Creating a Note - Posted by John Katitus

Posted by Michael Morrongiello on May 15, 2000 at 16:49:02:

At the conservative exposure level “creating a note” that can then be converted into cash becomes feasible However WHY NOT simply refinance your property through a more traditonal lender? You can put a 15 or 30 year long term fixed rate loan on the property in lieu of “creating a note”…

Michael Morrongiello

Creating a Note - Posted by John Katitus

Posted by John Katitus on May 15, 2000 at 01:23:20:

For about the tenth time in a year, I just finished reading J.P. Vaughan’s article on creating a note to fund a real estate purchase. I am wondering about creating a First note on a property to recoup my investment and obtain some investment capital.

I have excellent credit, with the exception of some credit card debt that will be paid in full before I create the note. The property has an existing 20k mortgage that would be paid in full from note proceeds. Value of the property is between 150k and 200k. My rehab investment will be around 20k.

I want to structure the note with attractive but not outrageous terms. I don’t need to get every cent I can out of it.


  1. What LTV should I use? Interest rate?

  2. J.P. mentions a term of 12 to 18 months. I understand that term is tied to discount, but I would rather not have to refinance it in a short amount of time. What would an acceptable term be? Could renewable options be included to enhance its value?

  3. J.P. also pre-seasons the note by prepaying the first six month’s interest payments at signing out of the proceeds. Does this help substantially? Is six months the magic number? Would a year’s payments produce substantially better results?

I understand that a detailed appraisal is required. I would also be happy to provide pictures - even video - and get a realtor to do a market analysis, if that would help. Any other suggestions?

I greatly appreciate all comments.