Updated over 11 years ago on . Most recent reply
Are these financing terms reasonable or not?
I have a private investor for my first flip and thought we had an understanding of the terms which were 10% interest per year and 10% of the profits for the investor. As we get closer and I presented him with a promissory note, he says that there's a misunderstanding in the terms. He said it was 10% interest per year but also 10% of the note, which was to be $80,000. That means he gets $8,000 right off the bat no matter how long the term is. That was not my understanding at all but now my question is: are those terms reasonable? I have my own thoughts on this but I would like other opinions on it. Here's how the deal was to work, he invests $80,000, I put down $12,300 & pay for all the rehab (approx $15,000 but could be more, there's a few unknowns yet) plus do the work. Any thoughts?
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I really hate to say it because I know you have time invested in this so far, but if he's financing the 10% it may be illegal. I'd put him in the crook category.
A joint venture or partnership might be different. As a loan, a private unregulated lender he's walking a thin line in charging points, front end or back end.
No, that is not a good deal.
Do some reading on private lenders, this guy sounds like an old wheeler dealer doing predatory loans under the radar.
On that price of a deal, he's taking the lion's share of the profit so I'd suggest you run the other way. :)