document is a mortgage or deed of trust that secures the loan with your property. This mortgage says that if you don’t pay the promised pay- ments, the note holder can foreclose on your property. The two documents together provide a secured note that will be attractive to those who buy such things. And, lots of people buy them. Now you have created a note secured by your property. You, of course, pay yourself while you are figuring out how to use the note. You’ve got to keep current on those payments and show the note is performing. But you are literally tak- ing money out of your right pocket and putting it in your left. If you do this for some months, the note is ‘seasoned’ (i.e., it has a history of on- time payments). That also makes the note more valuable and salable. As an interesting side benefit, your property now looks as if it has much less equity in it making it and you a less attractive target for lawsuits. The note is typically worth it’s principal value (if it’s a note to repay $500,000, the note is valued at $500,000). But sometimes notes are worth less than their face value (e.g., if they are non-performing) or more than their face value (see any detailed discussion of corporate bonds). To keep things simple, we will say a note to repay $100,000 is worth $100,000. Why would a seller accept a note as a down payment for their proper-

ty? Don’t they prefer cash, which we already decided is also a note? Ac- tually, any seller with a brain would rather have the note. The one thing we know about a dollar (or a euro, yuan, or yen) is that it will be worth less next year. Every government in the world manages their currency so that it will depreciate about two to three percent per year. Governments do this so that the debt they take on will be paid in future currency that is worth less. But a note is a dollar with an interest rate. It’s pre-invest- ed to make money for the seller and is secured by a property that is not the one the seller is selling. Many sellers want nothing to do with the property they own (they are selling to get it out of their psyche). But a note secured by another property is a different animal. The end result is you keep your current property. You activate your equity on terms that you can tailor to your situation. And you leverage that equity into a new property to allow you to continue to build your wealth. How cool is that? •

Steve Streetman, president of StreetSmart Investments, LLC, a commercial real estate investing company, is an avid cryptocurrency investor and has worked

in cryptography and high-end computer modeling for over 30 years. He teaches commercial real estate investment courses and is a real estate agent with RealInvestors Real Estate Services. His book “Cryptocurrency and Real Estate: How Bitcoin and Blockchain Will Transform Real Estate Investing” is anticipated to release in 2020.

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