Real Estate Agent · West Hartford, CT · Member since 2016 · 449 posts · 476 votes
I am looking for more info on how a private money deal would work for buy and hold real estate. I know there has been a lot posted in here regarding private money for flips but I couldn't find how it would work for buy and hold.
My thoughts: You have a private money lender willing to lend you X amount to help fund 20% down. Coupled with personal money you saved you only need to borrow 10k and offer 10% interest in return. The next part is what I am unsure of...
Does it make sense to use private money if your plan is to pay them back their loan with interest every month from the cash flow of the property? Knowing full well that you would not be 'profiting' from the cash flow for the first year or so because you are paying your investor back each month until paid off.
Has anyone ever done this? Any insight or tips on how to structure this deal would be appreciated! Or perhaps this is not the best route to fund 20% down.
Real Estate Broker · Greer, SC · Member since 2013 · 548 posts · 271 votes
8y
We use private money on 99% of our deals. Our lenders that can defer payments (like a CD investor), we give them a higher rate on flips. When a lender needs to a payment, we give them a lower rate on a rental. When we create a payment, we want to also have income that's more.
We borrow all the money we need to buy and fix from our lenders in both cases. It can be done. We have a couple of hundred loans like this. I believe it's easier to borrow all and give your lender a 1st. The worst thing that can happen is the lender gets ownership of house. When you borrow for a down payment, that's more riskier to the lender. (more riskier is a SC term)