Private Money - Necessary Paperwork? How to Present it?

[Alex Witte]

Hello Everyone!

When presenting the idea to family & friends about them lending their money to you to invest into real estate how do you do it?

Do you have a pre-drafted contract that shows what guaranteed money they will get? 

What does the paperwork look like? I am interested in seeing an example if anyone has one.  

I understand that the variety of opportunities will determine if they want part ownership or a simple fixed rate of return, but I don't know how to present the options to them. 

As you all know a lot about real estate is proving your credibility and making other people comfortable and confident in your ability so I am trying to figure out the best way to do that...

Thoughts?

Thanks for all the feedback! I seriously love this community. Being able to talk openly about these types of topics is so useful. 

Alex

[Jeff Copeland]

Wisconsin being a lien-theory state, for a private mortgage, you would typically have 1)  a mortgage, and 2) a promissory note. 

For the most part, these will look like any other mortgage documents. Except instead of saying "Bank of America", they would say "Aunt Sally and Uncle Joe".

The documents are typically drafted by an attorney and executed at closing. You can google "sample mortgage and note Wisconsin" and find plenty of examples/samples.

On a $100k mortgage, amortized over 15 years at 5%, you would pay back Sally and Joe their $100k principal, plus $42,343.00 in interest, with fixed payments of $791. This can be derived from any mortgage calculator. 

Obviously, you want to start with the benefits of being the private lender ($42k in passive income) when presenting the idea.