Private lender relationships

[Account Closed]

Hello, 

I have a question about fix and flipping houses. 

I know that out of the many relationships you can achieve with a lender, two are: equity partner and taking a loan from them. 

Assuming that your lender isn't institutional:

1) what contracts do you use for a lender that gives you a loan? How do you get his name on the mortgage? Also, in your personal experiences, what rates have you been able to receive from them?

2) On the other hand, when you have a equity partner, where you use all his money and you do all the work, and you split profits, what contracts do you use to secure your/their position? Do you put the house under both your names? How does the partner know you won't just screw him over? Also, what contracts say that you will split the profit, when he can technically screw you over. Do you have different contracts for the house itself and the repair expense?

Thank you in advance. 

[Matt Motil]

Originally posted by @Account Closed:

Thank you so much for your help.

For the first one, what if its my Uncle Rick that is lending the money?

Definitely get the terms of the deal in writing for Uncle Rick, or you risk a very awkward Thanksgiving day dinner if things go south. If this is your first deal all together and you don't already have an LLC and you intend to do more deals with Uncle Rick after this one, then creating an entity together and disbursing funds as you deem necessary from the company is the way to go. Typically, LLC's are really cheap to setup, and even if you only want to do one deal together, you can dissolve the entity after the deal is done. You can actually have the entity exist only for that particular property and nothing else. Setting companies up like that is nice, because when the deal is done, there's no arguing about whether you continue in business as originally laid out or not; you have no choice but to dissolve the company, take the funds and move on. You can always go and start a new company with the funds, but that's up to you and you're not locked into anything.