Lending Short Term for a rental/house hack investment
I have a friend/realtor/potential partner that is interested in a property that he would buy and renovate and live in for 5+ years. It is in a nice area and he would be able to rent it out 6 weekends each year for college football games which could net 8-10k total. If he needs my cash to purchase and rehab can I legally just lend him the money with an agreement (Note & Mortgage or Trust Deed)?
Also, should I look at it as an investment partnership or more as though I am a hard money lender? How would you structure? Should I participate in rehab or let him make the calls since he will be living there?
Looking to get my capital back out in 2 years or less (unless worth risking the upside of the "flip" when he sells). He has a house currently that he would sell that could be most or all of the payback on the note for my exit strategy. I would propose a 20%? annual return on my funds while they are tied up
Numbers:
Purchase price: 65k
My investment: Estimated at 28k for down payment (12k), rehab and closing costs
ARV: Estimate 110k
Yes, you can lend him money secured by the property. However, if you're lending him the down payment he's likely to have a hard time getting the first loan. Most conventional lenders want the borrower's own cash for the down payment. Not a second position loan.
To go along with what @Jon Holdman said, if you're lending him the down payment, you would most likely have to go on the loan as a non-occupant co-borrower. Otherwise, your friend will have a tough time getting a loan.
