Private Money
Hi Everyone,
I have a question when it comes to private money lending and repayment in particular. If I want to borrower private money from someone how do I pay that back on a long term buy and hold scenario? I am sure there are a bunch of ways to do it, just having a hard time figuring out how to repay the loan from the cash flow, say 300 a month, am I just paying the person $100 a month out of that (or what ever the interest rate is) Some examples of how people are using private money for a long term buy and hold would be helpful. Thank you
Private loans are just that - private. You can negotiate however you want. If you want to finance the whole property with private money, you might want to amortize it over 25 years and pay them principle and interest.
If you are using private money as your downpayment, it might be structured very differently. Maybe you pay them only interest with a balloon payment due. Maybe you amortize the loan over 2 years and your monthly payments are high. Maybe you pay nothing and compound the interest into a balloon payment at the end of the loan term.
Figure out what would work for you, and what would work for the lender.
Good luck!
@Barry Rosenberg, The payback amount and terms are the result of what you and the private lender negotiate. It may or may not look like conventional bank loan terms.Most likely it wont be a loan for 30 yrs at 4%. Most private money is shorter term.Interest rates will most likely go up over time so why would a PML lock himself into that type loan product?They wont.A common strategy is use PML for short term, for purchase and maybe rehab then cash out refi with a bank at more favorable terms.
