Hello BP members I am hopping someone can give me some advice. I was approached with an opportunity involving a Fix and Flip on an SFR. The fix and flipper is asking for 25K from me for the purpose of purchasing the property and paying for the rehab. The Flipper would then sell it and repay me. I know the guy does a good job and am familiar with his work. What would be fair compensation for me lending the 25k. Thank you for any advice.
Typically a private lender like yourself will get a first lien on the property and have it recorded, get added as a loss payee on homeowners insurance policy, and receive a promissory note from borrower. The funds would then be sent to either a title company or attorney, who will disburse the funds as the project passes the required city inspections. The rate you charge can be anywhere from 6-15% ( or lower or higher as agreed on by both parties ) but if it were me I would ask for a rate of 10% or higher as that doesn't really impact the profitability of the borrower because the loan is fairly small. Usually this is an interest only loan and you can either ask for monthly payments or be paid in full once borrower flips property. I would ask for higher rate and in return let borrower pay me once property is sold. Hope this points you in right direction and good luck. Keep us posted on your decision and results.
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