Private Lender Advice

[Gregory Brooks]

Hey guys, I am new to BP, well posting on BP.  I have been lurking for a awhile and when I have a question I search for it and always find the answers somewhere in the forums.  

Anyway I have a question regarding private lending that I couldn't find or get some candid advice from. 

I have an acquaintance that is interested in being a private lender for me to invest in real estate, as long as the numbers work.  What, in your opinion, is the best way to structure a private lending deal primarily for buy and hold properties? 

here are some scenarios that I have thought of: 

1.  Private Lender covers the entire cost of the purchase including down payment, closing costs, rehab, etc... then combine all of that into one lump sum that is lent as a "mortgage"  with a predetermined interest rate. I would have $0.00 of my own invested, but pay off the loan amortized over 10, 20, 30 years etc... in this case the lender acts as a he bank. 

2.  The Private Lender pays upfront down payment, closing costs, rehab costs, etc...  I get a conventional 30 year loan on the property's and split the cash flow and equity 50/50 with private lender.  

3. Same as option 2 minus the equity and cash flow. BRRRR the property and pay off the lender plus a predetermined amount. I know this will only work with a BRRRR potential property.

Any advice, criticism, or other potential options would be greatly appreciated.  I do plan on reading Brandon Turners book on low and no money down investing.  

Thanks for your Time,

Greg Brooks

[Timothy Maloney]

Option 2 wouldn't be possible unless the "investor" is listed on the app.   Most lenders, myself included, would want to trace back the source of funds and would require them to be part of the app.   You've got plenty of patriot act rules these days so be prepared to show a detailed history of those proceeds.

I have a borrowers that started using your option 1.   That money is scarce and if you are able to secure it I say "God Bless" - It's a good way to get started and in time cash out refi.   

Good luck and welcome!