Private Money questions

[Rich Thomas]

Hello all, I need some advice on how to go about paying back a private loan... I am in the process of buying a house to flip and need to borrow 300k...i will be using about 200k of my own money also.. I have a close family member that has the cash and I believe is willing to loan the money, but my question is what is the standard way to go about paying this money back? And also at what percentage ? Do I pay him monthly payments with interest or repay the whole amount at the end of the project with all of the interest at once? Im expecting the project to take 3-5 months from start to finish with resale... I want to have all my ducks in a row with a solid plan to lay out before I approach him.. Any and all info is appreciated! Thanks Rich

[Shiloh Lundahl]

@Rich Thomas I  encourage you to use a promissory note detailing the agreement and to do a deed of trust on the property for anyone who invests with you; even if it is a family member. I would also encourage you to outline the details of the investment, including multiple exit strategies, when you approach him. You may want to know what your break even number is so that you can explain to him how much of a safty margin there is before the deal would lose money.  Then, I would encourage you to have all monies go either through the title company, or directly to the contractors on a draw schedule. That way there is never any question about mingling funds. There have been many family disputes over deals that have gone bad. This will protect your uncle and you and preserve the relationship in case the deal goes south. I would also encourage you to have an understanding what will happen if the deal does lose money.

 This might seem like overdoing it since it is a family member that wants to invest with you, but if you want him to take you seriously as an investor, then take him seriously as an investor. Also, by doing this you will be set up to do more deals with other investors. 

Good luck.