how should I structure this deal?
a fellow Reia fix and flipper has almost completed a rehab. but ran out of cash to finish. the project needs a new roof and some windows need to be replaced. all in all about $8000 to $10000 should cover it. he is looking for a short term loan maybe 2 to 4 months.
so how should I structure this?
-do I charge interest? and how much? it could take more than 4 months to sell. but it looks like it will go quick. not overpriced.
-do I just charge a flat fee?
- just take a percentage like I'm a partner in the deal?
if I did it like a short term loan say 10k @ 12% and it only goes 2 months not sure it would be worth it?
any help would be appreciated
If your money is sitting and not making any interest 10K @ 12% for 6 months is $600. Add a point on top so now your at 1600 (600 + 1000) that’s a return of 32% prorated at 6 months. Make sure you are protected. Are you the first lien holder or in second position. I’m guessing your in 2nd position. Analyze the deal as if it were your project to make sure the numbers work. If it takes longer to sell is there enough profit to pay you back. You can also go the equity format. Not sure what’s left after all cost are done. I think 12% and 1 point is an excellent return of your money. Protect yourself and have your attorney review the documents.
@Kenneth Garrett yes I would in the second position. thanks for the advice.