Best thing to do with 100k equity.... - Posted by DaleS

Posted by David S on April 29, 1999 at 06:28:02:

with the advice of creating notes, 1st, 2nd, etc, and trading these notes for use as down payment on income property, are you assuming you can get face value for these notes even in the junior position?

As for the idea of making “any” down payment using cash, notes, etc How do you propose there would be higher yields by using the paper created above to purchase property which may include face value paper (mortgage, note, etc) or near retail purchase price? I don’t follow your logic here.

Why not just buy discounted paper, using a line of credit, for higher yields vs creating retail paper that would have to be discounted to sell? After all, paper and cash are two dif things.

David S ( B-I )

Best thing to do with 100k equity… - Posted by DaleS

Posted by DaleS on April 28, 1999 at 12:16:21:

I was wondering if anyone on this board could help me with some suggestions. We have a rental home owned free and clear, giving us about 100,000 in equity. We were thinking of 1030ing it into another rental where we are moving, but wonder if there are better ideas from the creative RE community…

I am 72 years old, and would appreciate some insight from some of you younger folks that are a little more knowledgeable.

Thanks in Advance,


Re: Best thing to do with 100k equity… - Posted by Bud Branstetter

Posted by Bud Branstetter on April 29, 1999 at 18:06:49:


I have read the other posts and many of them are valid ideas. But I think the question becomes what does a 72 year old man need? What is his experience level? What is his confort level? If I were your age I would not have a problem doing what John Behle suggests. But do you understand what he is doing. Without knowing these things about you it is not appropriate to give advice, only speculate.

My first thought last night when I first read the post was to take 10K, buy Lonnie’s books and have fun making some money. Not knowning what cash flow you need I can’t say what is best for your situation. Maybe you need some of the principal for long term health care insurance. Maybe some estate planning.

So from one of the younger folks(you were graduating HS when I was born) spectulation is not as productive as planning.

Re: Best thing to do with 100k equity… - Posted by karp

Posted by karp on April 28, 1999 at 12:35:10:

This is an interesting question.
I am happy to announce there are no clear cut answers!

I think a good starting point for this discussion would be an analysis of WHAT YOU WANT.

ie, for me, if I were 72, I would be thinking of investment goals with the following guidelines:

  1. Ease of management.

  2. Profitability-EACH month.

See, I would want a “no brainer” investment. I mean, I am 31 and still want a “no brainer” that will NOT be time intense. Hence, I am no longer a landlord.

Regarding point number 2, I don’t want to be saving for retirment or college etc at age 72. So I want cash flow month after month after month-at a great rate of return.

So along those guidelines there are really only 2 options I would consider: PAPER (discounted mortgages and trust deeds) or a COMMERICAL Building with a Triple Net LONG term lease.

Anyway, now you know about me, tell me about you…lol



Re: Best thing to do with 100k equity… - Posted by DaleS

Posted by DaleS on April 28, 1999 at 15:06:21:


Thanks for your response. You’re correct in your assessment of my situation. I am looking for maximum return, with minimum management. (Who isn’t, though, right?!)

I am familliar with the concepts of buying paper at a discount. Is it possible to 1030 your money into discounted paper? This I’m not clear on.

Regarding your second idea, I’m assuming by the name that it would involve a long term lease on a commercial building (less vacancy, management in commercial RE), as long as it is structured to provide substantial positive cash flow. Am I correct? I am not familliar with this, but would be interested to find out how difficult it would be to do.

I would think it would be easier to buy discount paper, but maybe you can show me otherwise.

thanks again for the reply,


Not a 1031 - even better - Posted by John Behle

Posted by John Behle on April 29, 1999 at 24:13:59:

Property can not be traded for paper. Yet, property can be sold on an installment to create paper with good tax consequences. You can also trade the property for another that you sell to create paper.

The simplest option can be just to take an equity line of credit against the 100k equity to buy paper with. It can also be used to buy and turn quick deals or turn REO’s or pre-foreclosures into paper.

A very powerful approach - the one I would use in your situation would be to use a charitable trust (not the same as a Pac-Trust). Appreciated property that would have a tax problem if sold can be donated to the trust. You receive a deduction instead of a tax bill. You receive income for life and then the property goes to a qualified charity at death (you can arrange to skip a generation also). Sounds like you’ve given up some big assets in exchange for the deduction. It would be - unless you couple it with an insurance policy covering the appreciate value of the assets.

Once the property is in the trust, it can be held for income or can be sold tax free and the proceeds can be invested in other income producing assets like paper.

Tax deduction, income for life, give the property away to a good charity and still pass the value on to posterity.

One associate of mine does a lot with “homes for the homeless” and other similar charities. Another works with Universities and churches. People give heavily to charities even though it is costly for them. Imagine the heightened response if it actually puts them ahead while helping the charity too.

We’re going as far right now as setting up a qualified charity to further enhance the deals. Our charity is focused on a training program for troubled teens. We’ve been proving the program for many years and are now set to expand to a larger scale and get some cooperation from the school system.

Re: Best thing to do with 100k equity… - Posted by StevenS(CPA)

Posted by StevenS(CPA) on April 28, 1999 at 23:12:34:

A 1031 Exchanged can only be used to trade for another like property. But the like poperty guidelines are loose. You can not exchange a 1031 for stocks, notes or any other type of paper.

You should look into finding an income producing property or divide your property up into notes and trade them for more property. (example, create for note 1st, 2nd, 3rd and 4th note and trade each of them for a downpayment on other property.

This may give you a better yeild and more diversity.

If you need more help let me know.

Steven C.P.A.