Documents needed for engaging a private money lender?

[Paul LaSpina]

When initially engaging a private lender on a deal, what documents should be executed to:

A- Get their commitment

B- Structure business arrangement/partnership

C- Transfer funds

D- transfer payments

Thank you in advance!

[Seth Williams]

Hey Paul, Do you already have someone in mind / a firm in mind in order to fund? Having done a few seller financing deals I can tell you its actually a lot easier than people think. The attys typically can set up everything from Note, to Mortgage, and..at least here in Massachusetts, they usually request the wire from the private lender, pay off any current mortgages by requesting pay offs and so on. You literally can simply just discuss what terms you want, and then go from there. 

The deal I did - they did require I take the property in a LLC, which was fine, and carry a certain level of insurance with them as the payee in case of loss. Its essentially like purchasing a house cash, just using someone elses so there isnt really a need for a commitment letter so to speak, its more like proof of funds. I dont expect you could get the funds pre-closing, as the atty should always keep it to protect everyone.

Lastly, when it comes to payments, you have the option of getting a servicing company involved that would send you bills just like anything else per the terms of the loan, however, this adds costs since it takes some profit away from the private lender. I opted to just keep track of it myself, and as does my CPA, so they know how much I pay towards interest, principle etc & make sure its taken care of every year on taxes. 

Hope this helps, let me know if I can assist in anyway!