In which ways can you pay back private money lender?

[Nick Zias]

Hi Everyone,

I am looking for some possible alternatives on paying back a private money lender. If I was to borrow lets say 100K for a down payment on a property I am currently speculating on. My current strategy would be to offer an 8-12% on his investment for the year. However Id also like to borrow against the equity I would have on the home to repay back the full amount of the loan so that I only owe the bank now. Is this a possible strategy? 

Thank you 

[Jay Hinrichs]

@Nick Zias  to clarify all the post

NO you cannot borrow money from a friend and call that your equity. when you get a loan. you in essence have two loans.. lender won't allow it.

YES you should in this instance create a LLC with the 100K as a Member.. and there capital contribution is 100k.. NOT a Loan to the LLC but true capital.. if they own less than 20% of the LLC usually they don't have to PG. you CAN have uneven distributions in an LLC so no matter what % they own they still have a capital account to cover their cash.. the capital accounts would look like this

1. your friend  100K

2. you 100 dollars..

property is sold it makes 200k first 100k goes to your friend.. next 100 dollars goes to you.. the 99,900 can be split any way you guys agree to in the operating agreement.. this is the luxery of the LLC... you can establish a pref . return plus equity.. only a pref no equity.. what ever you folks agree to.