How do I provide assurances to family lenders?

[Taylor Campbell]

Hi BP peeps! So I am about to start making my rounds to friends and family, to generate gap funding for my first deal. I had mentioned this in a meetup, and someone told me to provide them assurances, one of those being to put them on the title of the house. But, my question is, if I have multiple family members loaning the company money, how could I get it so they all hold second position on the house? Is there a fund entity I can create? Or would it be best to just list them 2-Nth with the larger investors getting preferential positions? Or do I just scrap this idea, and is putting them on the insurance and signing a loan agreement enough?

Thank you in advance!!

[Ned Carey]

@Taylor Campbell welcome to BP.

Putting them on the deed is possible but probably not the best way to proceed. TO do that just everyone is on the deed as tenants in common. The deed can specify what % ownership each person has. 

Much more common is to have a mortgage (or in some states a deed of trust)  There is a promissory Note, which is the loan document and The mortgage is the document that gives the lender a security interest in the property. 

A third relatively common way is to create and LLC to own the property and multiple people can be members of the LLC. The LLC operating agreement spells out how profits get distributed.

Keep in mind the best assurance is the fact you are doing a good deal. all the agreements in the world won't protect them from losing money on a bad deal.