Private Money Loan: How to Present?

7 Replies

Hey BP,

I'm Jay, a Real Estate Investor in Las Vegas, Nevada. I'm looking to borrow 100,000 from my great grandma to do a BRRRR deal. I'm not sure where to start with the contract. I want to make the terms of it similar to a hard money lender so they are getting treated the same as a lender I would borrow from. How do I present the loan terms and what would they be? Plz hlp XD

@Jay Eubank Keep in mind, there is a major difference in this case from a HML. YOU need to do all the due diligence and be responsible for protecting your Great Grandma and her capital. A HML might catch if the property is in a flood zone or isn't insured properly, has a tenant in it and needs an estoppel certificate, if your renovation is going to cost more or take longer or your ARV is too hopeful, etc.

Second - make sure you have sufficient reserves. I would say at least 6 months of carrying costs (interest, insurance, taxes, etc.) PLUS probably 50% of the renovation costs (unless you are super experienced in construction management, then maybe just 25%)

Please be sure that the funds from your great grandma are not from any type of retirement accounts funds such as an IRA or 401k. Most likely not, but do confirm because you are a disqualified person to her retirement funds.

Find out from your local REIA who is the preferred RE attorney in your area. Changes are they have drawn up thousands of promissory notes and mortgages using private money. Using an attorney will ensure everything is recorded properly.

@Jay Eubank

Hey Jay,

I’m currently in the process of lending out my own private money and am following this topic to pick up any tips and knowledge. I did buy a property from my grandma a couple of years back where she held the Mortgage and we did a promissory note. I believe we just used a real estate attorney and it was a simple process. Not sure if it relates but hope I can gain some info from this as well.