I have networked with several people who are interested and willing to loan private funds. I will be meeting with them this week, to go over what it is we are doing with the capital and details of mutual goals and interests.
now that I am at this point. I need advice on how others close the deal.
1. how or where are the funds held (escrow, LLC, trust)? how are they transferred?
2. once we have a potential property lined up, should the funding be in place already, or have funds transferred after deal is found?
3. how are you securing their capital? are you putting their name on deed?
4. I assume the lawyer and contracts will have to be drawn up for all this to happen.
5. how do you usually pay out interest and/or principle (monthly, quarterly, annual)?
I would like to get all this info before sitting down with them, so they are more comfortable with the process. We plan to group a few individuals together to fund a few flips or new construction.
Aaron T. There are a several different ways you can approach what you're trying to do. You could do it via a Reg-D private offering, which would allow you to hold funds, until deals are found. Or, you could secure each investment with a first position on the deed. Alternately, you could do a simply loan from each of the investors to yourself or the company, which is probably the simplest way to handle it. There may be additional ways as well, but those are the 3 primary strategies that jump to my mind.
Regardless of how you're going to approach this, unless you are doing a loan from each investors to you or your company, you're going to need to get a lawyer involved...right now to ensure you are in compliance with all the applicable rules & regs.