Repaying Private Lenders

[Justine Scheuher]

Hey BP Fam, I am trying to wrap my head around how the repayment of private lenders works, specially while using the BRRRR strategy. Can y'all give me some examples of your terms/stipulations. For example, is a specific date of repayment set in advanced? What happens if theres a delay in refinancing? What type of interest does the private lender receive--a set amount? percentage? or interest? Thanks

[Alan G.]

Justine,

Its really up to you to structure the agreement. How long do you need the money for? Are you giving up equity? 

I use private money for short periods only until I do a refinance of a specific project. My agreement is written up with a 1 year max, but without any prepayment penalties.  I know I'll be paying them back in 5-6 months but I write it up for 1 year just in case. I do interest only payments and 1 point on the back end when loan is repaid in full. Also, in the case I should go over the 1 year mark, I have an additional point built in for the lender. 

This is just the terms I have come up with. I want to make it attractive for my investors but I also don't want to pay more than I have to for the money. Its really up to you to be creative.