How Do I Structure Private Money Line Of Credit?
I am trying to figure out how to structure a deal with a family member and was wondering if anyone would have advice for me. My uncle wants to invest in real estate with me and has a lot of cash. He is willing to put the cash in a CD at the bank giving me access to a line of credit for rehab's to flip or rehab's to keep and rent.
Is it a good idea to approach it this way or just get a loan from him every time we want to do a deal? What is a fair interest rate to pay him if we went the route of the LOC? I was thinking 8-10% interest a year based on the amount I need for each deal. i.e. If the project was 200K, the interest rate was 10%, and we had the loan for 60 days - I would owe him $20,000/12 months = $1666.66/mo and multiply that by 2 months which would be $3,333. Is that a fair set up?
Or... is it more realistic to give him the full 10% for the loan?
Also, do I put him on the title or does he put a lien on the house? What kind of legal document do I offer him? A promissory note? Do I draft or an attorney?
I am obviously new to private money lending and really could you some advice to fairly structure this for everyone.