Hello, I would like to know what percentage do you usually pay your investors and how do you pay them and do you use contracts with them? For example: If I am doing a flip and i need a Gap funder to fund the deal while its being flipped. Lets say the investor lends me 30k to pay interest payments to hardmoney lender and to pay for repairs. How much should i pay this investor to lend me the 30k and should i setup a promissory note or some kind of contract with the investor? Also, what if the deal goes south do i need to repay the investor and i guess thats why im asking about contracts.
Real Estate Consultant · Brookfield, WI · Member since 2014 · 873 posts · 350 votes
6y
@George Rodriguez The interest that the lender wants to charge and what you can afford to pay are two different things. All things being equal, the going rate for a private lender is 8% - 10% but this rate is based on the investor's experience. If this is your first deal (it sounds like it is) you might want to offer your lender a higher rate if the deal can afford it. You want to issue a promissory note and a mortgage to ensure your lender's investment is secure. In terms of a guarantee, if you will need to pay him/her back if the deal goes bad is all up for negotiation. The less secure the investment the higher the risk, the higher the risk, the higher the interest rate. If you want to be successful in real estate you need to make sure that your lenders get repaid. If you can't build a referral base of lenders you will always be at square 1.