Updated about 17 years ago on . Most recent reply
Setting up private lenders
Someone I know is interested in helping me finance a portion of my next deal. What's the process on setting this up? Do I have an attorney draw up the papers and then he get's a position on the mortgage? Does he get me a cashiers check then I bring that to the table at close? Does or can he attend the closing? Do I tell the bank that I have a private lender financing a portion of the purchase? Not quite sure how all of this works.
Also is there anyone out there that does private lending? If so then I may not have to go through all of this with the bank.
Thanks,
-Michael
Most Popular Reply
Michael,
1. It is a complicated question. We need more info.
2. Your lender in first might not fund the deal if there is a 2nd. Check to see what is being assumed. If they expect equity then the person putting up the cash really can not have a second at closing as that would be mortgage fraud.
If the cash was supposed to be seasoned and you borrow it that is another problem. Figure out what it going on with the 1st. Be careful about taking advice from a mortgage broker if they are not really seasoned. Some of the time they advocating things that can cause problems later.
3. If you want an equity partner do you want them on the loan (and have their credit checked)? Are they expecting to be on title? There are different ways to do the deal.
4. PA has a transfer tax. Minimize any changes of title after the initial purchase.
5. Any time you have a partner you really need to nail down the operating agreement. Figure that your partner will get hurt, get divorced, die, they will be sued and all the negative situations and then write up the agreement. You do not want the ex to become your partner or a trustee who is settling an estate. If they do become your replacement partner then you need a clear document so you do not lose control. It does not matter how tight you are with your partner if they are taken out of the deal by later actions. The same works in reverse if something happens to you.
John Corey