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Updated about 14 years ago on . Most recent reply

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Paul B.
  • Real Estate Investor
  • Alpharetta, GA
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How can/would you structure a $100K loan from four unrelated investors ($25K each)?

Paul B.
  • Real Estate Investor
  • Alpharetta, GA
Posted

I'm starting to look for private funding. Thing is, it's going to be easier to find people willing to put $25K into this product than it will be to find people willing to put in $100K or more.

If I need to borrow $100K but have access only to $25K investors, is there a way to do that? I was thinking the cleanest approach would be to just have one note with four co-lenders, but they might not like that; it could get messy if things go wrong and they don't know each other. I don't think you can have four separate notes, either, assuming that they all want equal collateral.

I then thought to do a single-purpose LLC that would loan me the money, but is it really worth the time and expense of creating an LLC just to hold one note? Plus, that might raise all sorts of securities issues, since now I'd be selling shares in an LLC and not just borrowing money.

Any way to make this work with smaller lenders?

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Jon Holdman
  • Rental Property Investor
  • Mercer Island, WA
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Jon Holdman
  • Rental Property Investor
  • Mercer Island, WA
ModeratorReplied

I've done it with the LLC. I was on the lending side, and the amounts involved were larger, but in CO the costs for an LLC are minimal.

Your four investors, NOT YOU, should form the LLC, sort out the operating agreement, put in their money and then the LLC should lend it to you. Unfortunately, I'm guessing this may be overly complex for your four investors. If you're the one who forms the LLC, and each contributes, then it lends the money to you, then you're a syndicator, and your life is much more complex. I doubt that's worthwhile for only $100K.

Really, the best bet is to find investors with enough cash to do a deal by themselves.

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