Personal loans from friends, returned with interest... how to do?

[James W.]

Howdy BP!

I'm currently looking at a property about $1,000,000 that I see as about a 12CAP... slightly lower than my average, but a solid property (24 units, only 1 empty, not a fixer-upper).

I mentioned to a few people I know personally that for an investment of 50-200k, I could guarantee a 5% return. They are interested.

I would not want them on the title. I would like to simply write an I.O.U. on a napkin stating that I'll repay them +5% over the course of a year or so.

How have you seen this done? What advice do you have on how to structure this? Any feedback (as long as it's constructive!) is appreciated.

Thanks, and happy investing!

[Chris Mason]

They don't have to be on title as an owner. They get the private mortgage recorded as a lien on the property, just like any other mortgage. 

The napkin thing you mention is just an unsecured loan with no security instrument providing any assurances of repayment. Sure, anyone can lend money to anyone with whatever they wish written on a napkin.