Creating a Note - Posted by Michael

Posted by John Behle on April 11, 2000 at 18:44:48:

What I would do would depend on other factors like existing financing. If there were existing seller financing, I might trade notes and then refinance.

If there were attractive assumable financing (or seller financing) then I might put the ten in and sell the property on a wrap for a very high yield.

If there is a low balance loan, then I might create a second to the seller for him/her to sell at a discount (for the 10k cash) and then have them take back a third for the balance of the equity.

So, I guess the answer is “it depends”. There are dozens of ways to structure deals and I look at all the factors and needs to create the best scenario possible.

Creating a Note - Posted by Michael

Posted by Michael on April 10, 2000 at 20:09:25:

How do you do it? How would you do it? Thanks

Re: Creating a Note - Posted by Crissie C. Luckey, J.D.

Posted by Crissie C. Luckey, J.D. on April 27, 2000 at 02:29:05:


You mentioned that most “national” note buyers shy away from notes created on property specifically for the purpose of sale. Why is that? I ask because I’m currently seeking to create a 2nd mortgage on my own home to sell at a discount. (the funds are desired to finish fixing up a recently-purchased investment property).

Rolling Equity - Posted by John Behle

Posted by John Behle on April 11, 2000 at 11:54:42:

Creating a note can happen in a sale as Michael mentioned or you can create a note to sell, trade, etc. It is as easy as putting the form into a typewriter or your computer. I would recommend a title company the first time or two.

As far as creating a note specifically to sell it, you have a challenge there. Most “National” buyers and brokers shy away from notes of that type. A local buyer or investor could be interested, but you would need to find one first and give them a say in how the deal is created.

When I was first into real estate, I began creating notes on property equities. I would create a note on my equity in property “A” to buy property “B” - then create a note on my equity in property “B” to buy property “C”, etc. I called it “Rolling Equity”.

Sometimes the seller of the property that I was giving a note wanted or needed more cash and I began finding buyers for my notes. I would create a note to the seller of the property for the purchase of his property and he would sell the note to a note investor. I found it a great way to buy properties.

One of my strategies was an ad that said:

I will give you full price for
your home if you will sell on
flexible terms.

The first question was usually "What are flexible terms and I would answer that I needed a $1000 discount off of the price (fair market value) for every thousand dollars cash I put into the property.

I found that that way I could easily create a note and discount it, for as much as 50% to get the cash I needed. So, if the seller needed 10k cash, I could create and sell as much as a 20k note. I would make sure it had a decent LTV ratio through the technique of “Create a second and a third and sell the second” - so the note being sold was in a second position with a decent LTV ratio.

I got to know some of the note investors quite well and they intrigued me. It didn’t seem to make any sense to me that they bought notes. I thought they didn’t know enough about real estate. What I found out is they were total pros in real estate and I just didn’t know enough about note investment.

Its 1,2,3,… - Posted by Michael Morrongiello

Posted by Michael Morrongiello on April 10, 2000 at 23:29:14:

Find a property, buy it below market, fix it up, and sell it offer owner financing. Get some cash down from the buyer and then you take back what is known as a (PMM) Purchase money Mortgage and prommissory note for the balance that would be owed. This is secured by the property in a 1st lien position. Make sure the documents are properly witnessed, executed, and notarized, and then recorded in the county venue where the property is located.

Congratulations, you have now just created a new seller financed purchase money mortgage note.

Michael Morrongiello

Re: Rolling Equity - Posted by Neil Roseman

Posted by Neil Roseman on April 11, 2000 at 18:12:31:

John, could you give more details on how the advertisement you placed would play out. I’m missing it somehow, If you have a 100,000 FMV house, and the owner wants 10,000 cash, you would pay 90,000, right? Then what would you do?

Thanks for your help…