Promissory Note

A promissory note is the signed document in which a borrower promises to repay a loan on stated terms: amount, rate, payment schedule and maturity. Every loan in a BRRRR deal, from the hard money loan to the long-term refinance, starts with a note secured by a mortgage or deed of trust.

The note creates the debt, and a separate mortgage or deed of trust pledges the house as security for it. Default interest, late fees, prepayment penalties and extension terms all live in the note, so it is worth reading before closing on short-term financing.

In a seller-financed purchase, the investor signs a note to the seller instead of a bank. The seller can hold it, collect payments, or sell it to a note buyer, and the investor pays it off at the refinance like any other loan.

Further reading: Promissory Note on Wikipedia.