What paperwork do I use to combine private lender and hard money?

[Gail Greenberg]

Hi - buying a flip shortly. Hard money lender is giving us purchase price of $95K and private lender is giving $60K rehab money. Hard money people want first position plus a deed that's won't be recorded unless they have to take ownership of the property.  What paperwork do I give the private lender to secure his investment? Is a promissory note enough?  Also private lender is from CA and I'm in PA. Any SEC issues to consider?

[Ed W.]

@Gail Greenberg I'm a very strong believer in keeping people nice enough to help me with financing very safe (this is true whether in seller-financed deal or on the rare occassion I might use a private lender). I think you do a great disservice to your private lender if they don't have a mortgage AND sufficient equity (say 30% of FMV) above the combined loan-to-value of the first and second to protect their position.

I'm not an attorney but I strongly suspect that the hard money lender holding a deed has the potential to compromise to a degree the private lender and, if I were the private lender, I'd sure be getting competent legal advice relative to law and precedent in the state wherein the property is located.