Private Lenders - All in First Position?
Hello,
I'm curious how to structure multiple private lenders. If three private investors all come in as debt to buy a fixer all cash, can you structure such that they are all in first position?
Thanks in advance!
#1 All Forums Contributor
- Investor
- Virginia
@Kenneth Reimer
You would need to do it as a fund or an LLC whereby they are active in the management of company and operating agreement states how money is returned
Technically you cannot have all in first but if there was a shortage one would not get nothing.
Make sense?
#2 All Forums Contributor
- Real Estate Broker
- Lake Oswego OR Summerlin, NV
- 58,859
- Votes |
- 39,960
- Posts
#2 All Forums Contributor
- Real Estate Broker
- Lake Oswego OR Summerlin, NV
Originally posted by @Chris Seveney:@Kenneth Reimer
You would need to do it as a fund or an LLC whereby they are active in the management of company and operating agreement states how money is returned
Technically you cannot have all in first but if there was a shortage one would not get nothing.
Make sense?
actually in CA you are able to fractionlize deeds of trust its how much of private/ hml is done in that state. what a fractionlized TD is you compared to tenants in common .. so the beneficial interest in the DT would read.. Jay to 40% Joe to 30% and Steve to 30% so each are investors in first position.
you simply need ( like me ) a CA real estate broker to do the very simple paper work and disclosures..
you can do as suggested and put them into title as co owners of a LLC or as tenants in common.
But if you want to retain title yourself and bring in debt thats how you do it in CA.
Some states its illegal to fractionalize DT or mortgages Like Oregon is not legal but other states it is legal.. Check what state your in and for easy double check just ask a good experienced Escrow officer if they see any of these or if its an attorney closing state they will know off the top of their head.
#1 All Forums Contributor
- Investor
- Virginia
@Jay Hinrichs
Ahh that’s correct i forgot about that in CA
#2 All Forums Contributor
- Real Estate Broker
- Lake Oswego OR Summerlin, NV
- 58,859
- Votes |
- 39,960
- Posts
#2 All Forums Contributor
- Real Estate Broker
- Lake Oswego OR Summerlin, NV
Originally posted by @Chris Seveney:@Jay Hinrichs
Ahh that’s correct i forgot about that in CA
There are many other states that allow fractionlized first mortgages IL is one we have seen this done.. Of course this is all done in the private sector but I have seen banks partner on loans as well but again those tend to be very large deals. where the borrower is requesting a loan above the banks loan limit they will partner with another bank .. Our bank did this alot when we enjoyed some pretty large guidance lines ..
@Jay Hinrichs @Chris Seveney This is exactly the information I was looking for! Thank you both for taking the time to respond. Problem solved!!!
#2 All Forums Contributor
- Real Estate Broker
- Lake Oswego OR Summerlin, NV
- 58,859
- Votes |
- 39,960
- Posts
#2 All Forums Contributor
- Real Estate Broker
- Lake Oswego OR Summerlin, NV
Originally posted by @Kenneth Reimer:@Jay Hinrichs @Chris Seveney This is exactly the information I was looking for! Thank you both for taking the time to respond. Problem solved!!!
No problem the reason fractionalized DTs and Mortgages are used widely in CA.. is the basic price points and loan sizes in CA.
Even when we were doing these in the 80s and 90s loan sizes were already north of 250k with averages more in the 500k range it was just very tough to find one investor who had that kind of cash.. or wanted to put it all in one deal.. but very easy to find multiple investors with say 50 to 100k each.. same theory as those who raise money with a fund they are simply pooling others money so they can either make loans or buy loans.