borrowing against owner finance notes rather than selling them - Posted by mike-tx

Posted by Michael Morrongiello on April 14, 2000 at 22:39:43:

Mike:
After establishing a good relationship with your local banker you very well may be able to Hypothecate (Pleged) your paper to them for a cash loan that would be secured in part by the note receivable. However they will be very conservative from an exposure standpoint since in essence they are actually removed from being the primary creditor (you are).

Michael Morrongiello

borrowing against owner finance notes rather than selling them - Posted by mike-tx

Posted by mike-tx on April 14, 2000 at 12:00:58:

How hard is it to borrow against a note I create when selling one of my rehabbed properties? What sort of terms or conditions can I expect? Would any local bank be the best place to start or is this something a note funder or national buyer would do also? I am trying to expand my options when I carry back paper and after reading the posts by john behle about the advantages of holding the paper this seems like a better option on some properties than selling the note, (particularly where the buyer is very marginal and the note would take a large discount). I envision something like this: existing financing on property (or my cash investment) no more than 50% - 60% FMV, write a note for about 80%-85% FMV. borrow enough against this note to pay off the original financing or recover my cash investment. The note would be collateral for my loan. I would be able to foreclose the deed of trust if any problems came up. Hopefully there would be a decent spread between what I pay and what I would be receiving and I would still be receiving payments after my loan was paid off. Is this doable? Am I overlooking something? Thanks for any input. mike