Buying Real Estate with a private lender

[John Anderson]

I am going to start looking for private lender partnerships. I would borrow the 20% down payment from the private lender and get an 80% LTV 30 yr fixed mortgage with a hard money lender (~6.5%). I would repay P&I to the private lender monthly over 36 months, likely at 12-14%.

I haven't started asking about the mortgage requirements & searching for hard money lenders that do this yet but would like to figure out some of the structuring details before I start calling. I will sign a promissory note with the private lender. Have some questions I am unclear about.

1) Does the private lenders name go on the deed or which paperwork does their name go on if they have a second lien on the mortgage? After the 36 months, when their debt is repaid, do I need to do anything regarding the paperwork?

2) Am I going to run into hardship to find a hard money lender that is willing to do this?

Also I have great credit but don't have the DTI & correct ratios to work with banks, so they are out of the picture.

Thanks in advance!

[Steve Hiltabiddle]

@John Anderson  

I'm going to use the terms Hard Money and Private Money interchangeably because for my response I'm treating them the same although they can be different.

To your question #2, and if I understand your post in general, yes you will have a hard time finding Hard Money to do this.  I think you need to spend a little more time understanding how different lenders work.  Hard money isn't for long term loans like it seems your looking for, nor is it going to be at 6.5% interest.  Hard money/Private Money is short term money at higher rates.  While there are many approaches, I'm most familiar with an investor using private money to buy a property that a conventional lender wouldn't lend on (i.e. distressed).  The investor borrows at higher rates of interest and points to rehab the property and either flip it to pay back the lender or season it to refinance through conventional LT loan and pay back the lender.

Working with the right private lender early on can be helpful as they may help you avoid a bad deal but it comes at a cost.  Some deals in this environment might not survive a HM loan with an inexperienced flipper.

Do some searches here on BP to enhance your knowledge, there are many articles and posts searching for Hard Money, Private Money, etc. Found this as a recent one below by @ann bellamy
https://www.biggerpockets.com/blog/hard-money-private-money-difference

Read forums.  After that, talk to some folks in your area how they use lenders. 

Hope that helps.