Standard Private lending rates
I have no idea as I've never used a private lender, but me commenting will bump it back up so maybe someone else will answer. :-)
A private lender is a friend or relative so you can offer them whatever you both are comfortable with.
If you are talking about hard money, they are companies that will charge 12-14% and if it is your first deal, 3 or 4 points.
I would talk with some friends and family if they have some cash laying around in a CD or just in their checking account getting 1%. They may be interested to see how they could earn 8%. You both win.
You should let me know where you're hearing 9-12% interest, 1 pt. I don't believe it ^_^
What @Rick Pozos says is more typical.
Private lenders are all over the place. I've heard 5%, and I've heard 20% with 5 pts (a local shark here in WA, hehe).
@Nghi Le and @Karen Jensen I must say that if you are buying from a distressed seller, you are probably getting a pretty good deal. If you are getting a good to great deal, whether it is 8% or 14% and 3 points, you should still make plenty of money. You should not hold that flip property more than 4 to 6 months. Houses are selling so fast that you should be able to sell almost immediately.
The difference between 8% and 14% is 6%. For half a year thats 3%. Add 3 points for a total of 6%. If your cost is 200k then you are paying 12k more for the 14% and 3points. 12k should NOT break a great deal. POINT: Make sure you are getting a great deal and you dont really have to worry so much about the interest rate.
When you are starting off you will have to pay higher rates. When you have a track record, things get a little easier. If you can create success at the higher rates, just think what you can do later on!!!
Haha @Nghi Le, I bet @Troy Fisher resembles, I mean resents that remark.
Hey, I didn't say a name! And those were his words, not mine :-)
Our competitive advantage in real estate has been our financing. In my market, the margins are getting thinner and thinner because there has been huge appreciation (10%+) in my area for the past few years, and now people are including appreciation as a part of their numbers. I can't (and won't) compete with that. The only way I still stay competitive is being able to reduce my financing costs and construction costs.
Oh sure, call my rates out. but I'm not a private money lender. I'm an attractive alternative to a cash partner who is going to steal 50% of the equity of deal, for providing the same level of service. And I come with some shiny bonuses. But the OP doesnt state whether he is trying to get the whole deal or part of the deal financed. Which is going to attract different types of lenders. And I know that @Julian Buick was getting my level of returns in Spokane.
Originally posted by @Nghi Le:
You should let me know where you're hearing 9-12% interest, 1 pt. I don't believe it ^_^
What @Rick Pozos says is more typical.Private lenders are all over the place. I've heard 5%, and I've heard 20% with 5 pts (a local shark here in WA, hehe).
Wow and I thought Washington would be one of the states with Usury laws...
What do you get for 20% and 5? 100% financing and he runs the project for you? Actually sounds pretty cheap vs a JV still.
/edit Might as well add to the topic as well. I have heard 6% to 14% for private money rates. Hard money rates can occasionally beat private money rates... it isn't often said!
I see 1% per month, which works out to 12% with a 2% origination rolled into the loan.
Balloon payment for balance in 6 months or so.
-
Real Estate Agent WASHINGTON (WA) (#95024)
- Sound Home Buyer
Thanks all for the good advice. My real estate attorney told me 9-12 for private lenders is the range most typical in our area. Also an investor in my office pays 9 or 10 percent plus 1 pt. I actually know several people interested but they are people I like and trust and I want to offer something fair and attractive. I did get an offer for 6percent...with 5 points.