Private money lending to "secondary circle"

[Tim Johnson]

Morning all,

I am thinking about lending on a private money opportunity in the Tulsa, OK area. The investor has already purchased the home, done a few months of work on it, and needs money to finish rehabbing - asking $12k but I think they may need up to $20k based on my observations of the property. The term would be 3-4 months and they are hoping to get money within a couple of weeks.

The investor is in my "secondary circle" - I am friends with one of their friends. I am comfortable with the person's character and background and consider them trustworthy. 

Who else has experience with private money lending like this? What kind of due-diligence did you put into the deal ahead of time? What kind of protections did you put into the deal? How long did it take to arrange -- what would you do if you only had a couple of weeks of prep time?

Thanks!

[Jeff Rabinowitz]

This rehabber has underestimated the amount of money they would need to complete the job when they purchased the home. You now think they are underestimating the amount needed to complete the job again. What will you do if you are correct? Are you able to step in and finish the job? Will your lien be in second position so you must negotiate with the first lien holder in order to step in? The "investor" is in a difficult situation--why do you wish to join them there?