Terms for Borrowing Down Payment from a Friend

[Jonathan Decoster]

Looking into buying a small multi-family unit here in Cleveland or Columbus. I will need to borrow the down payment. If you have experience in doing this how did yall  pay back the loan? Interest only payments and promise to pay the principal within a certain time frame?

[Jonathan Taylor Smith]

Well first, is your primary lender going to allow your down payment funds to also be borrowed? Most will not... And does the person expect to get any equity in the property in exchange for making the deal happen with their DP funds? Assuming not, you should still create a note with the repayment terms spelled out. And do you have anything you can pledge as collateral against the funds in the note? It has been my experience that the more you treat this as a professionally handled loan transaction, the more likely they'll be willing to do it again upon full repayment with interest.