Private Lending and How to Approach

[Mat Deveaney]

Do I need a lawyer to set up private lending? If I have someone who will lend me an amount do I just get a personal check? What types of return percentages are the norm for private lending? These might seem like dumb questions, but I would just be nervous to handle other people's money without knowing the legality of it.

[Julian Buick]

@Mat Deveaney I think in your state you need to go through an attorney. Otherwise you can do it through an escrow company. An attorney should write up the promissory note and deed of trust/mortgage and the escrow company/attorney handles the transaction. The lender writes a check to the escrow company/attorney and they ensure the documents get signed, notarized and recorded. Then they release the funds to you. The rates and terms can be whatever you and the private lender agree to. If they are someone that knows you really well and trusts you a lot and are just trying to help you out then about 7% is reasonable. If they are someone that knows you a little bit and are interested in lending you money because they think it will be a good investment then expect to pay anywhere from 12 to 20%. These are generalizations. Hope this helps.