Alan Cowgill’s Blog

I always get a lot of questions about how to handle the

money so I’d like to go over a few of the basics.

- Touching the Money

Sometimes when people hear the kind of interest I pay

they will get so excited about loaning me money that they

want to hand me a big check right on the spot. This is not

the way to handle the situation. I want them to send the

check to my attorney for the closing on a specific property.

I know that some of you are so eager to launch this new

phase of growing your business that you really want to take

that first check but don’t do it.

You may remember that in an earlier newsletter we

talked about having rules regarding how you want to run

your business? Well this is another rule that you need to

have in place. This is the procedure: Go over paperwork,

have a meeting of the minds, and then they send the check

to the attorney for closing. Nice, neat paper trail and

well-informed lenders.

- Co-mingling funds

Here is a common scenario: You will have two lenders who

each have a small amount to loan. With the combined amount,

you have enough for a particular property. Question: Can you

just put the money together and have them share the first

mortgage? You cannot typically co-mingle funds.

Now my procedure is to give an lender a first mortgage

on a property. If I need additional funds, I can give

another lender a second mortgage after explaining to them

that the first mortgage holds a stronger position.

BUT… if you do some paperwork with the state and

set up an entity. Then you can…

So, coming soon… “How to Pooling Private Lenders

Money.” Ok, you guys keep asking me the details on how to

do this so I’m on it. I’ll have something on this in the

near future.

- When do the payments start and end

This is a little tricky for some real estate investors

to understand. The best way to structure this is to start

paying interest at the time of closing. Their money is

loaned so they should be earning interest. My job is

to make repairs and get the place rented so it is producing

income to cover the interest payments I need to make to the

lender. I get this done as quickly as possible.

I continue paying interest to the lender as long as

their money is on the property. When the property sells,

They get a check at closing for their principle and interest.

I ask them if they want to loan their money on another

property. Nearly all will say yes and then, their interest

payments start again at the next closing (to buy) table.

So they earn interest while the money is loaned — from

purchase to sale.

Now I do pay a minimum of 90-days interest on all loans.

The lesson here is avoid the temptation to grab those

checks and cash them. Run a professional operation and have

your business rules in place and follow them.

You’ll be much happier in the long run.

Important Tip

Do not co-mingle funds unless you know the rules.

Alan Cowgill is a speaker, author, and real estate entrepreneur. Alan has bought or sold over 200 investment properties. His step-by-step system “Private Lending Made Easy” teaches others to find private lenders. Contact Alan at 937-390-0816 or 866-831-3540. For a FREE audio go to www.PrivateLendingMadeEasy.com