PML Delimma - How to Structure Lien

3 Replies

I'm a new investor, with some rentals and rehabs under my belt. Thru my network I got introduced to another investor who looking to borrow money. However, at this point I cannot completely fund their deals because I invested money elsewhere because it was taking too long for them to close.

However, they are planning to secure lending elsewhere but still want me to lend 1/5 (One-fifth) of the money. Their purchase appraised income approach around 300K which is also the purchase price.

I'm confused about the lien position on the Commercial/Mixed use property. Would we be in First, Second or 3rd position.

Borrower also suggested that we can put a lien on their other Free and Clear rentals that they own but they are in D class area and I don't value them over $30,000 for each. Total of $90,000. Moreover, in worst case scenario, I don't want to own their 3 rental if they default.

My inclination is still to put the lien on the subject property. I hope they succeed and fulfill their note obligation.

Any suggestion on how to structure this lending in our best interest?

Thank you

@Steve K.  It sounds like he wants you to lend the downpayment and someone else will finance the rest. If so the 80%  lender will want to be in first position and you in second. I would not do a loan unless I am in first position. Clarify his intent and proceed accordingly.

Promotion
Apartments.com
List, Screen, Lease, Get Paid, Manage.
No Better Place to Lease Your Place
Owners rely on the #1 rental site to get the best results from their rental properties.
Get Started Now

Take a second on this one, which gives you risky security, and a first on the other two.  Even though you wouldn’t want the other two, it gives your borrower more incentive to pay you.