Basics of Prive Money Lending (Debt Method)

[Mason Haley]

Hello, I am trying to better understand raising private money. To my understanding there is debt or equity methods and the debt method is more straightforward so let's start there. In my situation for this example I am assuming, I have a job that will enable repayment of my debt to the private money lender regardless of refinancing or income from the property. Let's say I need $50,000 to close on a $200,000 and would like to borrow $50,000 (a close friend not involved in real estate). Say that we negotiate a 9% rate paying interest only for 10 months then a ballon payment in full at the end of the 10 months.

So here are my questions with this scenario and private money in general...

1) How is this most easily accomplished a promissory note? 

2) Can you give some reasons as to why someone should do this who is not involved in real estate? (Obviously it will make them more money at a low risk...) (Is the private money lender taxed when payed?) 

3) What are some common ways to structure these deals? (average rate, are there points associated, etc.) 

4) Are there any deductions the buyer can take advantage of in this structure? (I.E. can the buyer write off the interest payments or anything along those lines?)

5) Any other advice you may have!

Thank you