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Updated over 15 years ago on . Most recent reply

User Stats

147
Posts
129
Votes
Brian Larson
  • Investor
  • Redondo Beach, CA
129
Votes |
147
Posts

How do I setup a private money loan with an investor?

Brian Larson
  • Investor
  • Redondo Beach, CA
Posted

Hi all -

As you can see, I am a bit new to the forums and somewhat new to RE investing in general. So, after many, many posts read on this forum, I think i have a plan and I was wondering what the best way to go about this situation is. Please note that I will be consulting a Real Estate Attorney to get this setup right, but wanted to get any feedback the great people on this site might have.

So with that...here is the situation.

My investor wants to buy a foreclosure in my state (he is in another state) and he knows that I have the right connections to get this done. Instead of paying me a simple fee to find him teh right price, he wants to help me out with some seed money...so here is how i see this working. Please comment as you see fit.

1. He loans my LLC $100k to buy a property. This loan is a 24 month, no interest loan (promissory note with balloon?) wherein I will pay him back the full amount in month 25
2. I then sell this property to him via traditional financing
3. He now has his house that is cash flow positive and I have $100k (or some sub amount of that) in seed money to invest as I see fit over the next 2 years

I know this is one of those 'too good to be true ideas'...or so I hope it is, but you have to understand that the initial discussions were around me looking to find investors to loan me $$ so I could buy, fixup and then resell. The goal was to give the investor 60/40 of the profit and return the $$ in 3 months.

Because this investor wants to own a property and does not want to pay cash, he sees this as an opportunity to get a good property (I do actually have that know how) with positive cash flow while helping me out in more than a referral fee method.

Some of my questions around this are tax implications and how the 'flip' takes place. Can he simply come in with traditional financing after I buy this house for cash (through my LLC) at a trustee auction?

Is the best way to setup the loan a promissory note? If so, can I do a 0% interest note or does there have to be a minimum percentage?

I have a ton more questions, but I think this gets my basic premise out there to see if there are major holes I am missing or why this woudl not work/is not legal.

Thanks a lot for reading this. Sorry for the long post. If I missed any details let me know and I will try to fill them in (if I had thought about it...)

thanks
-peeklay

Most Popular Reply

User Stats

1,148
Posts
903
Votes
Brian Levredge
  • Investor
  • Chattanooga, TN
903
Votes |
1,148
Posts
Brian Levredge
  • Investor
  • Chattanooga, TN
Replied

I understand the part about the two year, 100k loan. What I don't understand is the house purchase part of it. You are getting a 100k loan that you will have to pay back. Let's say for the sake of argument that you buy a house with that same 100k. For you to profit off this (in order to repay the loan) you would have to sell the house above what you purchase it for back to your investor. In essence, he would be paying himself back with his own money. If I'm not understanding you correctly, let me know.

  • Brian Levredge
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