How to Avoid Getting Ripped Off as a Private Money Investor?

Question

I am new to REI, so please forgive me if I am not using the right terms.

A friend of a friend does fix and flips in NJ and offers private money investors a 12% return with a $25K minimum investment. Does anyone have tips on how to determine if this is a sound investment? Does the interest rate strike anyone as suspiciously high or low?

For what it's worth, he is a close friend of someone who I consider a close friend, and my friend has invested with him and received consistent returns for two years.

Thanks BP community; you are truly wonderful!

Max McCann · Answer

Thanks for the helpful info Account Closed. From what I understand, he offers a promissory note. Is it usually that people offer a lien or a promissory note? Or is it typical to have a lien and a promissory note? Thanks again!

Account Closed · Answer

That seems like a decent return we pay private investors around the same depending on the amount. As long as you have mortgage on the property or a lien position. Make sure the contact is done through legal as well.

Steven Velez · Answer

In return for your investment, what is the rehabber offering? Promissory note? Lien position?

As far as the 12% stands... is it simple interest? Is it an ROI of 12%? How long does he need the money? Is there a pre-payment penalty?

You need to know the whole story of how this investor is funding the flip in order to properly assess whether or not its a good deal.

Hope this helps.

How to Avoid Getting Ripped Off as a Private Money Investor?

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