What are reasonable terms for private lending these days?

Question

I haven't used private money yet but know an individual who has expressed an interest in giving me loans. I'm finally getting the deal flow where it may make sense to take them up on it. Just wondering what people consider to be reasonable terms for such loans these days, the friends and family loans if you will.

Account Closed · Answer

Last one I borrowed from a friend and it was 10% for 1 year. That was 2012.  I hope that helps.

Nate Marshall · Answer

• 2-5 Points 
• 10-14% 
• You can get better with experience in RE and with that lender. 
• I have seen a few doing under 9 but you need to have 7 flips or more or 4 rentals.
• If you are using a private money broker ask if the lender discounts their points to pay the broker fee or if the broker adds points. Brokers are paid 1-4 points (varies by lenders) 
• Once someone has done a few deals with me I charge the minimum for that lender.

Kevin M Finley · Answer

I pay my private lenders (Friends, family, local individuals) 2 points and 12% for a 6 month interest only loan. 100% funding. All payments and fees are on payoff. Typically 65% LTV. 90 days minimum interest (Prepayment penalties illegal in WI). I also write one 6 month extension for an additional 2 points into the loan.

I write the mortgage and note for my lenders as well as calculate their payoff, write the payoff letter, and take care of just about everything. Other individuals in my market tell me I am paying too much and that 1/10 are more reasonable in our market, but I would much rather have lenders lining up ready to go than always be bickering on numbers.

At the end of the day, the money is at my disposal and there is no hassle, fees, application process, etc. That is worth it to me.

Dale Ferrell · Answer

I am a loan placement broker with a database of nearly 200 lenders I work with to help loan brokers save deals. I say this to let you know I see a lot of different term/offer sheets.

Of you are getting an offer of an Interest Only Loan for 1 to 2 years, interest rate from 9%to 12%, and 2 to 4 points in fees from the LENDER, then that is in the normal range. If you are dealing with a broker (like me) expect another point or 2 to the fees.

The lender I work with the most generally puts out terms of 12% I/O for 2 years, 4 points to him, 1 point penalty for early payoff (less than a year), plus a due diligence fee to be paid upfront (amount depends on size of the loan and complexity of the deal).

These deals are usually for 45%LTV but he is very loose  with his doc requirements and rarely looks at credit. If you want higher LTV or better terms then I go to other lenders with  heavier doc submission and solid FICO. There is always a give and take.