How to Structure Private Money Loan

[Adam Reynolds]

Happy New Year BP friends! I have a question regarding private money loans. A 50/50 partner and I are purchasing a BRRRR property and a third party (mutual friend) will be lending us the funds for the purchase and rehab. The friend will be a passive debt partner only (ie we are not offering him equity) and we plan to return his funds + interest in 7-8 months. This will be our first time using a private lender so I'm curious what the easiest and best way to structure the contract is? Should we give him first position lien in case something goes awry? What pitfalls should we be aware of? We want to make sure all parties interests are aligned and protected. Any advice you can provide would be greatly appreciated.

Thanks BP!

[Jay Hinrichs]

you can do a formal secured transaction.. or you can simply do a unsecured personal note  if its super close relationships there is no need to spend the money on secured loan.

although make sure you buy the property with title insurance.