

I would be happy to speak with you personally on what you want to accomplish and help guide you to stay out of some of the pitfalls. We help investors do this all the time and we do it successfully ourselves.  It sounds like you want cash flow without the hassles of the 3 T's (Tenants, Toilets and Trash).  I am based out of Fort Wayne and would be happy to help.  Just reach out to me on Bigger Pockets and we can then set up a time for a private conversation. Feel free to check me out out on Facebook or go to our Note website at www.CassidyInvestments.com  
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@Tevin Edwards You should check the usury laws in your state before determining your interest rate. In CA, you can't charge more than 10% without using a broker to arrange the financing.

In my opinion, people should use seller financing in cases where the property is not easily financed to regular buyer or they really want to hold the note for cash flow. If you don't really want to hold the note, you're better off having the buyer find their own financing.

If you want to sell the note on the secondary market, most note buyers will want a discount. (Having a higher interest rate makes it easier since the yield will be higher.)

Hypothecating loans seems to be that unicorn that used to exist in the 80s & 90s but is mostly a myth that gets floated around. The only lending that I know of are for portfolios of loans that are $10 M+. You would need to find a private note investor that would lend money to you for your loan.

@Tevin Edwards -

"Premium" owner financed notes on the secondary market have these characteristics: 

  1. Single-family residential collateral
  2. Owner-occupied
  3. Borrower credit 680+
  4. Equity of 20%+
  5. UPB of 85K or higher

A licensed third-party such as calltheunderwriter.com (no affiliation) can inexpensively qualify your borrower and provide compliance guidance. While long terms such as 30 years are common for institutional paper, they are less common in seller financing and less attractive to note buyers. However, there's a balancing act between down payment, interest rates, and loan term to ensure your payments remain affordable for the buyer. Try to make the PITI payment (Principal, Interest, Taxes, Insurance) similar to or lower than rent for a similar property in the market.

@John Underwood well there are a few reasons why I haven't went in that direction yet. The first reason being that my credit was hit a few years back due to some fraud charges been done against my Credit,so I went for a Heloc a few weeks back and still couldn't get it done. And also I'm kind of done with the Added maintenance and repair cost that come with being a landlord. So the only things that I do have going for me is the fact that I own the properties that I do have free and clear. 

Originally posted by @Tevin Edwards :

@Marco Bario Whenever you say Equityof 20%+ do you mean that the Buyer has 20% of equity in the property or that the note that I am trying to sell would be 20% or lower of that Property value to get Top dollar?

The end result is the same. A $100K property with an $80K note balance = 20% equity.