I'm a newbie investor and like many, I have tons of questions to ask; but I narrowed it down to one specifically.
I'm interested in doing a flip and wanted to know how the structuring of using a PML and HML together would go? I understand that when using HML's, if the borrower was to default on the loan, the HML is then entitled to take the home and sell it themselves. However. what happens when you have PML involved also. What rights do they have to home if the borrower defaults on payment - considering that a HML is involved on the deal as well?
Thanks in advance Bigger Pockets Family!
When you're working with HML & PML, everything is negotiable. You'd have to find both in this instance and one would get the first position and the other would get second position on the property. So if you were to default, the first position would get all their money back before the second position received any. It might be difficult to find HML & PML who are willing to do this, but no one said it would be easy!
For a very experienced flipper these are done someone starting out only way this happens generally speaking is with your warm contacts IE your parents grand parents uncle aunt brother sister someone that knows you well.. Also HML while they will loan to first time flippers will be very cautious and you will have to show money in the bank and how your going to pull this off.
It would be challenging to find a private lender that will loan 10k- 100k without having the security of a Note and a Deed of Trust recorded on the property, unless it’s from immediate family.