working with a credit partner

[Yaniv Kehat]

Hi there,

Does anyone have any experience working with a credit partner? I mean to cooperate with someone who can finance deals? 

thanks,

Yan 

[Mitch Ferraro]

@Yaniv Kehat I'll speak from experience with how we work with our private lenders. At a very high level, we offer our private lenders a percentage return on their money for lending it to us for our deals. Right now in our business our lenders are receiving 10%-12% returns when they lend to us on our deals. 

Now, before any of that money is provided to us we use a title company to draft up a mortgage note and a fixed rate note for the lender. Then, at closing all the funds and documents are executed and recorded by the title company. The mortgage note shows that the lender is going in 1st lien position on the actual property that we are renovating. This protects the lender in case anything happens during the deal. If something did come up the lender could essentially foreclose on the property and take the property over to recoup their investment. 

Next, is the fixed rate note. This note spells out the terms of the money that you are borrowing. So it will show how much the lender is lending to you, percentage that they are receiving in return, how long the note is going to be (if flipping a property this is typically 6 months), and if the term needs to be extended what type action is required. 

When we go to sell the property once it's completed that's when our private lender gets their principal investment back plus the interest for the amount of time that we held their money. 

I hope that info was useful. Please let me know if you have any other questions.