Private Money Interest Rates

[John Clark]

So I have maybe silly question about private money interest rates. I've got a potential person I can work with as a first time private lender, however I want to make sure when I try to convince them of their ROI I'm doing it right. So here is my question. If I say you loan me $X and your return is 12%, is that 12% of the total loan, 12% annually, or just 12% on however we decide to do it? If it's the latter, what is common practice for interest rate returns on a private loan?

[Rick Pozos]

Usually you would do an interest only loan if you are rehabbing the property. Lets stay simple, 100k loan at 12% or 1% per month. Payment is $1000 per month as long as you have the loan. If you rehab the property and sell it in 5 months you will have paid 5k in interest plus the 100k back. It is usually on an annual basis.