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Updated almost 7 years ago on . Most recent reply
![Felipe Munoz's profile image](https://bpimg.biggerpockets.com/no_overlay/uploads/social_user/user_avatar/168450/1681965933-avatar-felipe_m.jpg?twic=v1/output=image/cover=128x128&v=2)
How Do I Use Private Money? *NOT talking about hard money lender*
Hi BP Fam! I have a friend of a friend who's caught wind that I flipped first property and has money she'd like to lend. (Yeah! Pretty cool!) We are going to have a chat about her lending money for a fix & flip project but I'm not sure how to use private money. Is someone out here willing to really dumb it down and explain how you'd use someone else's money in this type of scenario? (This would be happening in Arizona...if that matters) Only questions I can think of are:
- Does she deposit checks to escrow company?
- I'm sure I have to record a "note"....but not sure how that happens
- I know all terms are negotiable between us, but what are "typical" interest rate and terms
Thanks for your time & advice!
P.S. I've posted some pics of first flip on IG. Feel free to follow @felnoz
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- Rental Property Investor
- Durham / Raleigh (Triangle), NC
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In NC, I use Private Lender funds to both purchase the home and provide some amount (or all) of the rehab funds needed for the project. The money never comes from the lender directly to me... Everything goes through the closing attorney, who prepares a Note and Deed of Trust between my LLC and the PML that spells out all the terms and secures the lenders interest in the property. The Note details the amount being loaned, interest rate, points, term, etc... And the Deed of Trust ties it to the property.
On day of closing, the PML wires funds to the closing attorney (verifying the wire details by phone) and the attorney records the documents with the City electronically, completes the closing and sends the original docs to the PML. I then own the property and the PML is my bank with full rights to foreclose if I default on the loan (would never happen).
I normally do interest only payments for 18 months with an option to extend (for a fee) another 6 months if needed for a total of 24. And since I'm more Buy & Hold than Flip, I complete the rehab, get the property rented, and then refi out anytime after a 6 month minimum term, but I like to try to give a full 12.
J.T.
- Jonathan Taylor Smith
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