How to bring in investor without them having lien on property

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How to bring in investor without them having lien on property

Account Closed
Specialist 路 Hendersonville, NC 路 Member since 2018 路 159 posts 路 23 votes

Hi all.

I have a project that I need 10k for. The rate of return is near 100%. 

How do I bring in a lender as a partner and promise them a 10% return on their money WITHOUT putting the property as collateral?

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Aaron Hunt
All Over, USA 路 Member since 2017 路 689 posts 路 756 votes
7y
Originally posted by @Account Closed:

Hi all.

I have a project that I need 10k for. The rate of return is near 100%. 

How do I bring in a lender as a partner and promise them a 10% return on their money WITHOUT putting the property as collateral?

Offer to marry them as well. 

You'll only owe half your net worth that way, but at least no lien on the property as collateral.

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  • Jay HinrichsBusiness Member
    Real Estate Consultant 路 Summerlin, NV 路 Member since 2014 路 45k+ posts 路 66k+ votes
    7y

    personal note.. although be careful with small balance notes many states have usury for these  Anti loan sharking rules.

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  • Account Closed
    OP
    Specialist 路 Hendersonville, NC 路 Member since 2018 路 159 posts 路 23 votes
    7y

    @Jay Hinrichs -

    Thank you.

    How does a personal note work?

    Could you either share this with me or tell me where to go to find out?

    Thank you...

    Ben

    0Reply
  • Jay HinrichsBusiness Member
    Real Estate Consultant 路 Summerlin, NV 路 Member since 2014 路 45k+ posts 路 66k+ votes
    7y
    Originally posted by @Account Closed:

    @Jay Hinrichs -

    Thank you.

    How does a personal note work?

    Could you either share this with me or tell me where to go to find out?

    Thank you...

    Ben

    Google unsecured promissory note there are 100s of variations. one page simple document does not need to be notarized although it does not hurt ..

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  • Account Closed
    OP
    Specialist 路 Hendersonville, NC 路 Member since 2018 路 159 posts 路 23 votes
    7y

    @Jay Hinrichs Fantastic. Thank you!

    0Reply
  • Account Closed
    OP
    Specialist 路 Hendersonville, NC 路 Member since 2018 路 159 posts 路 23 votes
    7y

    @Jay Hinrichs

    Is there also a way to bring this person into the deal as a partner?

    0Reply
  • Aaron Hunt
    All Over, USA 路 Member since 2017 路 689 posts 路 756 votes
    7y
    Originally posted by @Account Closed:

    Hi all.

    I have a project that I need 10k for. The rate of return is near 100%. 

    How do I bring in a lender as a partner and promise them a 10% return on their money WITHOUT putting the property as collateral?

    Offer to marry them as well. 

    You'll only owe half your net worth that way, but at least no lien on the property as collateral.

    2Reply
  • Account Closed
    OP
    Specialist 路 Hendersonville, NC 路 Member since 2018 路 159 posts 路 23 votes
    7y

    @Aaron Hunt

    Are you speaking from experience?

    0Reply
  • Account Closed
    OP
    Specialist 路 Hendersonville, NC 路 Member since 2018 路 159 posts 路 23 votes
    7y

    ;)

    0Reply
  • Aaron Hunt
    All Over, USA 路 Member since 2017 路 689 posts 路 756 votes
    7y
    Originally posted by @Account Closed:

    @Aaron Hunt

    Are you speaking from experience?

    I wish if it were only half for me.

    My wife married me before I had anything, then we had a kid, and then we started making real moneys. So she pretty much owns everything now (even though we're still together). I just have to be careful not to up my life insurance policy too high or pay off the properties too quick, so I'm still somewhat relevant!

    1Reply
  • Account Closed
    OP
    Specialist 路 Hendersonville, NC 路 Member since 2018 路 159 posts 路 23 votes
    7y

    @Aaron Hunt

    馃槤

    0Reply
  • Jef Lopes
    Boston, MA 路 Member since 2019 路 3 posts 路 0 votes
    7y

    @Ben Gabin what certainty would they have or leverage against you if you fail to pay the 10% back?

    0Reply
  • Taylor Chiu
    Real Estate Agent 路 Salt Lake City, UT 路 Member since 2014 路 473 posts 路 230 votes
    7y

    @Ben Gabin

    An unsecured promissory note should do the trick.

    Are you wanting them to be more than the private money lender (you mention partner)? As in give them more than the 10%? If so, you might want to purchase the property with a LLC jointly owned by the two of you. If not, then the unsecured promissory note should be enough.

    0Reply
  • Kay G.
    Lender 路 Member since 2019 路 1 post 路 0 votes
    7y

    @Taylor Chiu great point!  @Account Closed just remember, unlike a secured promissory note that is secured with an asset/collateral an unsecured promissory note does not have a secured asset. But as stated above you should be fine using it for your situation :)

    0Reply
  • Account Closed
    OP
    Specialist 路 Hendersonville, NC 路 Member since 2018 路 159 posts 路 23 votes
    7y

    @Angel Grant

    Thanks all.

    Besides asking my local REIA and family/friends,

    Where does one go to or who does one ask to get an unsecured promissory note?

    0Reply
  • Saravanan Saravanan
    Lender 路 Troy, MI 路 Member since 2019 路 432 posts 路 147 votes
    7y

    @Account Closed

    When some one invests their hard earned money; I want to respect their funds and secure their fair share of the funds.

    It is good practice to keep the person with 1st lien holder and provide a mortgage /note.

    Sometimes adding folks in LLC might be more costs with attorney and how to handle refinance; profit sharing in long term etc.

    In the long run; when you keep it clean and lenders are happy; you would have more funds pouring in.  

    0Reply
  • John Corey
    London 路 Member since 2019 路 722 posts 路 386 votes
    7y

    Ben, an unsecured loan is a loan that has no security other than your promise to pay. Credit card debt, a bank loan without collateral are examples.

    A car loan would be secured if the lender holds the title to the car.

    While there are lots of loan agreements on the web, you need to understand what you are doing. A loan with a handshake is also valid.

    Bringing in an investor as a partner could be opening a can of worms. There are regulations for collective investment schemes. Jail time can be a result even if the deal goes entirely smoothly. 

    0Reply
  • Caleb Heimsoth
    Rental Property Investor 路 Durham, NC 路 Member since 2016 路 7k+ posts 路 7k+ votes
    7y

    @Ben Gabin why would you need a private lender or partner for this at all?

    If you have good credit, goborrow 10-20k as a personal loan and use that. Interest is probably 9-12 percent and you can get a 3-5 year term. Get your money in 2-3 days. Problem solved.

    This only works if you have good credit and a W2 job

    1Reply
  • Caleb Heimsoth
    Rental Property Investor 路 Durham, NC 路 Member since 2016 路 7k+ posts 路 7k+ votes
    7y

    @Ben Gabin companies that will do what I mentioned: prosper, Sofi, LightStream, best egg

    1Reply
  • Account Closed
    OP
    Specialist 路 Hendersonville, NC 路 Member since 2018 路 159 posts 路 23 votes
    7y

    @Caleb Heimsoth

    Brilliant. Thank you!

    0Reply
  • Noel MooneyPro Member
    Investor 路 Greensboro, NC 路 Member since 2020 路 1 post 路 0 votes
    3y



    @Caleb Heimsoth

    I'm not sure about the rest of the companies you listed however when I looked into Sofi they request to certify that:

    "By checking this box you certify that your loan proceeds will not be used for post secondary education costs, or to invest in real estate or securities, or for any business purpose. Except as detailed in this consent, the SoFi personal loan may be used for legal, personal, family or household purposes."





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