Family Member Lender Protection and Entity Questions

[Matthew Haskins]

I am investing in and around Minneapolis Minnesota. I have been working on finding funding for Rehab projects. I have found family members and friends that would be interested in loaning on deals. I want to make sure that these important people in my life are protected properly in these deals.

Questions that come to mind:

• Do most lenders create a business entity for their loans?
• Do usury laws apply when the lender is secured in the first position of a mortgage deed? Minnesota law seems to not restrict interest rates on mortgages MN Law, Law Summarized in Paragraph 4 by MN Lawyer here
• How else can a family member safely be brought into a real estate deal as a lender? Is a partnership appropriate in this case?
• Other than securing the lender with A Promissory Note, Mortgage Deed, First Payee on Insurance Claims, and Personal Guarantees what else should the lender be secured by?
• Anybody know of good attorneys to send lenders to in Minnesota so that they can do their own due diligence?  

[Dan Coleman]

Instead of pooling money for capital to invest. I would just start off buying with FHA/FHA 203k financing. There is really no need to have to syndicate to start investing. After you have done a handful of deals then venture out.

Personally, syndication, creative investing and to some degree partnerships are tools best used with experiences. At the end of the day "you don't know what you don't know"and in my opinion you really only can gain the knowledge by actually doing. An inspector can give you a surface level idea of the properties condition but when you start to open up walls, all bets are off. Losing your own money is one thing but a family members money is another.