Then, an objection.

Another one.

Now, you’re scrambling. You’ve already offered what you think is a good deal to your private investor. They were “in” and now they’re on the fence. Reaching to pull them back over, you offer them what you think is an unshakable security in the deal: putting them on deed. The purpose of putting them on deed would be to provide an additional layer of protection to the investor. You couldn’t do anything to ‘run-off’ with their money, so they should feel secure, right?

Credit to any real estate investor who explores this possibility.

If you’re thinking along these lines,  it means you are in problem solving mode. Instead of wilting you working toward a solution.This is good.

However, I do not think putting your investor on deed is a very good idea. There are several reasons why; let’s explore a few.

If you’re giving the private investor a mortgage, then it is redundant to have them on deed as well. If you take control of the property via warranty deed and your investor has a recorded first mortgage (or deed of trust, depending upon state) then the investor has plenty of collateral (provided your LTV is not too high). In addition, this may raise potential problems in the future. What if you want to sell for “X” and your investor does not?

Perhaps more importantly, if your private investor needs to be on deed to feel good about their investment with you, they probably aren’t the right investor. This may sound like cold water to the face if you’ve fought to get to this point with your investor. However, you must always think long term with your investment deals. Are you willing to put your private investors on every single deed of every single deal you do? More than one, even?

If your investor is demanding security or collateral for their deal with you, it’s better to use a mortgage. Show them that even banks aren’t put on the deed of properties they loan money on.

Another option would be to enter into a different arrangement with the investor. Use their additional need for security as a power negotiating tool. For instance, if they are almost to the finish line and ready to write the check but demanding security, then tell them that you will form a partnership with them as a owner in the company that holds title – but to do this will mean them investing an additional $X thousands of dollars. Show them that for you to give up ownership interest or restrict your decisions (which you are effectively doing by putting them on deed) that you require additional capital. Bottom line: if you’re going to take on more potential headache then you should get paid for it.

Private investors that make unruly demands aren’t the right fit, any way. Much the same as the investor that wants to make 30% or more on their money per year investing with you or wants to set up draws like a construction loan, this is just not “good money.” There are plenty (and I mean plenty) of investors out there who would be happy to invest with you for a comfortable return and a good night’s sleep. This is the money you want.