This is my first time loaning money, how do I protect myself?

[Thomas Elam]

Greetings,

I have been to Real Estate Expos and searched the web. There are plenty of ways to find out how to borrow money but very little about how to loan it. I need a sanity check please.

One of the members in my REIA (Joe) is trying to get started in real estate with buy and hold but has no money. I am trying to get started in buy and hold myself but am having a hard time finding that first great deal. I have an ample amount of money in my SDIRA. I want to work with Joe so we both can get started. I spoke with Joe and suggested that he rehab a few houses that I will finance so he can build up his cash reserve. I am looking for a short term financial commitment.

Joe is trained as an engineer so he builds spread sheets and knows how to crunch the numbers. He has found a house that is a a great candidate for his first project.

How do I protect myself?

Do I purchase the house in my LLC and finance the repairs, let Joe supervise the rehab and divide up the profits when it is sold?

Do I hold the note on the house? How do I create a note for the house?

Am I insane for even considering doing this deal?

My thought is that in the worst case I will end up with my first rental property.

Tom