Skip to content
Mortgage Brokers & Lenders

User Stats

15
Posts
7
Votes
AnTuan Adderley
  • Investor
7
Votes |
15
Posts

Private money lending - from family member - how to utilize

AnTuan Adderley
  • Investor
Posted May 20 2023, 06:42
What are some good ways to utilize private money from a retired family member open to funding my startup in REI? They offered to help fund a rehab for a purchased property.  I want them to get something out of helping me, like a rate return and set a payback time frame post refinance. Thanks for the advice.

User Stats

2,061
Posts
1,672
Votes
Mitch Messer
  • Rental Property Investor
  • Medellín, Colombia
1,672
Votes |
2,061
Posts
Mitch Messer
  • Rental Property Investor
  • Medellín, Colombia
Replied May 20 2023, 07:41

Hey @AnTuan Adderley, if you plan to involve family members in your investment projects, I urge you to treat them like any other valued lender.

At very least, you should:

— Be hyper-specific about the terms of the loan, including interest rate, payment amount and schedule, loan duration, late-payment penalties, etc.

— Use only valid, written loan docs (note and security instrument) that fully protect them as the lender

— Give them a valid, 1st-position lien on the property at no more than 80% loan-to-value (LTV)

— Pay for a lender's title insurance policy

— Obtain property insurance that fully protects their interest

Also, I see you're located in Georgia, a fast-foreclosure state that closes with attorneys. If your investment property will be located there, your private lender will have access to swift and fairly inexpensive remedies if you default.