My Co-workers want to Lend to me. Now What???
Hi fellow BP'ers!
It seems that I have proven myself to my co-workers who now are willing to invest with me as private lenders. I am negotiating two home purchase deals and possibly a third. Part of the incentive is the ability to make a cash offer and close fast. I can fund just one of the deals myself, but that would leave me with zero cash on hand until I refinance out of it. I would prefer to have private lenders fund the purchase of the properties. My problem is, I don't know where to start and how to draft such an agreement to borrow private money.
So here are my questions:
1) If co-worker Bob lends me $10,000 with a 10% interest, how would that be structured? Where can I download an agreement form or or loan form?
2) Co-worker Bob wants to make sure his investment is safe. How do I do it as a lien on the subject property? And if Bob is lending $10,000 and I'm paying him 10%, is the lien amount the principle plus interest? In other words, is the lien $10,000 or $11,000?
3) How do I get some type of payment amortization schedule? How are the interest on these types of loans calculated and structured? Do I just automatically add 10% on day one and pay it as a $11,000 loan instead of a $10,000 loan?
4) Where do I file all of the paperwork? Is it something done at closing or can it be done before closing? Do I get it notarized and then file it at the county clerks office?
5) There are about four co-workers interested in lending money to make 10%. Is the process the same for one house purchase with 4 private lenders vs one hoyse purchase with just one private lender?
6) My exit strategy: Use cash to acquire a property using private money. Get a commercial loan to refinance to pay the private lender back plus the rehab. If for some reason that doesn't transpire, I'd wholesale or flip it.
I already talked to a portfolio bank and they will do a commercial loan with the rehab. No seasoning. 15% down or 15% on the ARV for a refi. 30 yr amortization, 5 year ballon.
7) Any advice, resources, information or anything that may help is much appreciated.
Thank you!
Phillip Lanier
