Real estate private money

[Bryce DeHaan]

I have a bunch of deals lined up but plan on borrowing down payment capital from a private money lender. The mortgage itself would be a regular bank conventional loan. My question is, how do I structure this for the private lender to ensure they have security? One of my potential private lenders is weary because she wants to be first priority lien holder but obviously the bank would come first. I understand that we would do a promissory note but what would be her collateral? This will be a buy & hold multi family investment and we would pay her back in monthly payments until she gets her money back at let’s say 8%. What would be the best strategy here?

[David Ginn]

@Bryce DeHaan
 Number one, I would point back to my guidance and just say make your decisions on the fact that the market is going to correct.

I would not focus on borrowing money for a deposit and would stay in the lower end markets--whatever the lower end of the markets are in your area. So if the lowest end is at $100,000 for blue collar workers, go in and buy a property using your own money as a deposit. Then use the lender’s money, so he's more comfortable with you having skin in the game.

Go do some flips and get in and out as quickly as possible. Prove yourself to the lender. After you've done that, then the lender may be willing to come in at 100 percent. If, on the other hand, you’re not successful and you lose money in the deal or break even or make a small profit, you're gonna scare your lender away.

So I would strongly advise against borrowing a deposit unless you have a ton of experience that you can show the lender that you can take on 100 percent financing and deliver successfully to the other side.

You also want to be sure to look at the margins in your deals. If an investment you buy off the MLS hasn't any margin or spread, then your lender would be crazy to lend you money in the market right now.

I'm with a group of people they’ve 8 to 10 online Zoom meet up calls a week. You can come in for and get a strong education. You can’t get a better education anywhere else on what's happening in the marketplace. So that’s also your best move, hands down.