Bank on Your Neighbor: The Audiobook Podcast
Building wealth doesn’t have to mean Wall Street. In this exclusive audio series, Mel Dorman brings you Bank on Your Neighbor — a practical, people-first guide to seller financing. Learn how to create ethical, win-win deals rooted in relationships and strategy, and start building financial freedom right in your own community.
https://meldorman.com
Bank on Your Neighbor: The Audiobook Podcast
Bank on Your Neighbor: The Audiobook - Chapter 14
Ready to level up from white belt to black belt in creative real estate? In this chapter, Mel pulls back the curtain on advanced strategies that turn complex obstacles into win-win solutions. You’ll learn how to navigate underlying mortgages, use wrap notes, loan assumptions, and subject-to purchases, and even structure lease options and joint ventures with integrity.
Mel shows how to create deals that protect sellers, empower buyers, and build sustainable wealth—without banks, credit, or exploitation. This is where compassion meets creativity, and where you stop just chasing deals and start designing them.
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Hi, friend. I'm Mel Doman, real estate investor, former social worker, TEDx speaker and financial activist. And this, this is Bank On Your Neighbor, the podcast. You're probably here because you felt it too, that the system wasn't built for us. That building wealth shouldn't mean selling your soul to Wall Street or crossing your fingers every time a bank says no. That there has to be another way. Well, there is, and this podcast is my free gift to you. That's right. Free, no paywall, no audible subscription, no gatekeepers standing between you and the knowledge that can change your life. Because here's the truth, just because something's free doesn't mean it isn't valuable. Sometimes the most valuable things, clarity, empowerment, freedom, don't come with a price tag. They come with purpose. I created this podcast because I'm on a mission to decentralize wealth, to take power out of the hands of billionaires and put it back into our communities. Each episode is a chapter from my book Bank on Your Neighbor. Read by me. It's my way of making sure this knowledge reaches the people who need it most without a single algorithm getting in the way. We'll walk through the real strategies I use to go from dumpster diving in my twenties to building a multimillion dollar portfolio in my thirties without banks, without credit, and without compromising my values. We'll talk seller financing, community centered investing. And creative ways to build wealth that actually serve people, not exploit them. But this isn't just a podcast, it's a movement, a radical reclaiming of power, a blueprint for creating more community-minded millionaires and fewer billionaires extracting from our neighborhoods. Every chapter builds on the last, so I recommend listening in order. I'll drop links, visuals, and extra resources in the show notes to help you take action. Not just absorb information, and if something in an episode strikes a chord, send it to someone you care about. That's how we spread financial literacy. That's how we grow a movement. That's how we rise together. Welcome to Bank on Your Neighbor. Welcome to the movement. Let's build something together. Chapter 14, the Art of the Advanced Deal. It's not that I'm so smart, it's just that I stay with problems longer. Albert Einstein. One of my favorite real estate mentors is a black belt, not just in martial arts, but in deal making. When I first started, I'd watch him talk with sellers, calmly, navigate obstacles and offer solutions like it was second nature. Meanwhile, I was basically a human Morocco nervous, jittery, and barely able to string a sentence together. After each appointment, he'd remind me, you're a white belt trying to grow into a yellow belt. It takes time to become a black belt. He was right. Success doesn't come from perfection. It comes from patience from showing up again and again and again. This chapter is about the next phase of the journey where you begin to string moves together, anticipate opportunities, and grow into the kind of investor who can structure creative deals with confidence. I'm going to walk you through advanced techniques like subject to deals, wrap notes, lease options, and capital stacking. The same strategies that help me turn one triplex into 20 more units. If some of this feels outta reach right now, let it stretch your imagination. Let it plant seeds. The black belt moves don't come overnight, but keep showing up and you'll earn them dealing with an underlying mortgage. Here's one little complication you're almost guaranteed to run into with seller financing the underlying mortgage. In plain terms, this is the existing loan the seller still owes on the property. It doesn't just disappear because you make a deal. It's still there quietly expecting to be paid each month. Think of it like a third wheel in your new relationship with the seller. It's not your deal breaker, but you've got to make room for it or risk being blindsided. Most mortgages come with something called a due on sales clause, which says, if the ownership of the property transfers, the lender has the right to demand immediate payoff of the full loan balance. Yikes, right? But don't panic. You don't need to wipe out that mortgage to make a deal work if you don't have the cash or can't qualify for a loan to pay it off. There are creative workarounds. These next tools are your way forward. Rap notes, loan assumptions, and subject to purchases. Each one offers a unique path to honor the seller's mortgage while still crafting a win-win structure. Let's start with one of the most flexible options, the wrap note. The wrap note. When a seller still has an existing mortgage and equity in the property, a wrap note can be a powerful tool. It lets you buy the property without needing to pay off the seller's loan upfront and sometimes without even needing a down payment. Here's how it works. Imagine a layer cake. The bottom layer is the seller's current mortgage. It's already baked and it needs to stay right where it is. The seller then adds another layer on the top that's your new seller financed note wrapped around the existing one. You make one monthly payment to the seller and they use a portion of it to pay their mortgage. The rest that's their profit. Usually the seller transfers the title to you, but keeps the original mortgage in their name. This means you own the property, but their lender still holds a lien on it. You are now paying for the whole cake, both the original debt and the seller's equity through a single combined payment. You may be wondering, but what about the due on sales clause? Yes. This structure can trigger it if it exists on the underlying mortgage paperwork. If the lender discovers that ownership has changed, they can demand full repayment within usually 30 days. Will they often? No, but can they? Absolutely. That's why you should always review the seller's mortgage documents first and talk openly with the seller about this risk and proceed with transparency and a backup plan like a bank refinance lined up. Now, let's turn up the volume because wrap notes aren't just for buying real estate. They can also be used to create passive income from the terms alone, making money on the spread. One day when I'm ready to sell, I already know how I wanna structure the deal, and it has nothing to do with listing it on the MLS or handing it over to a bank qualified buyer. Let's say I own a fourplex worth $1 million with 4% interest only seller finance locked in over a 10 year term. My plan, condo wise, the building by converting it into four separate units with individual titles, I instantly expand the buyer pool. Most people can't afford a million dollar fourplex, but a $350,000 condo that's within reach for a lot more folks. This isn't just a value play, it's an access play condo doesn't make the property fancier. It makes it affordable for the average working buyer with more buyers able to purchase a condo versus a fourplex. Demand drives up the price. This is an example of expandability, one of the three laws of a good purchase. Now instead of four units worth 250,000 each, I've unlocked 350,000 in value per unit. That's an extra a hundred thousand dollars per door or $400,000 in total equity I've created just through strategic repositioning, and here's the part I'm most excited about. I'll offer each tenant the chance to buy their unit from me on terms structured to match what they're already used to paying in rent. The monthly payment, 2040 $1 and 66 cents. Practically identical to what they're paying now. Interest only payments at 7% with a nine year balloon, giving them time to refinance or sell for a profit. And no banks, no credit score, gymnastics, just a clear, steady path to ownership. And after 10 years, they'll have built up meaningful equity from appreciation. They'll have real options, real dignity, real stability. Let's run the numbers. Here's the spread for number one, the original note. I'm paying 4% interest on $1 million, which is $40,000 a year. I'll be collecting 7% on that same million dollars, which is $70,000 per year.$30,000 a year is what I'll have in cashflow just from the interest spread. Here's spread number two from the equity that I created. 400,000. You see by condo and increasing the value, I've created $400,000 in equity and financing that at 7% brings in another $28,000 a year. That's mailbox money from the value I created with strategy, not sweat that makes my total cash flow. 30,000 plus $28,000 equals $58,000 a year, and not a single call about broken dishwashers or noisy neighbors. This plan doesn't just generate passive income, it creates access. Tenants become owners, monthly payments stay affordable. Long-term wealth is built for both sides. And while the conization process might cost me 30,000 to $50,000 upfront and legal survey and recording fees, I'll structure it so that each buyer pays a small down payment, say 10,000 or $15,000 each. I get reimbursed on day one and they get the dignity of home ownership without needing a bank. It's a win-win, built on creativity, clarity, and care, because I'm not just selling a building, I'm passing the baton and helping someone else start their wealth journey too. Loan assumption, some sellers have a mortgage that's not just tolerable. It's beautiful. Low fixed interest. Long amortization, no prepayment penalty. If you're lucky, that loan might be consumable, meaning instead of creating a new loan, you can simply step into the seller's existing one. It's like getting handed a perfectly broken in pair of jeans, comfortable, familiar, and already approved by the bank. Here's how it works. You take over the terms of the seller's existing mortgage, same interest rate, same monthly payment, same timeline. The loan stays intact, but the lender must approve you as the new borrower. That means going through underwriting, just like any traditional loan, if you qualify, this can be a dream scenario, especially in a high interest rate environment. But even if you don't qualify, here's the creative twist. You can pair the Assumable loan with seller financing for the remaining equity. Let's say the seller owes $300,000 on a mortgage at 3.25%, and you're buying the home for $500,000. You assume their $300,000 loan and create a $200,000 note with the seller. Often with flexible terms, no bank and low or no down payment. In some cases this structure allows you to skip the traditional 20% down, avoid mortgage insurance and walk in with just closing costs to pay. Not all loans are assume, but many FHA VA and some conventional loans are. Ask the seller for their original loan docs. Look for language about assumption or assignability. If unclear, call the lender directly. Just know assumption isn't automatic. You'll still need to qualify, and the lender will still need to say yes. In a rising interest rate environment, assumable loans are one of the most valuable assets to find even more than the property itself. If you can inherit low interest debt, you've already won half the game. If you compare it with seller financing, you're playing at a level. Most investors never even see sub two purchase. Sometimes in this work, you stumble into a situation that shifts the entire tone of the deal. You didn't go looking for it. You didn't plan on playing the role of financial first responder. But there it is, a house that's not just underwater, it's sinking a seller who's not just frustrated, they're scared. Foreclosure notices, missed payments, mounting pressure. A human being behind all of it, quietly trying to hold their life together. These aren't just numbers on a spreadsheet. They're someone's last hope, and you have a choice. You can walk away, you can low ball, you could take advantage, or you can partner, you can listen. You can structure something that helps them land gently while protecting yourself and building your future. This is where compassion and creativity come together, where financial skills become a form of service. Creative financing stops being just a strategy and starts being a form of healing. One of the most effective tools in a situation like this is the subject to deal in a subject to purchase. The seller's mortgage stays in place, but you take over ownership and make the payments on their behalf. It's quiet, it's strategic, and when done right, it can feel like relief. This strategy often works best when the seller's overwhelmed and needs relief. The loan is at a good rate. The property cash flows when rented and the seller can't or won't refinance, and you can bring order to chaos. But be mindful, this is a high trust, high risk move for everyone involved. Because the mortgage stays in the seller's name, you could both be exposed to the due on sales clause. That means the lender could technically call the loan due if they discover the ownership change. Common triggers include insurance gets canceled or updated in your name, tipping off the lender. The seller panics and threatens to report you if they feel uncertain or regretful. You miss a payment and the bank starts investigating. The bank is small and hyper-local with five or fewer branches. They often scrutinize title activity closely, but let's say the loan isn't assumable or the due on sales clause, risk feels too high, or the seller doesn't have enough equity to carry paper. Another option is a delayed closing with early occupancy. In this arrangement, you agree to buy the property in the future, say 12 months out, but with written permission to take over maintenance, move in, and rent it out, and begin improving the property with the seller's permission. It keeps title in, the seller's name, reducing lender interference, and buys everyone time. Time for you to stabilize cash flow. Time for the seller to get out from under the pressure and time for the deal to breathe. Just don't overinvest in a property you don't own yet, especially if foreclosure is still on the horizon. Always keep an eye on the auction date and one hand on your exit plan. These aren't tricks. They're lifelines for both of you. When done right, creative financing can honor a seller's humanity, protect your investment and move both parties towards something better. Not because they were desperate, but because you showed up with the tools, the clarity and the heart to help them exit gracefully and build your future at the same time. Common seller questions and how I answer them. When you're stepping into a subject to or hybrid deal, sellers will and should have questions. Your job is to answer with confidence, clarity, and care. Here are a few of the most common ones I hear and how I respond. The seller, can I rent the property back after selling it to you? Me, that's not usually a great idea. Right now your mortgage payment is lower than what I need to charge in rent. If it's been hard to pay the mortgage, paying me even more will likely be harder, and it could strain both of us. A better option is for me to help you transition into a more affordable housing plan, like a lease option or a short term rental while you get your credit back on Track Seller. How will this affect my credit score? Will I be able to buy another home? Me, in most cases, this helps your credit. The mortgage payments you've been struggling with will now be made consistently through a third party escrow service. After a year of documented payments, I can provide your lender with a debt to income declaration form, which usually allows them to remove 75% of the debt from your DTI ratio. After two years of consistent payments, many lenders will disregard it entirely, giving you a clean slate to buy again. Seller, what if you don't make the payments? Me. Excellent question. To ensure you're protected, I will sign a performance deed granting you the right to reclaim the property within 30 days if I fail to make payments as agreed, this legal safeguard means you won't have to endure prolonged uncertainty or foreclosure proceedings. I take these commitments seriously, and I've never missed a payment precisely because of this strong protection seller. What happens if there's a fire or major damage? Me. I carry full insurance coverage on every property I own. In the event of a fire or significant damage, you are named on the policy and you'll be protected. The mortgage will be paid off, and you'll be compensated for the value of the asset. You are not just hoping I do the right thing. You are contractually protected. You don't need to have all the answers, but you do need to be ready for these questions when you respond with transparency, strategy, and care sellers begin to trust that you're not just solving your problem, you're solving one for them too. If you want to dive deeper into subject two purchases, check out the king of Sub two Pace Morby. Who offers additional forms, resources, and training on his website? The lease option, the try before you buy plan. Think of a lease option like test driving a home. You're not buying it yet, but you get to live in it. Lease it, and lock in the right to buy it later. Usually at a pre-agreed price. It's a low commitment, high leverage strategy for buyers and a great tool when sellers want to move slowly or protect an underlying mortgage. Here's how it works. You lease the property, now you secure the exclusive right to buy it later, usually one to three years out. You lock in today's purchase price, which can be huge in appreciating markets, and you avoid triggering the due on sales clause. Since title hasn't transferred yet, this can be a win-win when the seller's mortgage isn't assumable. Subject to deal feels too risky, or you just want to test the waters before committing. Some investors never intend to live in or manage the property themselves. Instead, they lock up a lease option with a seller. At one monthly price, they sublease an option to an end buyer at a higher monthly rate and purchase price and cashflow. The difference without tenants, toilets, or active management, just like the fourplex to condo conversion we discussed earlier. You can structure these deals to profit off the terms alone. You become the bridge between the seller who wants out and the buyer who wants in earning mailbox money from paper you creatively positioned without ever buying any real estate. Here are some tips for structuring a strong lease option. Pay a non-refundable option fee to the seller. This secures your right to buy. It's like a down payment on the possibility of ownership. Negotiate rent credits. Try to apply a portion of your lease payment towards the future purchase price. This builds equity over time, even before the sale closes. Pull a title report. Make sure there are no hidden liens or title issues that could derail the future sale. Record the lease option. File it with your local, county or escrow company. This prevents the seller from refinancing, reselling, or backing out during the option period. Secure the longest possible option, period. The longer your lease option lasts, the more time you have for appreciation to build equity. The whole strategy here is to lock in today's price while capturing tomorrow's value. The longer the timeline, the bigger the upside. The lease option lets the seller move forward without transferring title, keeping their mortgage safe. You meanwhile get control of the property with flexibility, upside and time. It's especially powerful when you're deciding if you wanna own something and the seller is unsure but open, and you want to preserve affordability and cashflow while planning your next move. This strategy won't work for every deal, but when it fits, it fits beautifully wholesale and innovation agreements. Let's break down the concept of wholesaling. With a real world example. My friend Joe finds an off market house and gets it under contract for $400,000. He calls me and says, want this deal? I'll assign it to you for $410,000. I say, yes, Joe makes $10,000. I take over the deal. He never buys the house himself. He just had a contract that included one magical phrase, Joe, and or assigns that one clause, gave him the right to pass the deal along and profit from the paper, not the property. Here's how it goes. The contract stays the same. Joe simply assigns his buying rights to me. He gets paid an assignment fee at closing, and the original contract terms remain intact. This is clean, fast and doesn't require Joe to bring cash or go on title. Meanwhile, a innovation agreement is like replacing the original contract with a new one goes like this, Joe finds the seller. I become the new buyer with new terms. Joe gets paid a fee for brokering the deal. The original contract is replaced, not assigned. This approach is often used when there are repair credits, updated timelines, or new negotiations required. It gives the end buyer and seller a direct relationship and keeps Joe out of the chain of title. But here's where things get sticky. In both strategies, the wholesaler is motivated to get the lowest possible price. While the seller often doesn't understand how much their property is actually worth, it becomes a tug of war. And guess who usually loses the seller? I've seen wholesalers make $80,000 on a $400,000 house just because they convinced a desperate seller to accept far below market value. That's not investing. That's exploitation. And let me be clear, if the seller had all the facts, they might have kept that $80,000 for themselves. Here's how to play fair. In my world, a 5,000 or $10,000 fee for connecting the dots is totally fair. You are earning while learning. You are creating value. You are building trust, but draining someone's equity for a quick win. That's a shortcut to a bad karma and a short-lived business. If you want to build a life you're proud of, align your interests with the sellers. Don't see them as prey. See them as partners, which brings me to one of the most powerful underused tools in real estate. The joint venture agreement. It's not just more ethical, it's often more profitable. Let me show you how it works. The joint venture with a seller. Running the numbers on a flip can feel like solving a Rubik's cube, blindfolded repairs, holding costs, commissions, surprise disasters, hello, burst pipes, and the high cost of borrowing money from a hard money lender. Because of that risk, most flippers need to buy properties at 60 to 70 cents on the dollar just to make it work. That means wholesalers trying to assign to flippers often beat sellers down on price hard, but. What if we cut that risk and those costs in half? Enter the joint venture agreement. Instead of playing hardball, you say to the seller, let's do this together. You form a short term partnership. You are the general partner. You run the project there, the limited partner, they stay passive together. You renovate the home, sell it at top dollar, and then split the profits. Here's a simple example. Let's say the seller wants $300,000. The house needs $30,000 in repairs. The A RV or after repair value is $500,000 and the seller still owes 200,000 on the mortgage. Rather than coming up with all the cash, the seller agrees to carry a hundred thousand dollars note for their equity. You finance the project with a $260,000 hard money loan that pays off their$200,000 mortgage covers 56,000 for repairs and closing costs, and leaves the seller holding a second position note for their remaining a hundred thousand. You handle the renovations, list the property, and sell it for $500,000. After paying the hard money loan payoff, the seller's a hundred thousand dollars note repairs and holding and closing costs, you are left with $52,000 of profit to split. Want to boost the profits even more if the seller's willing to, you can do a Novation agreement directly with the retail buyer or let them buy subject to their existing mortgage. Then you can avoid the hard money loan entirely that saves you $12,000 or more in interest in fees and puts more money in both of your pockets. But how do you split the profit? Well, you can keep it simple, 50 50, 60, 40, or structure it based on risk, effort, or upfront cash. Sometimes you'll give the seller a little cash upfront to help them move and then split the profits later. Other times, if the equity is rich and the rehab is easy, you might take a smaller cut. There's no one size fits all. The key is alignment, transparency, and mutual upside. This isn't just about saving on interest or squeezing a better margin. It's about shifting from a transactional mindset to a relational one. You reduce risk, you increase trust. You keep more money in the hands of people who actually live in the neighborhood. You treat the seller as a partner, not a stepping stone. Anyone can crunch numbers, but a sophisticated investor sees the bigger picture. Community ethics and equity. Builds deals that serve everyone involved. You've just added some serious tools to your belt. In the beginning, you may have felt like a white belt, eager, uncertain, and maybe a little overwhelmed by the possibility of seller financing. But now you've stepped fully into your next level. You've learned how to navigate complex situations with confidence from properties, with existing mortgages to sellers and distress to deals that don't fit neatly inside a bank box. We explored wrap notes, loan assumptions, and subject to purchases, creative ways to gain control without needing massive capital or bank approval. You learned how to structure lease options, not just as a path to ownership, but as a business model in itself. We talked through wholesaling and innovation agreements with honesty and how integrity isn't just optional, so you can sleep well at night. And we ended with a shift in mindset moving from adversary to partner. Using joint ventures to create aligned outcomes where everyone wins. But these strategies are more than just techniques. They're part of a larger transformation, one where you stop chasing deals and start designing them, where each contract becomes a conversation where you no longer see sellers as gatekeepers or obstacles, but as collaborators in something bigger. Maybe you don't feel like a black belt yet, but you are on your way. You started to speak the language of real estate fluently. You're building a toolbox, not just of tactics, but of trust, discernment, and vision. In the next chapter, we'll explore what happens after the deal is structured. How to exit wisely, scale strategically, and use the power of paper to multiply your freedom. Mastering the entry is one thing. Mastering the exit. That's where the pros live.