How to create a Note on Rental owned "free & clear"...?

9 Replies

For my experienced note investors, can I create a note on my property I own "free & clear"?  

The property is rented right now.  If this is possible, how would I do it?

Yes you can. (The property wouldn't even need to be owned clear to do this but it will be harder to find people who will fund in second position.) All you need to do is to find a lender who will give you money for a note secured by the property. If this is a private lender the valuation can be anything both parties agree on. Appraisals make sense to determine value but are not absolutely needed. Everything is negotiable, the LTV, rate, term, amortization schedule, balloon payment, etc. Draw up the note (it is probably best to have an attorney who knows lending laws in your State draw it up). Record a mortgage to protect the lender.

Sure, you would be best to contact a competent real estate attorney in your county to create the note and mortgage (or deed of trust) along with any other documents to facilitate the owner financing. 


Hold on there, no, you can't just do anything you agree to with a private lender. Individuals are still held to minimum loan amounts to create a mortgage, can still subject to usury laws, and even if you agree predatory lending matters still apply. 

You also said, "can I create a note" are you asking about placing a lien on the property as a means to show less equity in asset protection matters? Some suggest this and it's filing false liens at the least and could take you into areas of fraud. So, no, you should not create a lien on your own property. 

I totally agree with Jeff and Bob as to seeing your attorney! Filing mortgages liens is not a DIY thing to do. :) 

Bryan, what exactly is your goal?

Are you trying to draw equity out of a free-and-clear property?

I think i have some suggestions about a process that may help you get what you want, but I don't entirely understand what you're trying to do.  If it's not too much trouble, please elaborate.

I own a property free and clear...problem is the property is only worth in the $50k range....

I am toying with ideas to get cash out of the equity owned or another means and use that money to buy another property...

Lots of options here, you will need someone willing to lend in return for the note but totally doable.