All Forum Posts by: Melanie Raine

Another possibility not yet mentioned here are note hypothecations. I am of retirement age, looking to grow my self-directed IRAs as passively and risk-free as possible. Hypothecations are working for me. I buy partial notes from note owners. They get a lump sum of cash to reinvest, while maintaining control of the note. In return, I get monthly payments at a higher rate of interest than usual, tax free because of using my self-directed ROTH IRAs. I need cash flow later in life, and this will provide it if I keep rolling the money over into more notes, creating monthly payments for a longer length of time. Due diligence is a bit different with hypothecations. The note owner has already done due diligence on the security and it’s passed their requirements. My due diligence is done more on the note owner. How long have they been in business? What are they posting on Bigger Pockets and other forums? Are they trustworthy and honest? What is their level of expertise? What has made that note “safe” for them? In other words, what is their plan in case of default, for the borrower as well as for me? If they meet my standards, I reach out to see if they’re willing to do hypothecations. If so, and many of them are, then we structure a hypothecations deal that is a win/win for both of us. This model has worked very well so far for me. Could I make more money being the owner of the note myself? Yes, absolutely. But at my age, I’m ready to slow down. I’m still earning double-digit interest on my money. It’s good enough for me.

If you don’t have a lot of cash to invest, you can partner with friends and family using cash and/or self-directed IRAs. Build your accounts by rolling the money over and over, learn the business while doing so, and eventually you’ll be able to step into a more active roll, if that is your goal, as your time and funds allow.

I use Quest Trust Company for my self-directed IRA funds. They cannot guide you but will be more than willing to answer questions. I've been happy with their service and the fees seem comparable to others.

If you're interested in passive income from notes, consider hypothecating with someone. This is when you buy a partial note but the seller maintains control in case the note defaults, reducing your risk while still providing a decent ROI. @Chris Seveney is the expert here.

@Shea Davidson -- if you're looking at being as passive an investor as possible, you might want to consider note hypothecation. I have purchased partial notes over the last few years as hypothecations. Essentially, the seller of the note maintains control of the security in case of default. You have no tenants, toilets, or taxes to bother with. If the note defaults, the seller pays you out and takes over with the borrower to work out a plan. You get regular monthly payments that you can roll over again and again. You can use your SD IRA funds or personal funds. You can still earn double digits. Each hypothecation is different according to the terms agreed upon between you and the seller. @Chris Seveney can tell you much more. He's an expert, very professional, and comes highly recommended.

@Scott Kimberly and @Brian Mcmenamin -- just a friendly reminder that you don't need to sit it out and not make any money. I would suggest doing a joint venture with people like Chris Seveney or Chad Urbshott and get your money working for you. At least you'll be making money and learning from the more experienced guys as you prepare to start on your own. Building your network is an excellent use of time as well.

Hi Kaleb! :-) We missed the last couple REIA meetings. Good to see you here!

Your timing is impeccable. We checked with an attorney regarding South Dakota leases just last week. If they need to break the lease early, the current tenant is responsible for paying the rent until a new tenant is in place. So her landlord has the right to demand the full amount from one and/or the other. 

As Justin said above, it's not the landlord's fault your cousin has bad taste in men, but maybe he'd be willing to work something out because he has a soft spot for people who have been abused, such as having her pay partial rent until the boyfriend's evicted.  I think she's just going to have to have a discussion with her landlord and see what he says.

Kudos to you for getting involved and helping your cousin. Scary stuff!

@Dan Deppen and @Chris Seveney

I'm in the same place as Zach. Any chance I could get your video and do not use list too? This is a great post for us newbies. Thank you all for helping us, and thanks, Zach, for getting it started!

@Steven Burke -- Martin Saenz is also an excellent resource, especially for beginning note buyers. He has a book called "Note Investing Made Easier", and it kind of goes through the step-by-step process of note buying. Before I read his book, I had a general but disjointed idea of how to buy notes. His book put all the pieces together. He's got a Facebook group too that goes by the same name as his book, and his website is 2CFNow.com. 

CFD is Contract for Deed. And you're welcome! :-)

@Eileen Murray -- found another one. BK is bankruptcy.