Lending your money with a private party loan is quite simple. The most secure and legally acceptable way is with two documents: the promisary note and the mortgage or deed of trust. In our business we use both and here's why.
The promisary note is signed by the real estate investor who promises to pay back your loan. It lays out the precise terms of the loan. What is the length of time of the repayment? Years? Months? The note should reveal the interest rate, payment schedules and the other aspects of the particular deal the private lender is making (such as construction deadlines, etc.).
The mortgage or deed of trust is also signed by the real estate investor and recorded in the county or state public records by the closing attorney or title company. This secures your loan against the real estate. Each state uses either mortgages or deeds of trust. Do not confuse the deed with the deed of trust. They are two separate documents. The deed provides verification of the recorded owner of the property which in this case will be the real estate investor.
The deed of trust shows separate confirmation that you have money invested in and secured against the property. It is your protection if the real estate investor sells the real estate. You have a recorded document that proves you have an investment property loan. It assures you will get paid.
An experienced real estate investor will have these documents available and should know how to craft a secure, profitable, real estate deal. If not, look elsewhere...
Comments