Private Lending - OPM and Direct Placement

[Steve Hiltabiddle]

Hello BP Private Lenders,

Over the last 3 years I've been Lending my family's personal funds to Borrowers for their Flips and Buy/Hold projects. However, there have been opportunities where I haven't had all the funds necessary to fund a deal.

I'd like to be able to meet my borrower's needs by using OPM to fund the loans. I'd like to use that OPM from an ‘Investor’ in a direct placement approach, not raising money via a fund. Basically, my Investor would fund a specific loan not be part of a pool of funds.

One thought is I would maintain my same process and loan docs that I've used with my Borrowers where my LLC would be the Primary Lender, manage the loan and receive payments from the Borrower. My LLC would then pay the Investor from those proceeds based on agreed upon terms.

With the above set-up, could I hypothecate a Note against the Mortgage and Note my LLC would have with the Borrower that would spell out the terms of between my LLC.

Ideally, the Borrower would make a single payment like they are used to and my Investor has security based on the hypothecated Note.

Or, must/should I have Investor in 1st position with a Security Instrument and Note based on agreed to terms and then create a Note Rider for a Wrap Loan between my LLC and Borrower spelling out those agreed to terms along with a 2nd Security Instrument in 2nd position.

Example:

Borrower Pays: 12% and 3 Points

Investor gets; 8% and 2 points (spelled out in a Note)

LLC gets: 4% and 1 point

Perhaps there are a number of ways to skin this cat but I'm looking for a simple, yet protective, approach for both Investor and LLC.

Thanks,

Steve

[Steve Hiltabiddle]

@Michael DeAngelis  I actually did not move ahead with taking others funds.  It's still something I'd entertain but since things slowed a bit, I didn't have a need to pursue this.