A deal too good to be true?

[Daniel M.]

I've been presented with an unique opportunity that sounds too good to be true. I'd appreciate if anyone could offer some input. I met with an investor at a property he owns free and clear. He bought it the first week of December and he's about 70-80 % done with the project.

He wants me to lend him $50,000 and give me a $15,000 return in 3 months. I would have a first lien position on this property but he also told me my name could be added to the title. I ran the numbers on the property and the deal makes sense. With that being said, I want to be extremely cautious as this deal sounds too good to be true. Here is my plan:
1) Run a background check on his entity and the individual
2) Have title company run a title commitment, I think I should get title insurance as well to be safe?
3) Have him sign promissory note, deed of trust, loan agreement and a guaranty agreement.

Since I'm making my decision based on just collateral, should I ask him to provide tax returns? Since this is a 3 month short term loan, what penalties do you think would be appropriate if borrower doesn't pay in the 90 day time frame? What other things I can do to protect myself in this situation?

[Bruce Woodruff]

This does sound fishy....if you go ahead, consult an attorney first. Check and double-check this guy over and over before proceeding. CYA.