What Is Note Hypothecation And How It Can Work For You | Part 2 - YouTube

In the previous episode (What is Note  Hypothecation Part 1), we discussed how  

you can pledge your real estate lean notes as  collateral for a loan. In this episode, part 2,  

we're going to talk about how hypothecation  can affect your roi, your return on investment.  

My name is Mitch Stephen and I've been investing  for over 20 years. 70% of the properties I deal  

with, I sell with seller financing to my buyer.  So, I've done a lot of note hypothecation in my  

days. Note hypothecation is a form of leverage.  And leverage can always change your ROI.  

But besides changing your ROI, this episode offers  a revelation that can change your financial life.  

Let's walk on over to the white board.  Alright. In this example, you buy a property  

for $175,000 with your own cash, right here.  Then you sell the property for $275,000.  

Seller financed with 30,000 down. And you carry  the $245,000 balance at 7% for 30 years. Now,  

this means you have a principal and interest  income coming in every month of $1630  

per month. Now, that translates into $19,560 per  year. So, if you're leaving your $175,000 in the  

deal and you're making $19,560 per year. Then the  math is easy to figure out the ROI. You take your  

annual income of $19,560 divided by 175,000 and  it turns out that your roi on this transaction  

is 11.18%. It's not bad. It's not bad at all. The  problem is how many $175,000 do you have? Is that  

one deal for you? Can you do that twice? Can you  do it three times? Let's suffice to say no matter  

how much money you have at $175 a clip, you'll  be out soon enough. Now, let's solve that problem  

of running out of your own money by hypothecating  your note. What note do you own? You have a  

245,000-dollar note right here. It's at 7% for  30 years and it has an income. We're going to  

hypothecate it. Which again means we are going to  pledge it as collateral for a loan from more of  

an institutional lender or a private lender.  Now, remember, institutional lenders will do  

this too. Not the big box guys. But we're going to  talk about that later. So, we're going to pledge  

this 245,000-dollar notes for 175,000-dollar  loan from a private lender at 8% for 30 years.  

And we're going to have a payment of $1,284  per month. That's $15,408 a year that you're  

still going to make, okay? But you're not going to  have any of your money in it. So, you can choose  

to have $175,000 in the deal and make an 11.18  rate of return. Or you can hypothecate your note.  

Pledge 245,000 here for 175,000 loan. And you're  still going to clear 15,408 a year instead of 1900  

because you got a payment here. So, you're not  going to make 19,560. But you will still clear  

15,408. But you'll have none of your  money in it. So, if you're clearing 15,400  

a year with none of your money in it, what's that  rate of return? Well, you just went from 11.18  

return on your investment to infinity. Infinite.  There's no way to calculate a return on your money  

when you don't have any money in it. And that's  the power and the revelation of hypothecation and  

using opm or other people's money to buy houses.  And the biggest revelation is how many houses can  

you buy with your money. I don't care who you are  out there. Just think how much money do you have,  

start figuring out how many houses you can buy.  And eventually, you're going to run out of money.  

When you use opm, you're not going to run out  of money. But there's more. To get your hands  

on my private money changes everything webinar,  just go to 1000houses.com/free-stuff and scroll  

down. There's a lot of free stuff there. Find the  private money webinar. Watch it because private  

money does change everything. It'll change  your life. It'll make your buying unlimited.  

That's what it did for me. Alright and if you  like this kind of conversation, if you like these  

kinds of case studies, please like, like, like.  I can use all the help you can give me. Share it  

with your friends because a lot of people need  to know about this strategy. It's little known  

and also subscribe. And let's keep up with each  other and I'm going to keep rolling and rolling  

all year long. And don't leave because we still  got part 3 and part 4 coming up. Part 3 is next.