We use private money for our acquisitions of properties. We typically structure it one of two ways. 1. If you have enough funds to fund the whole deal then we will write up a promissory note explaining the terms of the loan (we do 8-12% Interest with a balloon payment after so many months) and will put a first position mortgage in your name on the property, like a bank would.
2. It’s a little trickier if your funding with others as you can’t really split up a first position mortgage on a property 8 different ways of everyone is let’s say lending $5,000 for a deal. So for this it is structured as an unsecured loan with only a promissory note as “collateral.” From a lending perspective be very cautious of this and do your due diligence on whoever your investing with if you go this route. Make sure they know what they are doing and actually have a deal with enough breathing room to if things go wrong.
As for the contract/promissory note, I’d have a local attorney draft and sign off on it, and make sure it has all the correct terms. He should be able to draft it as “fill in the blank” so it can be customizable for each transaction and you don’t have to keep going back to him.
This is just a little insight to how we do it, Don’t take it as legal advice, still talk to a local attorney and make sure everything is legal and drafted correctly.
-Logan
