Want to learn how to convert a physical rental property into a mortgage note

[John Gonzalez]

Hello,

I own a physical rental property. I want to convert this property into a mortgage Note.

What are the exact steps to do this?

Thank you

[Jason Sousa]

Do you mean seller financing? 

[Alecia Bolton]

You sell the property and owner finance it.

1) sell property 

2) create note/mortgage/deed of trust (depending on state); I would still accept a certain amount down, and take care to notice usury laws of your state.  This is the most complicated piece because you are essentially the mortgage originator (which might run into licensing concerns depending on how many times you do this and your state), and you need to make sure the person who is buying is a good borrower.

3) close with a title company or lawyer (state dependent) who knows how to deal with this type of transaction

4) set up an account with a servicer to collect the money from the borrower (not required, but highly recommended from note buyers)

5) collect payments

[Gino Barbaro]

@John Gonzalez

I started out learning creative financing by a guy named Fixer Jay Decimal. Great books!

You would need equity in the rental property, sell it, and create a note. Best thing to do would be to contact a lawyer and have them help you with structuring the note.

[Chris Seveney]

@John Gonzalez

My question would be - why do you want to do this? Why not just sell the property ?

[Don Konipol]

Quote from @John Gonzalez:

Hello,

I own a physical rental property. I want to convert this property into a mortgage Note.

What are the exact steps to do this?

Thank you

CREATING a note from the sale of rental property can be beneficial IF either of these two possibilities exist

(1) you are able to obtain a significantly higher price on sale of the property by offering a seller financed note WITHOUT an undo increase in default risk

(2) you are able to “wrap” an existing mortgage note bearing a low rate of interest with a seller financed note bearing a higher rate of interest. 

For numerous reasons, this strategy is not anywhere near as simple as it appears, and the risk of default problems can be quite high if the seller is inexperienced or unknowledgeable.   

[Blake Anthony Carter]

Are you saying you want to pull equity out in your home or offer it for seller finance? Message me - Happy to walk you through both