Question About Private Lender Fees

[Brandon Reed]

Hi BP!

We’re looking at working with a Private Lender on a Fix & Flip deal and I wanted a “sanity check” from you all on their fees. We’ve never done Private Money before so I just want to make sure that what they’re charging is on par with what other’s are charging.

• 3% fee on total loan amount (100% of property + 100% of rehab costs). This fee is payed when the property is resold.
• 9.9% interest only payments recurring monthly until property is resold and loan is repaid.

Does that sound about right? Any red flags?

Thanks so much for any advice or insight you can offer!

[Wayne Brooks]

@Brandon Reed Those fees/rates seem in line.  The suspicion comes from them offering 100% of purchase and rehab, which is not common.  When they start asking for “origination and insurance” fees up front, that’s when you know it’s a scam.

The only fees prior to closing should be an appraisal and perhaps maybe a $200 app fee.