Just secured a duplex through a private lender.

[Corbin Jones]

Hello,

I just secured my second property in Milwaukee, which is a duplex. My first deal was a single-family home under bank financing, and it's been working really well for the past year that I've had it. 

This duplex will cash-flow well and it's in a C-class area. I'm looking for some advice on structuring the deal since closing has not yet occurred. The private investor I'm working with is financing this property to me at 8.5%, so I'll be refinancing in a few years after I build up enough equity. I'll then transfer the property to my LLC once I refinance. My question is this - would it be best to have my private lender buy the home in cash and sell it to me on a land contract, or would it be best to have him send me the funds and I pay him on the loan? We will be writing up legal contracts, of course. If he sends me funds in the amount of the purchase price, how will that look to the government? Is it considered a gift? Can I be taxed on that amount? This is basically a choice of seller-financing or a private money loan.

Lastly, what all should we do to structure the legal contracts and everything? Should we talk to a title company and a real estate attorney? What all should we have in place to make sure this goes smoothly? The home will be placed in my name and all taxes, insurance, and repairs will be covered by me.