Loan on Real Estate

1 Reply

Hello,

I'm lending a long time friend money on a house that we are going to flip. I've flipped in the past but not lately. I've flipped and I own a few properties, but I've never lent money. Its not going to be a ton of money, 10k so far, $20k max id say. The property has already been acquired (not in my name) and was taken with the existing first mortgage. Its in PA. My question is do I make a second mortgage and file it or what forms would I use ? And I'd also like a POA on the property in case something happens to my friend and his family takes over. Hes single but does have a minor child. He lives a wild life at times and if something happens to him, I want to be covered. Our deal is I get back whatever I put in and we'll do a 60/40 split on the profits. Its his find so I agreed to 40.

Any help would be appreciated ! Thank you !

I would draft a note and mortgage which you alluded to being in 2nd position. To protect yourself in the event of your partner exiting, draft the note as a Participation loan. The language in the note would say, you get 40% of the Net profit. You could add dates and deadlines to the note as well as a clause that says in the event of your partner's death or incapacity to finish the project,  the note is due and you can take over the property.
My point is, any terms you agree on can be put into a note and mortgage.