How to originate Promissory Notes (with Mortgage)

Question

Dear Bigger Pocket Experts, friends and fellow Investors, I'm thinking of purchasing a property via lending from private lenders (more specifically, friends and close families).

Can i just go online and find a promissory note and mortgage template, write it and get it signed with all my stakeholders (lenders), or do I have to find an expert (or is it an attorney) and get it signed/notarized via some state authority?

Thanks in advance and happy investing! :)

Terrence Evans · Answer

it is farrrr better to go to a lawyer for the first time and pay the piper once. They are better equpped to make adjustments to templates they may draw from that are applicable to the situation at hand. Plus if you need repeat the process down the line you will have a suitable template.

Using a generic one from the Internet increases your risk when / if things go wrong.

Han T. · Answer

Dear @Terrence Evans and @Andrew Kiel, thank you for taking your valuable time off to reply. I appreciate it. I agree that it is better to look for an attorney to draft out the contract.

However, i was initially thinking if I could use Fannie Mae templates such as those here...I thought it would be more cost effective for a starting RE Investor. Anyway, I have spent a couple of days thinking through what you guys have shared and I agree that doing it via attorney the first time is the best idea.

A side question, say after the attorney has drafted it, and got it filled up, how do i get the notes in force? Is it just me and the lender signing it? Or do I need say a third party to witness?

Han T. · Answer

Hmm...ic. Ok thanks @Andrew Kiel!

Andrew Kiel · Answer

@Han T.-Again, the answer is it depends, based on your state.  They attorney will be able to provide that kind of guidance.

Andrew Kiel · Answer

I fully agree with @Terrence Evans above.  What you do depends greatly on what state you're doing business in.  Is it an attorney state or a title state, should you use a mortgage with a note or a deed of trust with a note?  (confused yet? I hope I'm making my point).  Also, when investing with family & friends, you may wish to use a JV agreement or some other document?  Please, get an attorney for this, it's well worth the slight extra expense.

Julio Garcia · Answer

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How to originate Promissory Notes (with Mortgage)

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