The 4 Steps to Pay off a Private Lender

These 4 steps to pay off a private lender are pretty important. Be sure to read through all of them because a lot of investors miss step 3… and I don’t want that to happen to you.

How to pay off your private lender

Step 1 – Satisfy the documents properly

You need to get both the promissory note and mortgage or deed of trust satisfied.

In South Carolina, to satisfy a note, you write “Satisfied Paid In Full” across the top and have the lender sign and date it. No witnesses or notary is necessary. And to satisfy a mortgage in SC, you write the same thing across the top, have the lender sign and date it, get two witnesses to sign and date as well… and file it at the courthouse.

But each state is different. So contact your closing attorney or title company to find out how to satisfy these docs in your area.

Step 2 – Get a testimonial

Social proof is huge in getting private money. And that’s what a testimonial gives you. Especially one from a private lender you’ve worked with before.

It can be written or even better, a video. Also, get a picture with your lender. You can use this in your private lender presentation, credibility kit, etc.

Step 3 – Send your private lender a 1099

If you’re private lender receives more than $600 bucks in interest income (if it was a debt investment) in a year, have your accountant send the lender a 1099.

You only send a 1099 if the lender actually receives the income (not if it’s accruing).

If it’s an equity investment, your private lender should talk to his or her own accountant to find out how it affects their taxes.

Step 4 – Ask for referrals

There’s no better time to ask for referrals than when you’re paying off a private lender. And referrals are like GOLD!

Many times they come “pre-sold” and are much more likely to lend on your deals much quicker than your average prospect.

Always ask for referrals!

… and that’s it.

Your private lender is paid off properly and you’ve got an awesome testimonial AND referrals to follow  up with.

Happy Investing!

– Patrick