Raising Private Money For Hard Money Downpayment

[James Craighead]

Hi everyone, I found a home through a connection that was left to owner in a will and is off market. The owner wants $300k for it and the sale of remodeled comparables in last 4 months is around $500K. I have done my due diligence and have brought in an inspector as well as my contractor who quoted 75K in repair costs. Even using HML this leaves considerable profit in the deal (like 60-70K)

I have found a hard money lender who will fund purchase, closing costs, and rehab for only 20% down on the purchase price for 10% interest and 2 points. My cash is tied up in other properties at the moment so I wanted to fund the downpayment ($60,000) with private money. I have two family friends who want to loan me the money for the downpayment. They dont want their names on the title in 2nd position behind the hard money lender (despite me telling them that will secure their loan), they just want to loan the money to me personally at 12% with a promissory note. 

Does anyone have experience going this route? Will I violate any security laws doing this? Should they loan to my LLC that will purchase the home instead of myself? Will be meeting with a lawyer tomorrow but just wanted to gauge your thoughts first. Thanks!