Advice on hard money deal
I was contacted by a fellow RE investor about providing hard money for his deal. I've not done a deal like this before, so I'm looking for advice, particularly from hard money lenders.
He bought a house on his credit card for $24,000 and closed on it last Friday. The title is in his name. The house rents for $2,000 a month - as a boarding house situation. There is property management in place, and they take $1,100 a month and pay him $900 a month, agreeing to do any repair up to $500 at their expense. Taxes are $1,200 a year and insurance is $800 a year. He has a full time job, and this is his first RE deal. The house is worth $35K or thereabouts. He got it as a short sale directly from the bank, since it had about $100K on it. I don't know his credit score or what interest rate he's paying his C.C., but I guess it's 18% or so.
We agreed to 12% for a 3-year note for $18,000 with 2 points. Does that seem like a good number for the risk involved?
My main question is how to secure the deal. I think we would get a land trust and put both our names on it. What other terms, and how, do we need to specify to cover me in the event that he defaults? I need to know how I take 100% ownership of the house if he defaults - is that built into the land trust document or is that a separate contract?
I will do additional due diligence, but for now, I want to know if the numbers make sense for me, and how to do this legally to cover my interest.