An investor finds a private money lender. Now what?

Question

Scenario: I'm an investor looking to borrow from a private money lender. I've found that private money lender, we've agreed on high-level terms, and we're ready to move forward. Now what? What do we have to do to get ourselves formally engaged? Lender isn't going to just write a check or wire funds directly to the individual.

Does the investor create a business entity, then contact a loan servicer to essentially broker the administrative part of it? Instead, does the investor create a business entity, then have an attorney draft loan docs?

I'd love to hear from those who have done this. Thanks!

EDIT: After posting, this post was suggested, and it answers the question quite well: https://www.biggerpockets.com/...

I'll leave this here for reference. If anyone else has additional points of advice, I'm all ears.

Chris Seveney · Answer

@Danny Simard

If you are the borrower, you will want to know who the title company is so you can sign the documents

Do not borrow money if there is no title company involved as the deal could be fraudulent and they want you to send them money upfront

Once the terms are negotiated the process is not different than a traditional transaction whether buying or refinancing

You will get a closing disclosure with closing costs and will sign a note, mortgage and several other documents

Hope this helps

Ned Carey · Answer

@Danny Simard The basic process is you put something under contract. You give the contract and the terms of the loan and lender information to the title company. The title company draws up the legal documents for the loan(a promissory Note and a deed of trust or Mortgage)

The promissory note is the legal cotract outlining the terms of the loan. The mortgage (or deed of trust in some states) is the legal document that gets recorded in the land records that causes the property to be collateral for the loan.

Not all title companies are skiilled at creating loan documents. They may be used to using documents that the lenders supply. A good title company that deals with investors and especially hard money lenders can do this easily.

An investor finds a private money lender. Now what?

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