Private Investor
I'm considering approaching a private investor about financing rehabs. Anyone ever work with a private investor? Not a hard money lender, but someone I kinda know with some money to spend. I'm trying to get an idea what I can offer him and what he may be looking for. I would think that if someone with the money could make say 5% on a short term investment, they would be willing to do it. What do you guys think?
Thats almost exactly like the proposal I was going to offer my private investor (my brother-in-law) except I'm going to offer 12% on the money loaned paid anytime in the first 6 months and then a 1% penalty every month after 6..so a $20,000 loan would net him $22,400 paid anytime through month 6 of the loan and then an additional $200 per month after 6 ...
Do you mean 5% interest on the money or do you mean 5% of your profits?
How much money are you talking about?
And what would you do to secure his risk?
No matter how you slice it 5% is too low. If I am putting up cash for a deal I want ate least 30% if not more interest. Remember, he could do this without you but you probably cannot without him.
Share the wealth!
I was thinking 5-10% on the money lent. This way his take isn't dependant on what I make or don't make on a property. I have cash and would be willing to put like 10 or 20% down on the property and have him finance the rest.
Linlin, Are you saying 30% of the total profit OR higher interest than the 5% that he mentioned? I aggree that if someone is putting up all the money 30% of the profit really is not that much to pay. When you take into consideration what hard money charges in interest payments and points. Plus you could get the deal done sooner then later.
5% is not good enough for the money lent. You could get that return on a Government bond.
I think your private investor will be interested with a 10-14% interest on money lent.
I recently completed a rehab and financed it through a private investor - a friend. My friend wanted to write up a contract through a lawyer, which is expected, but the terms of the deal were as follows: 10% of the amount bowrrowed for a 3 month term, for each month after the 3rd that we didn't pay, it was 1% per month. 5% is definately not enough especially where hard money lenders are getting a minimum of 20 - 25%. Hope this helps.