Real Estate Investor · Whittier, CA · Member since 2014 · 58 posts · 3 votes
Hey Everyone!
Happy Holidays.
Question: a partner and I purchased a property cash last month (vested in an LLC where we are 50/50 members). We have now started collecting rent, and what to set up the capital contribution we both put into the LLC to purchase the property as a personal loan to this business, with the net rents paying this loan back to us.
1) Does anyone have such a promissory note they have used that they could share?
2) Since there will be at least one person trying to get that easy post to rack up their post tally by briefly and ambiguously says "go see a state specific RE attorney," one tip that I would appreciate that comment at least say which state's laws I should be concerned about, and thus, know which state to find and attorney in?
3) Is there a cap to what we can set this interest rate to be (I've heard that you can't exceed whatever cap users laws would allow). If anyone has heard of this, I'd appreciate direction to resource it (because somehow, hard money lenders seem to be able to go around this, as well as sub-prime car lenders).
Thank you so much! Burned a lot of time on the web trying to figure this one out on my own!
You have some pretty technical and specific questions in this post and your other post that are also very state specific. As far as promissory notes go I have used them a lot in business and they are very straight forward. Since you seem to be trying to avoid attorneys I would honestly just go pull one off google and change wording to fit your needs. As far as usury laws go some states have them and some don't usually they are 30% or so. Easy way around that is loan origination fees, or any other type of fee you so choose to add on there. That can help your interest rate to meet the usury laws but still get you the additional income you're looking to get from the investment. Example you loan $1000 and usury law is at 30% so you give it a 29.99% rate. However your want to make 50% on your money so you charge the fees and fianace those fees as well so that in the end of the deal you're getting your desired rate of return.
Real Estate Investor · Whittier, CA · Member since 2014 · 58 posts · 3 votes
10y
@lance wakefield
Thank you so much for your thoughtful reply!
I'm definitely ready to pay for an attorney, in a situation that involves me and any other party. And, although I'm 50/50 with a partner on the deal, we have invested some good money with lawyers now on our LLC OA now. For that reason, it doesn't seem like we need to cash out a lot for a promissory note between our LLC, and our selves. Thanks for this cost effective option, that I hope others can learn from!
Also, thank you so much for the "Creative" elements you described (incorporating fees, financing them, etc). This is the kind of mind-expanding assistance I'm looking for, and what makes Bigger Pockets such a resource.
Thank you again, Lance, for your help. Happy Holidays!