Private Money Lending Trust

[Brice Aldrich]

Hello All!

I'm trying to raise capital to do some co-investing with experienced partners. I am new to the game but have done a fair amount of research, networking, and reading around the topic of realestate. I am 21 and have a decent paying software job for Fort Wayne IN, at $60,000 salary. I am able to set back about $33,000 a year out of this salary, but around $18,000 of that goes towards tuition for my wife and I each year. I am disappointed with such slow financial growth, and really want to get out of software and do full-time real estate investing. I imagine I'll have to keep my software gig for several years before I am able to do this.

In the mean time because I am only able to use about $15,000 a year towards realestate I thought of a creative financing plan to fund future partnership deals. The idea is you gather a series of private lenders and you put all of the loaned money in some type of entity. Each lender puts their money in at the same time, and the loan length is 5 years. The max debt I want to take from these lenders is around $80,000 combined, because if something were to fail, I could still make payments at this point. The entity that these lenders put their money in, will in return give them 7% compound interest (not amortized). In a way its kind of like an REIT. My LLC will control the entity that the loaned money is in. The lenders can't call their loans unless I miss payments of course.

My question to you, is if I were to set something like this up, what would the entity type be? Some type of trust? What are the legal consequences if any (I will still ask an attorney, don't worry)?