Structure a Private Money deal

[David Moore]

What is a typical way of structuring a private loan for a flip, specifically on the repayment side? I am the borrower and want to approach some individuals I know about investing with me. I want to be ready to lay out exactly how the loan would work. It seems the best/most common method is to sign a Promissory note, they will wire the money to the title company prior to closing and receive a Deed of Trust at closing placing a lien on the property.

I would also want to borrow additional funds for the rehab above and beyond the purchase price. Would they pay this directly to me after closing? Or should it be part of the closing so it is part of the DoT? How is their money secured or is this typically just based on our trust relationship and the Promissory note at this level?

Next I am wondering how actual repayment works? My thought was to essentially amortize the loan at 10% with a 1 year term and make interest-only payments during rehab, then repay the principle upon selling. Even better would be to not make any payments during rehab and pay Principle and Interest in full at closing, but I don't know if this is standard practice? Is this adequate earnings for the lender on this type of loan or am I still missing a component?

If I cannot cannot rehab and sell within a year I would refinance and pay off the private money lender and rent the home or continue to try to sell. I've done a few searches on BP and can't seem to find some of this more specific information. Thanks for the help!