A client of mine has approached me about lending him some money for a commercial real estate deal that he is working on securing. He is an experienced commercial real estate investor with a $10M portfolio that I trust, but I am not familiar with lending, so I wanted to come to post in the forum for some advice.

He will be putting $300k of his own money down on the property but needs to secure a loan for the remaining amount of $200k and has offered me the following terms:

$200,000 loan

Fixed, simple interest of 12% paid annually

4-6 year term

Balance is paid in full at the end of the term

The property and his plan for it seem to be promising. He has shown me the details of his current portfolio overview (one of which I currently manage for him as STR's). Has a credit score of 790 and has offered to provide his Personal Financial Statement if needed.

I am interested in this loan as it would provide a higher rate of return than what I am currently getting, but am wondering if the terms of this deal would be worth it for me.  It seems to me that considering the current high interest rates from banks, that rates for a loan like this should be higher than 12%.  I would also be tying up about 20% of the capital that I have ready to deploy for my own projects / other opportunities.

Do these terms seem to be on par with current rates and loan structures?  Any input would be greatly appreciated.