Equal Dignity Notes with Other Real Estate Investors

Mike: Welcome back to the flipnerd.com REI Classroom where experts from across the real estate investing industry teach you quick lessons to take your business to the next level. And now, let’s meet today’s expert host.
Jack: Hi. My name’s Jack Shea and I’m going to be the host for this session. My website is jackshearealestate.com. It talks about a lot of trust and option and IRA type of products and seminars.
Mike: This REI Classroom real estate lesson is sponsored by theinvestormachine.com, FlipNerd’s private investor coaching program and your blueprint to investing success.
Jack: One thing I use in the note investing realm is when I might have two or three investors in a note or in buying a note, or it could be in a property. Joe is putting in 30,000 and Bob’s putting in 40,000 and I’m putting in some money. There’s, well, who’s on first and who’s on second. What I use, everybody wants the safety and the coverage, so I use what’s known as equal dignity notes.
We all have a note for the separate amounts but we’re all in first place. As payments come in, payments come in, they’re divided 30, 40 and 30 among the parties. We’re in a position where say if we share the payments equally we share . . . Let’s say there are proceeds on a sale or if there’s a problem for missing payments. Everybody’s in the same boat and everybody’s equal and everybody’s aware of the fact.
These equal dignity notes have been used for many years. It solves certain problems with investors are struggling. The first guy wants to be in first position. The next guy doesn’t want to have a second or third mortgage. So it solves that problem and the payments are shared. If there’s a default, we all share in the loss equally. It’s a way to take on partners or share the profits, share if, rare event, but if that happens and everybody knows what position they’re in.
You think about that. Been around for a long time. You might find it used to keep your investors happy that everybody’s in first place. They like that. I hope you can use that in your real estate or note investments to your benefit. I’ll be back. See you next time.
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