Private Money Security

[Sean Howell]

Hello all! I just had a quick question about private money and how to reassure potential investors that their money is secured and we will not take their money and run off with it. A little back story. Me and my partner have started gaining traction with raising money from potential investors and would like to start using their money to fund deals. For some of the deals we would like to use all private money (and not have to pay lender fees), while for other deals we would like to use their money to leverage a down payment. 

My question is this, how can we basically reassure them that their money is safe with us and give them the confidence to invest with us by making sure that they know their investment is protected. If it's one person putting up all the money, we could give them a first position lien on the house correct? But what if it's multiple people combined which is funding the house/rehab.

Also, if we're using their money for a down payment, the hard money lender or bank will typically have the first position lien on the house. In that situation, how would we be able to show our investors that their investment is secured? What type of things are you guys doing to give private money investors the confidence to give you large sums of money? 

[Christopher Lombardi]

@Sean Howell, I like what @Kenneth Garrett does with the LLC and that works well. There are a couple of ways you can do it. If the senior mortgage doesnt allow for a 2nd on the property, you can secure their funds with the LLC that owns the property. This is called a mezzanine loan. Or, you can also simply personally guarantee the loan so they come come after you personally if you run away with the money. Best of luck to you.