Are you the developer or the lender? If you're a developer, my initial reaction is to ask why your lender isn't presenting you with documents that the lender prefers in such a transaction as is customary. Typically, lenders do not entertain a developer's form agreement, barring unique circumstances of course.
If you're the developer and looking to syndicate your own debt through your own placement of private debt, that's a different story, but you'll need to find someone with experience in creating debt offerings. If this is the case, you might search on here for a local securities attorney if that's the case.
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It appears you would like to be a private lender on an investment property that will include the purchase and remodeling project whereby a 6 month balloon payment is involved? If not, my appologies ahead of thime.
If this is a single residential project, I would recommend a Promissory Note, Security Interest on the property and Deed of Trust on the Property. However, this will likely require a Second Deed of Trust unless your financing the whole project and construction. Watch out for contractors, Vendors and Mechanic's liens on the property. This is where your Second Deed of Trust becomes important with the recorder's office. You will want to be on notice as a Reputed Owner or lender and notice to all contracts would be important including vendors.
In fact, you may be required to issue the debt over time in response to proper progress payments. (Conditional Waivers should be issued upon payment). This is where private lenders, contractors and owners get in trouble. They offer up the money, a second deed of trust issued, but projects costs exceed expectations and real estate values decrease. Then, your debt obligation is subordinated to the first deed of trust and wiped out on a Foreclosure Action or Trustee's Sale later. Now, your last question involves extending the time for the balloon payment and additional funds. Watch out there as well. Mechanic's liens would subordinate additional debt down the line. Before preparing the correct loan documents that may require a lawyer to form the loan. This is why institutions and construction lenders do this type of business better. It gets messy, complicated and challenging to foreclosure or force a sale later.
What might simplify this issue is issuing the debt to the key individual who is solvent/good credit, etc. Then, getting a promissory note and collateral on the debtor, along with a personal guarantee and security interest on the property. If the project goes belly up, you're not subordinated by a First Deed of Trust and have other collateral. This is what banks do to our clients trying to build an investment property. It will all depend on what you can negotiate, how much your putting into the project, etc. Don’t' offer up any money until you have specific progress made on the project.
Tim Broussard, Esq.
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