Promissory Note

[Eric Schrader]

Hey folks, 

So I have approached some family members and have a few that would like to start investing in real estate.  I would be the muscle and they are the $.  Does anybody have an example of a promissory note I could use as a template.  I understand the jist of what should be in that document but I don't want to miss something important.  If they are funding the rehab portion, what other folks need to look over the document (title company or attorney)? Since this is for rehab only, with no position on the asset, is it just as simple as a payment contract between 2 parties?

Thanks  

[Jeff Rabinowitz]

The note is just an agreement between you and your lenders. It can be as simple or thorough as you both agree to. Your lenders will be best protected if the document is thorough (defines defaults and addresses what happens in case of default), legal in your state (lending laws differ considerably between the states), and allows you lender to repossess the property if you fail to repay the loan (has a mortgage associated with it). The best agreements will have two documents: a promissory note which details the terms of the loan (interest rate, when payments are due, late fees, who pays for property insurance and what the lender can do if you are responsible for this but don't pay the premium, etc.) and a mortgage (which gives the lender the right to foreclose if you fail to repay the loan). The mortgage should be recorded at the County. 

You may be able to find templates but the terms are important and should be understood by all parties. Whether you use a template or not take the time to consider the documents. It is advisable to consult with a local attorney with experience in lending laws to make sure the documents are fair and will accomplish what you wish them to .