How do you structure you pml terms?

Question

Happy new year hope everyone's having a great start! Ill get to the point i am meeting w a potential private lender this up coming week, i have been doing my homework and educating myself with what i can to approach the situation. This will be my very first deal ever. I plan on doing a flip. Im not sure how much this man is willing fund i do know that he has two very successful restaurants . I dont plan on talking numbers or asking for anything our first meet i want to get to know him ask him questions and find out what his goal, and expectations are for his future and his money. That being said here are my questions

What do you ask you PML when you first meet them and what crucial questions should i ask that you wished you had asked at first?

What term should i include in the agreement?

How should i structure the lend. Lets say worst case scenario he does decide to invest w me and he lends me 30k should i do maybe 10% interest on the 30k for 4-6 months. ?

If my numbers are off can someone point me to the right direction on where i can figure out how to set my numbers right all i find is info on how to build a relationship w PML but no actualy terms and numbers.?

Would it be a good idea to use Private money for a hard money down payment and the rest to pay my rehab and that i have to pay up front before getting reimbursed?

Thank you for your time !

Jay Hinrichs · Answer

this is called gap funding and will be very very difficult to do when you have no experience.. these are the type of deals your mom and dad  uncle or grandparents do for you.. So really what you want to concentrate on is finding a money partner .. And concentrate on your skill level and how your going to execute since you have never done this..  this is why many to most HML will not fund someone with zero experience some will but you will need a ton of equity.   Partner  is what you need not lenders

Joe Villeneuve · Answer

PRivate money is a great way to do this.  Now before someone say "the person that speaks first loses", I will tell you that the person that speaks first wins.  However came up with the "loses" statement was totally unprepared, and was basing everything on what was dictated to them.  I don't work it that way.  This means not all private lenders will work with me, but I don't need them all to.

Now, before anyone can answer this question, we need to know what your plans are for this money you will be getting.  Is it for one property, and if so, what are your plans for that property?  Is it going to be your seed money, and if so, how much are you going to need, and do you have a plan on how to use this money over and over again...but only getting one loan...this initial one?

The terms for the two uses above will/should be dramatically different.

Pedro Amador · Answer

Thank you you for your time i will keep you posted !

Tracy Selfridge · Answer

I would just focus on doing a deal by JVing with the flipper and building your flipping skills. Use whoever the flipper uses for the funding initially. Get the experience first then it will be easier to find your private money lender. As others have stated, it's going to be hard to get funding when you have no experience so focus on getting experience.

Joe Villeneuve · Answer

Hard money lenders usually don't lend more than 70% of the ARV. Private lenders maybe 80%

Pedro Amador · Answer

thank you i will try and JV w another flipper ! I have someone in mind that i have been getting advice from and has a full gut rehab going on roght now should i let him know i have a might havr a potential private money lender or just work my side of the funds on my own meaning just bring my part to the table and work things out w my lender on my own

Tracy Selfridge · Answer

Great advice Jay. Especially the part about concentrating on your skill level and executing. In order to get the skills then you have to get experience. So perhaps a good approach would be to find a deal then bring that deal to a flipper and work something out between you and him. That way you can see the process from start to finish and build up your skills.

Rick Pozos · Answer

For your example 50k at 10% annual is 416.67.

If you are trying to get gap funding, the private guy is going to be 2nd position. Some people dont like that OR they will require a higher interest rate than that. I have used a 2nd a few times. I usually pay 12% interest only. It is usually a project went way over budget and I have 1 or 2 other projects going and need to conserve on hand cash.

Joe Villeneuve · Answer

What you're missing is you are not the one that sets the terms.

How do you structure you pml terms?

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