Multiple Private Money Lenders in 2nd Position - Legallity of It?

[Daniel Dietz]

Hello all,

We (three way partnership) are working on a deal to buy a porfolio of  properties that will consist of duplexes and a 4 plex for about 870K all from one owner. We are working on finding a portfolio loan that will cover 75% =/-. We could come up with the 25% down put it would tap us out a bit more than we would like, so we are looking into how Private Lending in a 'second position' could work in this scenario. Thinking along the lines of 75% bank loan, 10-15% private money and 10-15% our down payment. The owner is considering doing seller financing by carrying a small second, but wanted us to see what else we could come up with first.

Having talked to some friends, family, neighbors, etc.... we might be able to come up with a single private lender for the second position loan, but more likely it would be more easily doable with a couple of them going in on it.

A few questions are:

• What is the legality of using more than one Private Lender with all the newer banking regulations?
• What is the simplest way to do this with still having them have a secured interest in the properties?
• Would there be any benefit to doing doing some of the properties with more traditional financing being tied to just that one property? (Not sure how to work partnership in that case is only one of us was on each loan/property.)
• Other advice on how to do a portion of the down using Private Lender for part of it?

Thanks, Dan Dietz

[Jay Hinrichs]

you first need to make sure the lender in first position will allow a second position lender.. some will some will not.

you can simply do a second deed of trust and prom note.. or mortgage what ever is applicable in your state with multiple beneficiaries.

you need to check with your state to see if Multi bene loans are legal.. In Oregon they are not.. in CA they are ... In IL  they are ... so its state specific..

you could also create a small closely held LLC agreement and the LLC makes the second loan .. one entity one loan.. with your buddies members.. this can venture into securities.. but if they are all known to you .. then you should be OK.. but again check that with local lawyer.

the Seller second would be cleanest.

so there you go.. check your first lender first off to see if putting a secured second on the property is a event of default in their loan docs.

you also want to disclose it lest you get accussed of loan fraud.