Not only is the Creation of Paper technique valuable in property acquisition, it permits that complete leveraging of a buyer’s other holdings. Usually commercial lenders will lend only up to 80% of the value of a collateral property. If an owner wants to borrow against his assets at levels higher than 80%, he can readily create paper against the top 20% value and use it for exchange purposes. Rarely will a seller ask for credit checks or complicated paperwork to back up such a technique.

Technique No. 16 The Two-Way Exchange

In the Creation of Paper Technique, the buyer retains ownership of the property used to secure the note given to the seller as down payment on the subject property. In an exchange, the seller actually receives the buyer’s property in exchange for his own. Title transfers. Buying property by means of an exchange, if correctly done, provides great benefits in the form of tax deferrals. Section 1031 of the Internal Revenue Service Code permits trading of properties without triggering taxation on the gains. This is one of the single most important strategies in building up a real estate portfolio.

One Milwaukee investor we know of recently traded his $170,000 7-plex for a more desirable $280,000 12-plex by means of a two-way exchange. In another illustration, the owners of a free and clear $150,000 home in Palo Alto, California, traded their property for three other homes in the area and enhanced their tax and cash flow situation. There are countless variations of this type of exchange going on all the time.

Technique No. 17 The Three-Way Exchange

The principles are the same in the two-way exchange except that the seller, while anxious to get rid of his own property, is not willing to accept the buyer’s property in exchange. However, if someone with a property acceptable to the seller is willing to take over the buyer’s property, then everything will fall into place. The end result is the same as a simple exchange except that an extra link is added to the chain. Theoretically any number of links might be added. As a result, the business can get complicate – but the outcomes can be spectacular.

Technique No. 18 Lemonading

In exchanging parlance, lemonading refers to the technique of adding cash to a property that, for one reason or another, has not sold as