PML Models

[Amanda Fernandez]

Hi! I have some friends / ex coworkers interested in becoming my PML's. (Private money lenders) I am wondering how I should structure the loan though. I would like to see how others that have used PML do it. I would like a model that works for a rehab and also one for a buy and hold loan. I just want to make sure I'm being fair but at the same time use criteria that won't put me out of business. Thanks!

[Bill Gulley]

Well, sort of what Jon mentioned, he's what I'd call an old salt lender, been around RE, not really the private individual who is willing to make you a loan out of love, affection or based on your friendship, not that Jon can't be loving, affectionate or even friendly!

So, reading into that remark, what is really going on? Sounds like you want an example to propose to some people you know, or did they really get excited about your getting into a deal and wanted to join in? It makes a difference.

If your "friend" is getting 3% they may be delighted in getting 5% or 6% for a year. They do need to be assured of getting their money back, you plus collateral might be enough for them, they might go 95% of the total deal. Is it that kind of friendship like family or a friend who has never done a deal and wants to do what the professional types might do, 70/75% LTV, 10+%, deferred payment for 90 days or 120 days then boom, pay up?

There is no set standard with true private money, there is with those that lend as a sideline or as a hard money lender.

I suggest you post what you need, what you need it for, the price of the property generally, when you can make payments, how long you need it for and we could start devising some terms that you might ask for or suggest.

As to long term loans, private folks rarely go beyond 5 years really, they need some access to their money if nothing more than a feeling they aren't tied in for long terms, people can't really go there unless they really never need that money. It's more involved meeting their financial needs, some financial planning is necessary in all fairness. You also don't do high LTV loans long term, they need to begin secured.

People aren't business entities, things happen to people, things change, things can happen to you too, so they need or their estate needs to be secured. Nothing like having some wild and crazy loan out there that get tied up in an estate with trustees or executors or judges looking at it. :)