New Private Lending Relationship
Good Afternoon BiggerPockets!
I recently had someone I'm very close with approach me about the potential of becoming a private lender for me. He is a retired business owner, lives a very comfortable life from the proceeds of his business, and is fed up with the returns he's getting in the stock market. He knows I've rehabbed houses in the past, and I've discussed some ongoing deals with him. I've never used Private money for Flipping, so I'm looking for some opinions here.
He has absolutely zero interest in dealing with either contractors or tenants - he just wants a better return on his money, because like a lot of people in the market, the returns aren't very good. So when I told him what I think of as 'typical' terms for short-term loans are, he was very interested.
I told him rates can vary from 6%-15%, 0 to 10 points, and anything from a couple of months to a couple of years, but that 9%-12% with a couple of points for 12 months was very standard.
So I'm interested in what the BP community feels is a fair arrangement. The most important thing for me is to maintain and/or improve this personal relationship in a way that gives us both what we want on the financial side.
What's a fair rate? Points? I'm perfectly happy to have the first deal more expensive for me, just to lay the foundation.
If I buy the property with my cash and borrow the rehab costs, how would that change the situation from if I borrowed the full amount? Interest only payments - raises rates and/or points? What are typical loan amounts as % of ARV?
Thanks All!