Private Money Real Estate Investing – One Clause You Should Never Forget

Substitution of Collateral

There are certain clauses you should always include when you use private money for real estate investing. The Substitution of Collateral Clause is one of these. Heres how it works.

Would you like to be able to simply switch one property with a different property on your mortgages or deeds of trust? Of course it would, and when you use private money for real estate investing, you can just by including one little clause in your private lenders notes.

This is what the clause should say.

"Borrower reserves the right to substitute like collateral of equal or greater value"

Notice what just occurred? By slipping in one small sentence, you have put yourself in a position to NOT have to obtain new financing every time you sell a piece of property and buy a replacement. The flexibility and power this one little clause will give you is outstanding.

Suppose you own a duplex that you used private money for real estate investing to obtain, but now you have the opportunity to sell at a large profit. Dont worry about paying off the existing note instead, just find a replacement property of equal or greater value and transfer the lenders security interest over to the new property.

After you finalize the purchase, make certain you file the security documents with your county recorders office. Your lender will most likely insist on having a mortgage or deed of trust on file to protect their interest.

This clause is a wise idea because of the power and leverage it gives you- another great reason for using private money for real estate investing.

Your investor will be happy to keep his money working, and you will too. When you remember to include a Substitution of Collateral clause in your private money for real estate investing notes, you create a win-win scenario for both of you. Try http://www.private-money-real-estate-investing.com for more info.

Smart very smart.

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