Private money lending- loan structure

[Andrew B.]

I run a real estate investing business in Florida, where we are acquiring properties through various channels, rehabbing and selling them. We started with a few per year, but have progressed to 1 per month at the moment. We currently fund 30-50% of all our properties and rehabbing etc, but do have 2 private lenders from whom we are lending from.

We are purchasing the properties and paying in full and then get them onboard after the closing to take a look and decide what they want to lend. We then record a note and mortgage for the loan and once we are done rehabbing and have it under contract, we need a satisfaction of mortgage from them and redo the mortgage to a new property.

The whole process doesn't really work well due to the increasing volume and was wondering if there is a better solution to structuring these loans with the lender feeling secure and a way of rolling over the money from one job to the next. The main reason it gets complex is due to the fact that each loan is only for a period of 3-6 months.

Is there any other type of loan or way they can secure their loan without having to do actual mortgages on each and every property. The fact they have never loaned before leaves me helping to structure the loans, but I just don't know enough about it.

They enjoy their cheque every month and the rates are better than HM and most other lenders, but I know they don't want the headache so any suggestions on doing this a easier way would help.

I have reached out to my attorney and cpa, but have not had a great response.

Thanks

[Craig Rismiller]

I do private lending but I prefer to pull my money out after each deal - that way I can evaluate the merits of the next deal. Of the 6 deals that I have funded right now, 5 are secured with mortgages / deeds, a Note and Personal Guarantees and 1 of the deals just has a Note / Personal Guarantee (i.e. no recorded mortgage).

Like previous posters have stated, I look at experience, loan size, duration, lien position, etc. to decide if I am going record the docs or if it is going to be unsecured.

If you are doing multiple deals with the same lender, you may also want to consider forming an LLC. You would then be partners with your lender(s), and you could determine the profit split via your operating agreement. You would serve as the general partner and make all decisions, but the company would hold title of the properties that you buy -- thay way they still have the security without the hastle. This can be very useful in states that charge taxes / stamps / fees for recording mortgages / deeds.