Every landlord who’s managed a rental for a decade knows the feeling. The property cash flows on paper, but the reality is a different story: rent that shows up when it shows up, repairs that constantly eat into your margin, and a tenant that keeps things interesting in ways you didn’t sign up for.
That was the situation for Jay and Kyle, a father and son-in-law team that has built a portfolio of rental properties. Now, they’re selectively converting those rentals into notes, because they’d rather be the bank than the landlord.
A note pays a fixed return every month without a single phone call about a broken water heater. A rental only pays if the tenant pays, the repairs stay small, and the vacancy stays short. Given the choice, Jay and Kyle are now choosing the note.
Their deal on a single-family rental in Fort Wayne, Indiana is a good example of why.
The Rental Property in Fort Wayne, Indiana
The house is a well-maintained 3-bedroom, 1-bath starter home, 1,100 square feet, in a Class C neighborhood of Fort Wayne. Jay and Kyle bought it back in February 2015 for $19,000, and had rented it out ever since. By the time they were ready to sell, the property was owned free and clear.
Ten years is a long time to run a rental, and this one told a familiar story. Rent at the time of sale was $835 a month, or $10,020 a year, but that rent had never been consistent, and the home has no air conditioning, which didn’t help with tenant retention or turnover.
Run the numbers using a standard 50% expense ratio, and the property should have netted $5,010 a year, or $417.50 a month, before debt service. That works out to a 4.0% cap rate on the $130,000 current market value. But Jay and Kyle were quick to point out that in ten years of ownership, the rental never actually hit that “if everything was perfect” number. It just never worked out that way.
The Decision to Sell on Terms
Rather than list the property for a cash buyer, Jay and Kyle sold it on seller-financed terms in July 2025 for $130,000.
Here’s how the deal was structured:
- Sale Price: $130,000
- Down Payment: $15,000 (12% Down)
- Interest Rate: 10.25%
- Term: 360 months
- Loan Amount: $115,000
- Monthly Principal & Interest: $1,030.52
- Escrow (Taxes & Insurance): $238.17 (Paid by New Property Buyer)
- Servicing Fee: $35.00 (Paid by New Property Buyer)
- Total Monthly Payment: $1,303.69
The property buyer was underwritten by an RMLO and came in with average to good credit, a 15.86% housing expense-to-income ratio, and a 17.46% total debt-to-income ratio. That’s a well-qualified buyer on paper and in practice.
Rental vs. Note: The Math That Made the Decision Easy (THIS is the part of the story that tends to get landlords’ attention)
Side by side, here’s what the property looked like as a rental compared to what it looks like as a note.
Cash Flow As a Rental
- Rent: $835/month ($10,020/year)
- Expense ratio: 50%
- NOI: $417.50/month ($5,010/year) – IF everything went perfectly, which in 10 years it hadn’t
- Cap Rate: 4.0% ($5,010/$130,000 = 4%)
Cash Flow As a Note
- Principal & Interest: $1,030.52/month ($12,366.24/year)
- Expense ratio: 0% (since the servicing fee, taxes, insurance, and repairs were paid by the property buyer)
- NOI: $12,366.24/year
- Cap Rate: 10.0% (12,366.24/$130,000 = 10%)
The note produces 2.47 times more cash flow than the rental ever did, with none of the expense ratio dragging it down. No vacancy. No maintenance calls. No leaky faucet at 9pm on a Sunday. Plus they retained the down payment funds less any closings from the sale.
What These Landlords Accomplished with Seller Financing
By converting this rental into a note, here’s what changed for them:
- Sold a headache property that had been inconsistent for a decade.
- Harvested equity that had been trapped in the property.
- Spread capital gains over time instead of taking the full hit in one year on a cash sale.
- Increased monthly cash flow by nearly 2.5 times compared to the rental.
- Eliminated tenants, toilets, turnover, trash, and maintenance in one move.
- Cut their time commitment to about 5-10 minutes a month.
- Retired the property while keeping the cash flow that made it worth owning in the first place.
- Now earn 10% on their equity, collected passively every month.
The Takeaway
Jay and Kyle didn’t sell their equity or walk away from the deal. They just changed the property’s job. Instead of managing tenants and repairs, they’re now collecting a fixed, well-secured payment every month at a return most rental portfolios can’t touch.
This is the landlord-to-lienlord transformation in action: same property, same equity, a completely different experience of owning it. It’s also one deal in a larger strategy. As Jay and Kyle work through their rental portfolio, this is the trade they keep making. They are trading tenants for terms, and fewer landlord headaches for more bank-like income. Being the bank, it turns out, beats being the landlord.
Jay and Kyle run Cassidy Investment Group in Fort Wayne, and they’ll be joining us as guests at the upcoming Landlord to Lienlord Boot Camp, sharing more about their journey from landlords to note holders.
Curious what this could look like for one of your own rentals? Learn more about the Landlord to Lienlord Boot Camp.
Leave a Reply