Wholesaler · Sterling Heights, MI · Member since 2014 · 335 posts · 105 votes
Hi everyone,
I need help with structuring a private money lender deal. I have a rehab that is almost done. I'd like to purchase the property instead of listing it. I have a private money lender, but I just don't know how to structure the deal.
Anyone out there in the Michigan area that can assist me?
Rental Property Investor · Mercer Island, WA · Member since 2008 · 22k+ posts · 14k+ votes
8y
Are you doing a fix and flip that you used a private lender to do, and now you want to keep it? Or are you looking at a fix and flip and want to buy it using a private lender? I'm confused.
If the former, just refinance it into a long term loan, ideally a conventional loan. That will pay off your private lender.
If the latter, the private lender will be just like a bank. You will have a promissory note to document the loan terms and a mortgage or deed of trust to give the lender security in the property.
Rental Property Investor · Mercer Island, WA · Member since 2008 · 22k+ posts · 14k+ votes
8y
Are you doing a fix and flip that you used a private lender to do, and now you want to keep it? Or are you looking at a fix and flip and want to buy it using a private lender? I'm confused.
If the former, just refinance it into a long term loan, ideally a conventional loan. That will pay off your private lender.
If the latter, the private lender will be just like a bank. You will have a promissory note to document the loan terms and a mortgage or deed of trust to give the lender security in the property.
Wholesaler · Sterling Heights, MI · Member since 2014 · 335 posts · 105 votes
8y
Hi @Greg Scott & @Jon Holdman- Sorry for the late reply and thanks for responding. Sorry for the lack of details in the property. Here are the details of the property.
Purchase price: $15K
ARV: $75-80K
Rehab costs (estimate): $30K
All in costs: $45K
Will rent for $950/month
I partnered up with 2 investors and we all invested $15K. Our goal is to list it for $75K and split the profits 3 ways. However, I really like the property and wanted to acquire financing to keep it as a buy and hold because rentals are very strong in the area. I wanted to connect with a private money lender to finance me so I can cash the other 2 investors out. I would be more than willing to create a promissory note and mortgage with the private lender. My goal is to refi the property in a year or less.
Wholesaler · Sterling Heights, MI · Member since 2014 · 335 posts · 105 votes
8y
@Greg Scott & @Jon Holdman - I forgot to mention. It's in the city of Roseville (Michigan) and I have a property management company lined up to start screening tenants. The house comes with a 2-1/2 car garage as well so it should rent extremely quickly.
Rental Property Investor · SE Michigan · Member since 2014 · 4k+ posts · 6k+ votes
8y
Emilio:
Thanks for the details. Here is an idea for you.
The best private lenders might be your existing partners. The easiest way to make this work is to buy them out by turning their equity into a loan to you. (You may want to throw some cash their way to sweeten the pot.) Then in a few months you convert that private loan into a conventional and they get fully paid.
Wholesaler · Sterling Heights, MI · Member since 2014 · 335 posts · 105 votes
8y
Thanks @Greg Scott. I did discuss that with them. This was my first rehab and I think I'm falling in love with the property which I should be careful. I can't buy them all. I should just rehab it, list it and then keep moving forward.
Rental Property Investor · Grand Rapids, MI · Member since 2016 · 262 posts · 205 votes
8y
A commercial lender may be able to help you cash out your partners. It’s worth a look for sure.
I️ totally empathize with you about becoming attached to a property you rehabbed. When you put a lot of time, money and sweat into a place it can be hard to hand the keys over to someone else, even a tenant. It gets easier though. Just make sure you screen very well. I️ wish you luck!